Why is dYdX’s escape from Ethereum already a foregone conclusion?

Written by: Haotian

Recently, I saw @dYdXChinese claim that its total transaction volume has exceeded 120B, and the supply is 14.9%.TokenMore than 20MUSDC was pledged to the pledgers. In short, the data indicators of dYdX independent chain are pretty good after it was launched. So, how do you evaluate dYdX from L1 to L2 Then, the development process of independent chains "escaping from Ethereum"? Can the Ethereum Layer3 application chain narrative pull dYdX back? Next, let me talk about my opinion:

1) dYdXiaobai NavigationX is a typical application representative for the Trading system. Its goal from the beginning to the end is to become a perpetual system focusing on the order book type.contractDecentralized DerivativesexchangeBecause of this, dYdX has three core pain points in its development over the past few years:

1. It must have super strong technical expansion and high performance, because compared with the AMM trading pool type, the order book has extremely high requirements for real-time batch matching and execution, system throughput and latency;

2、要尽可能追求去中心化，因为在 L1 和 L2 阶段为了追求极致效率，dYdX 不得已采取了链下中心化服务器撮合订单的方式，但专注交易的 DeFi 项目，且目标和 CEX 等中心化exchangeIn the long run, we must compete for the market through intelligencecontractand DAO Governance to achieve transparency of key processes and disperse node deployment,CommunityUsers are more involved in governance decisions. (This is also the main reason why a large amount of transaction fees are allocated to verification nodes and staking users;

3. Manage user retention and growth as much as possible.exchangeIn comparison, the threshold for on-chain decentralized derivatives exchanges will be higher, so a better product experience is required in terms of product design, interactive interface, trading tools and risk control functions. Compared with DEXs such as Uniswap, dYdX is a relatively closed trading system. Unlike Uniswap, which can obtain a large amount of liquidity and transaction fee sharing by integrating with a large number of projects, dYdX can only rely on long-term user retention, especially fixed user groups such as professional traders and market makers to support product operations.

2) So, why does dYdX want to be an independent application chain? The answer is that currently neither L1 nor L2 can meet its ultimate performance pursuit.

Initially, dYdX developed its business on Ethereum L1. Due to the low performance and high gas fluctuations of the main chain, it faced the competitive pressure of Uniswap and chose to migrate to L2. When it came to StarkEX's layer2 product form, it seemed to have the foundation of L2's low gas and high throughput, but it was still a little short of the high performance that dYdX pursued. Therefore, a compromise solution of off-chain matching of transaction data was adopted, using Starkware Zero knowledge proofOn-chain and off-chain Finality Proof realizes the solution of high-speed transaction engine on L2. However, this solution still relies on off-chain services, which makes dYdX often criticized for its "centralization problem";

Then, with the launch of dYdX V4, dYdX built a dedicated high-performance chain based on Cosmos SDK, with 60 active validators maintaining the consensus mechanism, including Ledger, Coinbase Cloud, etc., and a continuously launched user staking reward dividend mechanism. With the support of independent application chains, dYdX has been frequently refreshing various operational data indicators, such as:

1. Currently, there are 149 million DYDX (14.9% of the total) in the pledged state;

2. The protocol has distributed more than 20 million USDC to 18,991 stakers;

3.CommunityMembers have initiated 55 governance proposals to date;

Judging from the data, the dYdX independent application chain is gradually realizing its original vision and becoming a super decentralized perpetual exchange. At least, dYdX has determined its ultimate application chain form, and there is no need to talk about the technical layer stories such as chain expansion and performance. In the future, it only needs to continue to operate the growth of data such as users and transaction volume.

3) Since dYdX already has its own independent kingdom, from a business perspective, as a successful application, dYdX today should be the tomorrow when many L1 and L2 application goals may be achieved.

One cannot help but ask, since both L1 and L2 are currently overly involuted at the infra level, and there is also the narrative expectation of layer3's super application chain, theoretically speaking, it should be no problem to develop dYdX on the Ethereum layer3 application chain, right?

The answer may disappoint most people: no.

1. dYdX focuses on the Trading system business of decentralized derivatives trading. Its initial positioning is to cultivate an independent user group and data growth model, and become an exclusive customized application chain.

Although layer3 can customize Gas Tokens, consensus mechanisms, verification rules, etc., the core interoperability capabilities of the layer3 application chain and the key asset settlement of the layer3 application chain still rely on the Ethereum mainnet, which will also bring certain limitations to dYdX.

2. Even Uniswap is not yet mature enough to build a layer3 application chain based on Ethereum. The depth of layer2 ecological liquidity and the performance barrier of layer1 settlement (high gas fee) still limit their possibility of building a layer3 application chain. In particular, the extremely scarce user and market liquidity on layer2 make it difficult for the application chain built on layer2 to have a stable user base and transaction depth. What's more, dYdX has such high requirements for decentralization, order book matching performance, and trading experience.

Therefore, dYdX's departure from the Ethereum ecosystem to become an independent application chain is both an active escape and a helpless choice limited by the performance limitations of Ethereum's underlying infrastructure. (Thinking from another perspective, although the competition for Ethereum's ecosystem and Infra has become fierce, it is still necessary.

This actually indirectly exposes a prominent problem in the multi-chain narrative of layer3 applications: the actual customization needs of applications like dYdX that have mature users and markets may not be met, and some applications that start from the application chain cannot benefit from the spillover effect of the super-strong ecological liquidity of L1 and L2 in the layer3 environment in the short term.

above

All in all, dYdX’s positioning and development trajectory in the Crypto ecosystem are quite unique. Although it has been “successful” to some extent, it can continue to have stable business expansion and growth in a turbulent market environment, just like protocol companies such as Uniswap and AAVE.

However, dYdX’s path to success is not something that can be easily replicated by many current applications on L1 and L2. In fact, Uniswap has already given the answer. It is difficult to escape by relying on the Ethereum ecosystem. It can only continue to optimize in the continuous stacking of L1, L2, L3, etc. After all, most applications will almost lose their survival without the composable liquidity provided by the underlying public chain.

The article comes from the Internet:Why is dYdX’s escape from Ethereum already a foregone conclusion?

Related recommendations: Why hasn’t there been a hit blockchain game in this bull market?

There will be new popular WEB3 games, please wait patiently. Written by: Gua Ge, W Labs I have been at the 2024 Hong Kong WEB3 Carnival for almost a week, and I was filled with various meetings and face-to-face meetings. I envy those who can attend seven or eight shows a day. I have basically become face-blind after three or four shows, and I still feel a little dizzy on the plane. Flight mode...