dYdX announces it will move to the Cosmos ecosystem, “escaping” Ethereum

On June 23, dYdX announced that it would move to the Cosmos ecosystem, develop a custom application chain based on the Cosmos SDK, and implement the migration in the upcoming dYdX V4 version. This may be the first time that a well-known Ethereum native DeFi application in the industry has chosen to escape.

Antonio, the founder, said something meaningful: "When choosing a chain, I think people should not think about what kind of users are on the chain, but what kind of product experience the chain can achieve."

The application layer has suffered from Ethereum for a long time. As early as November last year, dYdX founder Antonio publicly questioned Ethereum's efficiency improvement on Twitter, and his words revealed that he was considering moving dYdX to other chains.

Antonio believes that Ethereum has been lacking in technological implementation for many years, and dYdX's goal is to become a DEX that is "ten times larger than its current size and can compete with centralized trading platforms in terms of experience."

Antonio has always been known as a product manager in the industry. As one of the earliest DeFi projects, dYdX has long been committed to developing mobile applications and striving to bring decentralized applications (Dapp) to the mass market. In the migration announcement, dYdX mentioned that the team is not satisfied with the current transaction speed of 10 transactions per second and 1,000 orders/second. The expansion requires the construction of a centralized off-chain order matching system, which does not match the positioning of dYdX decentralized trading. Therefore, in V4, dYdX will build a decentralized off-chain order system that takes into account both performance and concept.

But is it just because the Ethereum ecosystem really cannot meet the needs of dYdX? The community believes that the reasons behind Antonio’s decision may be more complex and multifaceted.

Crypto KOL polynya said that technically, the chain performance required by dYdX V4 can be achieved by Rollups. Therefore, this decision may be made out of considerations of chain sovereignty and timing. First, rollup technology is too late to be ready for prime time; second, there is not enough demand in the industry to require rollups. In addition, using dYdX as an ecological token may cause chain security and sustainability issues.

In response, Antonio said that the migration does have chain sovereignty considerations, and dYdX's exclusive use of one chain will make it easier for the protocol to recover from vulnerabilities (fork). In terms of security, the number of nodes in the initial stage of the new chain will be controlled to ensure security.

Regarding rollup technology, Antonio expressed pessimism about the future scalability of rollup. “dYdX is the largest dapp on rollup right now and knows rollup too well.”

Crypto analyst @EffortCapital said that the impact of dYdX choosing Cosmos as a DeFi OG should not be underestimated. Other crypto KOLs are not optimistic about this decision because they do not understand the Cosmos ecosystem.

In addition, Chainlink community ambassador @ChainLinkGod and Cosomos ecosystem developer Zaki and others welcomed and looked forward to the migration.

Solidity developer 0xTomoyo analyzed the reasons for the migration from a technical perspective. The current dYdX order book is run on a centralized server off-chain, and L2 is only used to settle matching transactions. In theory, they can build an order book with memory on L2, but such a tool does not exist at present. Therefore, dYdX chose to build a new chain on Cosmos, and each validator runs a memory order book. This further realizes the decentralization of the protocol.

StarkNet co-founder @TobbyKitty said frankly that the biggest reason for migrating to Cosmos is to allow dYdX Token to run verification nodes on the new chain and lock in the value of the protocol, but this is not possible on L2.

Finally, in response to the community’s general question of whether the decision should be put to a vote by the dYdX DAO, Antonio responded, “The DAO will vote on the decision. This is just software that the company is developing, and the protocol can choose to use it or not.”

The protocol layer pushes the developer-friendly workload to Layer2, and next to Layer2 there are a large number of API providers and node service providers such as Infura and InfStones. Is the development work becoming easier or harder in the years of ecological accumulation? It is not difficult to feel that Antonio is tired of following the pace of Ethereum again and again.

Whether ecology breeds applications, or applications feed back to ecology, it is not a matter of the east wind prevailing over the west wind. Different aspects of contradictions in different periods lead the development of things.

But the dYdX incident tells us that at the moment, instead of arguing about who is the boss of Layer2, perhaps we should listen more to the voices of product managers.