The DEX’s V4 has migrated to a new blockchain for greater scalability and decentralization in derivatives trading. This evolution includes novel staking opportunities and fee earnings for token holders.
dYdX has recently unveiled the beta mainnet of its Version 4 (V4) platform. This latest release marks a significant shift, as the platform now operates on a standalone blockchain powered by the Cosmos SDK. The V4 update brings support for 33 markets and up to 20x leverage, along with the opportunity for dYdX token validators and stakers to earn trading fees.
In the realm of decentralized derivatives trading, dYdX is a frontrunner. Data from DefiLlama indicates that the protocol accounts for over 40% of this sector, boasting a daily trading volume of $1.8 billion in the past 24 hours.
Source: defillama.com
In June this year, dYdX announced its decision to develop a new blockchain. This move was primarily motivated by the limitations of existing Layer 1 and Layer 2 blockchains, which could not support the high throughput required for a sophisticated order book and matching engine.
To address this, the team decided to leverage the Cosmos SDK for its new blockchain, aiming to achieve a capacity of over 1000 order placements/cancellations per second. Additionally, the choice of Cosmos SDK was driven by its ability to offer full customizability and the necessary technology to manage a decentralized order book.
dYdX is the first derivatives DEX that has decentralized its order book. Usually, similar platforms keep their order books off-chain because blockchains cannot handle a large number of transactions from high-frequency traders. While keeping the order book off-chain can make trading smoother, it does not fully align with the idea of decentralization.
Although the dYdX order book will not be hosted directly on the dYdX chain, as this would still be too slow, it will instead be hosted within the validators, effectively making it decentralized. This approach was not feasible when the platform operated on Ethereum.
Importantly, the team behind the project does not plan to support the previous version of the protocol (V3 on Ethereum) and will begin winding it down once V4 is fully launched and battle-tested.
The dYdX token has responded positively to the announcement of the beta mainnet launch, surging by over 24% in the last 24 hours. With this development, token holders now have the opportunity to participate in staking while simultaneously receiving a portion of the platform’s trading fees in USDC.
Considering that dYdX ranks among the top fee-generating protocols, having generated over $8 million in fees in just the past 30 days, demand for the token could see significant growth.