Announced for over a year now, version 4 of the dYdX protocol intends to completely overhaul the structure of the famous decentralized exchange platform. The main argument justifying such a decision lies in the ability of the team to increase the effective decentralization of the DEX by leaving migrating to a new network. Many disruptive and innovative features, particularly in terms of scalability and innovative trading products. Let’s discover these new features together.
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dYdX abandons StarkEx and migrates to the Cosmos ecosystem
dYdX is a decentralized finance protocol that has established itself over the years. Indeed, it is today the main decentralized exchange platform for cryptocurrency derivatives. Her initial launch dates back to July 2017. The only services back then were options trading and leveraged positions.
The year 2021 represents a major turning point for dYdX. The DEX then becomes a second layer solution (or layer 2) in its own right on the Ethereum network. A solution that reduces the very high transaction costs on the main layer to almost nothing.
To do this, dYdX opts for the solution offered by the company starware as part of its protocol StarkEX, using proof-of-validity rollup technology. An approach that ensures high scalability while guaranteeing a level of security similar to the Ethereum blockchain.
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From then on, the adoption of the protocol becomes very wide thanks to a very efficient order book system. From the perspective of the vast majority of traders, this is a success.
But dYdX does not stop there and now wishes to focus its efforts on optimizing the decentralization of its services. Indeed, although the use of StarkEx guarantees an optimal level of security concerning the management of the transactions carried out, it nevertheless remains a network implemented by a single entity, and therefore centralized. Further decentralization of the protocol would allow greater transparency and therefore a greater fairness between the different categories of users.
This is how dYdX chose to develop a blockchain dedicated at his service. A choice made possible by the technology offered via the Cosmos SDK And Tendermint. Indeed, the latter makes it possible to provide an instantaneous finality of transactions, very appreciable for a DeFi protocol. V4 of dYdX will therefore be entirely autonomousand dYdX Trading Inc will no longer have any connection with its future development.
V4 and its long-awaited features
dYdX is now able to tailor all the parameters of its own blockchain. This is to optimize it for its specific use and at the same time allow validators to manage the off-chain order book. Furthermore, the IBC protocol guarantees him de facto ease of communication with all the blockchains of the Cosmos ecosystem.
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In addition to full decentralization, including off-chain decentralization of the order book and matching, dYdX seeks to improve its performance. Thus, the off-chain management of the order book means that no fees are charged on placements and cancellations while guaranteeing a very high throughput. Only completed transactions will incur transaction fees, which are collected and then remitted to network validators.
Regarding the $DYDX token, many changes are also coming. It is currently an ERC-20 token on the Ethereum blockchain. The migration to V4 counts well transform this token into a layer 1 coin of the dYdX blockchain. Thus, holders of $DYDX will truly have the protocol in their hands, making rhyme governance and decentralization. It will also be possible to build validator nodes on the network via $DYDX staking. A way to get even a little more involved by participating in the consensus of the network using proof of stake.
The dYdX protocol (like its web interface) will be entirely open-sourcewhich will allow anyone to develop new tools and protocols on top of dYdX. A mobile application is under studywith an open source and decentralized design goal.
A public mainnet planned for the end of September 2023
According to roadmap official version available on the dYdX blog, several stages of testnets, first private then public, are to be expected before the launch of the protocol mainnet. THE testnet private is set to debut at the end of March, while the public launch is scheduled for September. These dates are of course informative and may be subject to change depending on the results of the testnets.
At the moment, only the most basic elements of the decentralized exchange protocol have been implemented on the new blockchain, such as the trading fee systemTHE liquidationsTHE oracle systemTHE fixed rates or even the token transfer and the API service.
Are currently in development more advanced featuresincluding dynamic rates, advanced order types, web trading interface and documentation for validators.
The organization of the governance system is also being finalized, as are future methods of adding and removing trading pairs and connecting the blockchain to the Cosmos network via IBC.
dYdX is taking advantage of a lackluster market to focus on developing its offer, and the news is particularly positive. Already crowned number 1 among decentralized trading platforms for derivatives, dYdX intends to establish its superiority thanks to its imminent V4 which looks very promising thanks to a dedicated Cosmos blockchain. Improving platform performance and revamping tokenomics with a $DYDX token becoming central, the future looks bright for healthy development and mass adoption of dYdX over the long term. Will you enter the era of decentralization?
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