Decentralized Exchange dYdX To Build Its Own Blockchain

A cryp­to deriv­a­tives plat­form based on Ethereum layer‑2 blockchains is devel­op­ing its own blockchain.

The new prod­uct from dYdX plans to be based on Cos­mos, using Tendermint’s proof-of-stake con­sen­sus pro­to­col to val­i­date trans­ac­tions. Layer‑2 pro­to­cols are built on top of pop­u­lar blockchains, such as Ethereum and Bit­coin, and are typ­i­cal­ly used to increase effi­cien­cies, add fea­tures and scale the technology. 

The game plan for dYdX V4 — the exchange laid out by the com­pa­ny in Jan­u­ary — is to be ful­ly decen­tral­ized by the end of the year. 

“Devel­op­ing a decen­tral­ized, off-chain order book and match­ing engine and mov­ing from Ethereum to a dYdX-spe­cif­ic chain as a major [decen­tral­ized finance] pro­to­col is very much untest­ed, but we believe it gives the dYdX ecosys­tem the best shot at hav­ing a net­work that could offer a long term com­pet­i­tive prod­uct expe­ri­ence with cen­tral­ized exchanges,” the com­pa­ny said in a statement. 

Found­ed in 2017 by ex-Coin­base and Uber engi­neer Anto­nio Juliano, dYdX is posi­tion­ing itself as the largest decen­tral­ized deriv­a­tives exchange — with more than $690 mil­lion in trad­ing vol­ume in the past 24 hours, accord­ing to CoinGecko data. 

The com­pa­ny not­ed the exist­ing dYdX prod­uct process­es at about 10 trades per sec­ond and about 1,000 order placements/cancellations per second.

In the company’s vision for dYdX V4, each val­ida­tor will “run an in-mem­o­ry order­book that is nev­er com­mit­ted to con­sen­sus” such as off-chain. Mean­while, on a real time basis, “orders will be matched togeth­er by the net­work. The result­ing trades are then com­mit­ted on-chain each block.” 

A spokesper­son for the com­pa­ny didn’t imme­di­ate­ly return a request for comment.

In August 2020, dYdX part­nered with Stark­Ware to scale decen­tral­ized trad­ing. The com­pa­ny raised $65 mil­lion in a Series C fund­ing round in June 2021 led by Paradigm.

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