On the 22nd of June, dYdX revealed on their official website that they will be launching a new V4 chain built on the Cosmos ecosystem. The new version is tagged “Our Path towards full decentralization”.
The upgrade will remove all forms of centralization on the protocol (including dYdX Trading Inc.) and will transfer authority to the community. The dYdX V4 will be the primary version of the protocol by end-of-year 2022.
The V4 chain will be built as a standalone blockchain on the Cosmos SDK and Tendermint proof-of-stake consensus protocol. This version will feature an off-chain order book and matching engine capable of scaling to orders of magnitude and possessing more throughput than any blockchain can support.
Previous versions of the dYdX DEX were built on the Ethereum network. The platform will also offer margin and spot trading, perpetual trading, lending, and borrowing.
According to dYdX, the team needed to build an order book-based protocol. Other layer one and layer two blockchains were incapable of handling the throughput needed to run a first-class order book and matching engine. With Cosmos, the team would be able to build a decentralized off-chain network to run its order book.
Furthermore, Cosmos provides an environment where developers can build customized blockchains while still benefiting from the cross-chain capabilities it offers. dYdX will use this feature to build a chain that offers “zero trading gas fees” (similar to dYdX V3).
Other products the team is developing to support the dYdX chain include; Core nodes, indexer, a web app, and a mobile app. Additionally, the team is working on a TypeScript client that connects both the indexer and core nodes.
A spokesperson from the dYdX team revealed that One of the core values of dYdX is thinking big. The project is still developing its off-chain matching engine protocol and the migration from Ethereum to a new chain has not been fully tested yet. However, dYdX believe the upgrade gives the project the best shot at offering a long-term competitive product experience with centralized exchanges.