The decentralized trading protocol dYdX informs its community that its V4 will be developed with the Tendermint consensus and the Cosmos SDK. Thus, the platform will become a blockchain in its own right, with the aim of improving the performance delivered to users.
dYdX to join the Cosmos ecosystem (ATOM)
The decentralized trading platform dYdX has presented its V4 and it will be built on the Cosmos ecosystem. The team hopes that this version will be available by the end of this year, but such an ambitious project might experience some additional delays.
Indeed, with this change, dYdX will use the Cosmos SDK and the Tendermint consensus to become a full-fledged blockchain. The Cosmos SDK is a kind of “construction kit” for developers. Tendermint, on the other hand, is a Proof-of-Stake (PoS) consensus, capable of functioning normally even if a third of the validators did not play their role.
With this total overhaul of its engine, dYdX aims to become one of the most used trading platforms in the world. While this means many challenges, the project team is committed to this vision:
“We realize that this is an extremely difficult and ambitious goal, but believe that dYdX should make choices to maximize the chances of achieving this goal, rather than settling for a lower definition of success.”
In addition, placing or canceling orders on the protocol, will not involve transaction fees. Only the trading itself will cost a small proportion of fees, as with all platforms. For this, it is the DYDX token that will be used to be redistributed to the validators, who will use this to secure the network nodes.
A choice motivated by scalability and decentralization
dYdX currently runs on the Ethereum blockchain (ETH), thanks to a layer 2 solution from StarkWare. This is what allows the protocol not to apply transaction fees for the moment, but this solution has capacity limits.
For now, the platform processes about 10 transactions per second and 1,000 orders and cancellations in the same time frame. But dYdX doesn’t want to limit itself to its values and intends to provide an institutional quality tool.
Moreover, it wants to provide a fully open source solution to its community and this notion is not fully possible with StarkWare’s technology. This necessarily implies a dependence on a trusted third party.
This state of affairs therefore consists of a centralization point. Yet dYdX wants to become a fully decentralized protocol, as the team emphasized in its announcement:
“The main requirement for the V4 protocol is complete decentralization. The decentralization of a system is equal to the decentralization of its least decentralized component. This means that every part of V4 must be decentralized while still performing well.”
Recall that the platform’s core business is trading futures contracts. Such an investment vehicle operating in a decentralized manner may have a promising future ahead of it, when regulation prevents this for centralized platforms.
If the work to be done is substantial for dYdX to achieve its goals, their ambition nevertheless promises great prospects for the future of the platform.