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dYdX announced the launch of its V4 private testnet this Tuesday, taking a significant step that will see the decentralized derivatives exchange (DEX) leave Ethereum.
By the end of September, the platform will be fully running on Cosmos.
The network allows developer teams to spin up their own native blockchains using the Cosmos Software Development Kit (SDK) according to their own preferences. Though distinct, each independent Cosmos-based blockchain can interact with one another.
The private testnet for dYdX is set to launch this Tuesday and run for two to three weeks. After that, a public testnet will be launched by the end of July.
The platform cited the lack of scalability on Ethereum as the main reason for the move.
"We reached a point where Ethereum couldn't process the transactions fast enough," dYdX’s marketing lead Nathan Cha told Decrypt at this year’s Paris Blockchain Week.
This is the second project to announce its migration from Ethereum to Cosmos. SushiSwap is also making the same move after the project acquired the Cosmos-based trading platform Vortex Protocol last month.
The teams explored various options, including Solana and layer-2 solutions. "We came to the conclusion that Cosmos was the better option because we can customize the blockchain to our needs,” said Cha. “Now we can handle transactions at a faster pace."
dYdX and centralized exchanges
Launched in 2017 by Antonio Juliano, who previously worked at Coinbase and Uber as a software engineer, dYdX currently has roughly $341.5 million in total value locked (TVL), per DeFi Llama.
TVL is a metric used to measure how much money is sloshing around in a given DeFi protocol. Lido Finance, a liquid staking protocol, currently has the largest TVL at a whopping $10.4 billion.
Though decentralized exchanges like Uniswap, Curve, and dYdX are steadily growing, they still only account for a small share of transactions compared to their centralized counterparts. Trading volume over the past day, Uniswap has facilitated more than $642 million in orders. Binance has processed more than $4.28 billion in trades over the same period.
Contrary to expectations at the time, the collapse of FTX last November did not significantly change this proportion.
"After FTX, we saw a 20-30% increase in trading volume, but only for a short time," David Gogel, Vice President of the dYdX Foundation, told Decrypt. "The companies that benefited the most from the FTX case are other centralized exchanges. People don't really know about self-custody, and there's still a lot of work to do to educate them. It's a complicated journey."