dYdX moves to Cosmos-based blockchain for v4 to optimize decentralization and trading flow

dYdX moves to Cosmos-based blockchain for v4 to optimize decentralization and trading flow

On Thursday, dYdX, a crypto derivatives platform currently built on top of Ethereum’s Layer 2, announced that it will migrate to a separate blockchain based on the Cosmos SDK and Tendermint’s proof-of-stake consensus for its v4 update. The company cited the decentralization and performance of the Cosmos blockchain as the “best fit” reason to build dYdX for v4.

Currently, the existing dYdX protocol processes about 10 transactions per second and 1,000 orders placed and cancelled, with the goal of scaling to higher orders of magnitude. However, the company said that neither Ethereum Layer 1 nor Layer 2 solutions could meet its throughput speed requirements, nor would it be able to meet its 100% decentralization requirements by the end of the year.

All dYdX code is open source, the protocol itself will run on an open permissionless network, and the parent entity dYdX Inc does not operate any services. All validators and node operators will run the core node software, which will handle off-chain consensus order book matching, deposits, transfers, withdrawals, and price oracles. Additionally, traders don’t need to pay gas fees to trade, just pay to execute trades similar to dYdX v3 and centralized exchanges. The fee is then distributed to validators and stakers as rewards.

Additionally, dYdX seeks to bridge blockchains by leveraging Cosmos’ inter-blockchain communication protocol. In this way, dYdX can directly bridge digital assets, such as stablecoins, from other secure chains on Cosmos. Top priorities in development include moving collateral for transactions to blockchains like Ethereum and centralized exchanges. Since its launch in February last year, the protocol has processed over $626.6 billion in digital asset derivatives trading volumes.


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