Recently, I saw that it claimed that its total transaction volume has exceeded 120B, and 14.9% of the supply of tokens has been staked, and more than 20MUSDC has been allocated to stakers. In short, all data indicators after the launch of the dYdX independent chain are good. So, how do you evaluate the development process of dYdX's "escape from Ethereum" from L1 to L2 and then to the independent chain? Can the Ethereum Layer3 application chain narrative pull dYdX back? Next, let me talk about my opinion:
dYdX is a typical application representative born for the Trading system. Its goal from beginning to end is to become a decentralized derivatives exchange focusing on perpetual contracts of order book type. Because of this, dYdX has had three core pain points in its development over the past 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 on system throughput and latency;
2. It must pursue decentralization as much as possible, because in order to pursue extreme efficiency in the L1 and L2 stages, dYdX had to adopt the method of off-chain centralized server matching orders, but as a DeFi project focusing on transactions, and aiming to compete with centralized exchanges such as CEX for the market, in the long run, it must achieve transparency of key processes through smart contracts and DAO governance, and disperse node deployment to allow community users to participate more in governance decisions. (This is also the main reason why it allocates a large amount of transaction fees to verification nodes and pledge users;
3. Manage user retention and growth issues as much as possible. Compared with exchanges such as CEX, the threshold for on-chain decentralized derivative exchanges will be higher, so there must be a better product experience in terms of product design, interactive interface, trading tools and risk control functions; compared with DEX such as Uniswap, dYdX is relatively a more 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 operation.
So why does dYdX want to build an independent application chain? The answer is that neither L1 nor L2 can currently meet its ultimate performance pursuit.
Initially, dYdX developed its business on Ethereum L1. Due to the low performance and high Gas volatility of the main chain, dYdX faced competitive pressure from 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 proof of on-chain and off-chain Finality Proof to realize the solution of building a high-speed transaction engine on L2. However, this solution still has to rely on off-chain services, which makes dYdX often criticized for having "centralization problems";
Immediately afterwards, with the launch of dYdX V4, dYdX built an exclusive high-performance chain based on Cosmos SDK, with 60 active Validators that maintain the consensus mechanism, including Ledger, Coinbase Cloud, etc., and the user pledge reward dividend mechanism is continuously launched. With the support of the independent application chain, 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 US dollars of USDC to 18,991 pledgers;
3. Community members have initiated 55 governance proposals so far;
From the data, the dYdX independent application chain is gradually realizing its original vision and becoming a super decentralized perpetual exchange. To dYdX has already determined its ultimate application chain form, and there is no need to tell the story of the technical layer such as chain expansion and performance. In the future, it only needs to continue to operate the data growth such as users and transaction volume.
Since dYdX already has its own independent kingdom, from a business perspective, as a successful application, dYdX today should be the tomorrow that many L1 and L2 application goals may be achieved.
One can't help but ask, since L1 and L2 are currently over-involution at the infra level, and there is also a narrative expectation of the layer3 super application chain, in theory, if dYdX is put on the Ethereum layer3 application chain for development, it should be fine, right?
The answer may disappoint most people, it can't.
1. dYdX focuses on the Trading system business of decentralized derivatives trading. Its initial positioning is to cultivate independent user groups and data growth models, and become an exclusive customized application chain.
Although layer3 can customize gas tokens, consensus mechanisms, verification rules, etc., the core interoperability capabilities of layer3 application chains and the settlement of key assets of layer3 application chains 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 ecological liquidity of layer2 and the performance barriers of layer1 settlement (high gas fees) 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 application chains 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 build an independent application chain is both an active escape behavior and a helpless choice limited by the performance limitations of Ethereum's underlying layer. (Thinking from another perspective, although the competition for Ethereum ecosystem Infra has become fierce, it is still necessary.
This actually exposes a prominent problem in the multi-chain narrative of layer3 applications: the actual customization needs of applications like dYdX, which have mature users and markets, may not be met, and some applications that start from the application chain cannot get the spillover effect of L1 and L2's super strong ecological liquidity in the layer3 environment in the short term.
The above
In short, dYdX's positioning and development trajectory in the Crypto ecosystem are quite unique. Although it has been "successful" to some extent, it can be compared with Uniswap, Like protocol companies such as AAVE, they continue to have stable business expansion and growth in a turbulent market environment.
However, dYdX's path to success is not something that many applications on L1 and L2 can easily replicate. In fact, Uniswap has already given the answer. It is difficult to escape if you rely on the Ethereum ecosystem. You 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.
Note: If you are a dYdX coin holder and recognize dYdX's stable independent chain business development and trends, you may wish to participate in staking mining: (https://dydx.zone/Haotian) As the transaction volume increases, the pledgers can continue to obtain stable dividends of USDC, which is still very attractive. Note: Only suitable for users who pursue stable long-term value investment.
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