CRYPTO NEWS & DATA SPACE

CRYPTO NEWS & DATA SPACE

Introducing dYdX Chain

Published on:

Introducing dYdX Chain V4 developed as a standalone blockchain based on Cosmos SDK and Tendermint Proof-of-Stake consensus protocol.

dYdX V4 marks the full decentralization of the dYdX protocol with a unique combination of decentralization, scalability, and customizability that Cosmos offers.

WHAT IS COSMOS

Cosmos is a technology that makes it relatively easy to create a standalone blockchain with strong cross-chain capabilities. The Cosmos chains are based on Tendermint proof-of-stake consensus system. Cosmos offers high throughput and customizability. Each Cosmos chain traditionally has its own validators and Layer 1 staking toke.

WHY A STANDALONE COSMOS BLOCKCHAIN

dYdX embraces radical changes in technology that have the potential to dramatically improve the protocol. After exploring the landscape of current and upcoming blockchain technologies dYdX decided that Cosmos would allow them to build the best fully decentralized protocol.

The main requirement for the V4 protocol is full decentralization. The decentralization of a system is equal to the decentralization of at least a decentralized component. This means that every part of V4 needs to be decentralized while also remaining performant.

Off-chain, decentralized, order book and matching

The fundamental problem of every layer 1 or layer 2 dYdX could develop is that can handle even close to the throughput needed to run a first-class order book and matching engine. For reference, the existing dYdX products process about 10 trades per second and 1,000 order places/cancellations per second with the goal to scale up orders of magnitude higher.

dYdX considered pivoting to developing another trading such as an AMM or RFQ system. But ultimately decided that an order book-based protocol was critical to the trading experience pro traders and institutions demand.

This is where Cosmos comes in. A massive benefit of developing a blockchain dedicated to dYdX 4 is that it offers full customizability over how the blockchain itself works as well as the jobs that validators perform.

In dYdX V4, each validator will run an in-memory order book that is never committed to consensus (i.e., off-chain). Moreover, Orders placed and cancellations will be propagated through the network similar to normal blockchain transactions. Ensuring that orders placed and cancellations will always make their way through the network. The order book that each validator stores is eventually consistent with one another. On a real-time basis, orders will be matched together by the network. The resulting trades are then committed on-chain each block.

This allows dYdX V4 to have extremely high throughput for the order book (which remember requires 100x the throughput of trades!) while remaining decentralized.

No trading gas fees

As mentioned, a major benefit of Cosmos is that the chain can be developed to suit the exact needs of the dYdX network. One application of this is that traders would not pay gas fees to trade. But rather pay fees based on trades executed similar to dYdX V3 and centralized exchanges. These fees would accrue to validators and their stakers.

The ideal platform to build on

Furthermore, dYdX V4 is a fully sovereign blockchain, meaning the chain is not reliant on any external blockchain or system. This is a great platform for the dYdX community to continue to build in a vertically integrated way with the protocol. Token holders fully control the system. Whether it’s building additional features like spot trading, options, multi-collateral, or improving core underlying technology the dYdX community will now control every aspect of the stack and can build the best possible product experience.

ABOUT dYdX
dYdX IS building an open platform for advanced crypto-financial products, powered by the Ethereum blockchain.

Website | Twitter

RESOURCES
dYdX Blog

Related

Market Stats:
BTC Dominance: 42.66%(+0.03%/24h)
ETH Dominance: 15.37%(-0.04%/24h)
Defi Market Cap: $37.41B(+7.48%/24h)
Total Market Cap: $946.54B(-0.67%/24h)
Total Trading Volume 24h: $58.07B(-14.00%/24h)
ETH Market Cap: $145.76B
Defi to ETH Ratio: 25.67%
Defi Dominance: 3.78%
Altcoin Market Cap: $542.79B
Altcoin Volume 24h: $35.84B
Total Cryptocurrencies: 19999
Active Cryptocurrencies: 9946
Active Market Pairs: 58880
Active Exchanges: 523
Total Exchanges: 1683