By ditching Ethereum for Cosmos, dYdX has sparked claims that it has chosen sovereignty over security.
Last week, crypto derivatives exchange dYdX announced that it will be leaving the Ethereum ecosystem and launching its own blockchain within the Cosmos ecosystem. According to dYdX’s founder, a new chain will allow the platform to provide the best possible experience for its users – enabling the platform to more easily customize things like fee structures and transaction speeds.
Even as layer 2 networks like StarkWare are expanding Ethereum’s capabilities at a rapid pace, updates to the core Ethereum protocol are lagging, and competition from other smart contract ecosystems is growing fiercer by the day.
DYdX’s decision to leave Ethereum has been viewed by some as evidence that the original smart contract network simply is not moving fast enough to accommodate the demands of a maturing crypto ecosystem.
DYdX’s path – which saw the platform outgrow Ethereum’s layer 1 blockchain, move to StarkWare, and then leave Ethereum altogether – provides insight into two competing visions for the future of crypto: the app chain versus the global computer. It’s also a case study into the weaknesses of Ethereum layer 2s, which are generally viewed as a saving grace for a network that has famously struggled to scale.
The decentralized order book
The advantage of decentralized finance (DeFi) is that it enables users to transact without any intermediary. In the case of a decentralized exchange (DEX), this means users can buy and sell assets without a bank dictating prices and taking fees. DYdX might not have the same name recognition as DeFi giants like Uniswap, but it has quietly grown into a major force within DeFi due, in part, to its ability to facilitate large trades without slippage.
Slippage is a quirk of automated market makers (AMMs) – the go-to technology that powers decentralized exchanges, such as Uniswap and Sushi, behind the scenes.