The dYdX team, one of the veteran decentralized exchanges, shared the details of dYdX V4. According to the announcement, the project will be on Cosmos blockchain with their own chain at the top of it.
It is found interesting on Crypto Twitter as Ethereum L2 projects (such as Polygon, Arbitrum, Loopering, Optimisim ++) are getting more popular these days. Obviously, the dYdX team played the game for the long run.
Let's learn about their decision and the ideology behind it.
Why on Cosmos Ecosystem?
There are two main reasons: Cosmos SDK and Tendermint Proof-of-stake consensus protocol
Basically, Cosmos SDK enables everyone to create and deploy their own blockchain by using Cosmos. The freedom that SDK provides is, obviously, favored by dYdX team to be on Cosmos.
After making a brand new blockchain with their own rules, the team used Tendermint consensus protocol for some valid reasons:
it can be used as a plug-and-play replacement for the consensus engines of other blockchain software.
This consensus engine is up for any blockchain software to interact and read the codes for the development. Since we are heading for cross-chain crypto ecosystem, that is a brilliant idea for such a decentralized project.
As a result, they created their own blockchain with Cosmos technology and the blockchain can interact with any programming language that they want.
New Trend - Side Chains, Validators, Native Tokens
Side Chains are one of the hottest concepts that is embraced by top projects in crypto. The chains enable the teams to drive their own projects with their sets of rules.
Via side chains, the projects are making the community stakeholders much easier because the users / investors / community play active role in validation, token burn, governance and more.
In dXdY example:
In dYdX V4, each validator will run an in-memory order book that is never committed to consensus (i.e., off-chain).
Validators play an important role like miners play in Bitcoin and Ethereum as well as Witnesses of Hive. At that point, dYdX is preparing itself for the upcoming and inevitable future:
🔥🔥 Side Chains & Cross-chain operations 🔥🔥
Though it may sound doubtful in the beginning, the details of announcements and looking at the market from the outer make it clearer for us to give credit for the decision of the dYdX team.
TL;DR
The dYdX team designed V4 in a futuristic way that will inspire many other projects. By using Cosmos SDK, they created their unique blockchain in Cosmos Ecosystem. Besides, Tendermint PoS enabled them to opt for going inter-blockchain since it enables the software to interact with other blockchain software.
Since it has always been discussed on LeoFinance, we are marching through the adoption of two important concepts in crypto:
- Side Chains
- Inter-blockchain Operations
The dYdX V4 will be a role model for the other projects if it can be successful 😎
What do you think about this move by dYdx?
I belive Hive would, also, be a nice match for that 😉