Decentralized exchange (DEX) platform DYdX has announced plans to migrate its entire ecosystem from the Ethereum network to Cosmos, while simultaneously introducing a decentralized order book strategy.
The development was revealed by Charles d’Haussy, CEO of dYdX Foundation, during an interview at Korea Blockchain Week 2023.
The migration signifies a significant strategic shift for dYdX and speaks to the broader push within the cryptocurrency world to uphold decentralization as a core value. Decentralization allows for greater inclusivity and security, limiting the potential for single points of failure or control. dYdX' move to establish a "purely decentralized" order book reflects an industry-wide quest to further these decentralized ideals.
One of the key challenges facing decentralized exchanges like dYdX is the latency in on-chain order books, particularly when it comes to high-frequency trading markets such as crypto derivatives. According to d’Haussy, traditional on-chain order books suffer from lag times as long as one second, which is a significant drawback in a market that demands speed.
“If you have like a one-second block time, you still have a one-second latency. And the market of crypto derivatives is a very high-frequency market. So, you cannot offer one-second latency," d’Haussy notes.
To mitigate this, dYdX is taking an innovative approach by keeping the order book off-chain while still maintaining its decentralized nature. The order book will be hosted within the memory of the validators, a move that d’Haussy described as a "new step forward" in decentralization. Normally, validators are responsible for validating and creating new transaction blocks. However, in the case of dYdX, validators will take on an expanded role by also storing order books in their memory, enabling a truly decentralized yet efficient trading experience.
According to the clarification from d’Haussy, this move is a full migration, not an expansion.
“The Ethereum exchange will close within a few months [...] we are migrating the full ecosystem,” the exec revealed.
The transition is expected to be smooth for dYdX users, requiring only a simple connection of their MetaMask wallets to the new dYdX chain.
According to dYdX Foundation, the community has overwhelmingly supported the migration and the new v4 Adoption, as revealed in a recent vote. The shift to Cosmos and the introduction of a decentralized order book underscore the significant transformation underway at dYdX, echoing the larger trend in the crypto industry to continually refine and redefine what decentralization can accomplish.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
