• The goal for dYdX V4 is to have high throughput for the order book while remaining decentralized, the company said
  • DYdX is positioning itself as the largest decentralized derivatives exchange, with more than $690 million in trading volume in the past 24 hours

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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  • Blockworks
    Jocelyn is a New York-based reporter. Prior to joining Blockworks, she covered wealth management for Financial Times’ B2B publication Financial Advisor IQ and wrote about the crypto markets for Forkast.News. Jocelyn holds a bachelor's degree in journalism from Emerson College. Born and raised in Beijing, China, she is native in Mandarin. You can reach out to Jocelyn at [email protected]