dYdX has announced that it will launch its private testnet on Cosmos, following its earlier decision to move away from Ethereum. For the first time, whitelisted third parties will be able to participate in the launch of the private testnet as validators on the network. This will then pave the path for the rollout of a public testnet by the month’s end.
Understanding how dYdX works and the reasons for leaving Ethereum
In order to make a more secure, decentralized, and privacy-focused platform, dYdX employs StarkWare’s zero-knowledge proofs (ZK). Midway through 2022, dYdX announced that it would be moving away from Ethereum and developing its own Cosmos-based blockchain. According to the dXdY team, the Cosmos ecosystem will improve the user experience by allowing for more flexible pricing and more efficient transactions.
While dYdX’s DEX is similar to that of Uniswap and SushiSwap, it stands out in that it was developed specifically for perpetual trading. Perpetuals allow investors to speculate on an asset’s price movement in the future, similar to futures and options. In contrast to futures and options, however, perpetual swaps do not expire, hence the name. As of this writing, DYdX’s TVL was around $337 million, making it one of the more popular exchanges on the market thanks to its accessibility to both institutional and retail traders.
dYdX claims it looked into other options, such as Solana and layer-2 solutions when deciding to switch from Ethereum. However, it says that the flexibility of the Cosmos blockchain led them to conclude that it was the best choice. During this private testnet, DYDX will concentrate on developing its validator infrastructure and implementing its latest network enhancements. Some of the primary trading functions of the exchange will also be tested by the validators.
The move from Ethereum to Cosmos is notable because it is the second such announcement in recent times. After last month’s acquisition of the Cosmos-based trading platform Vortex Protocol, SushiSwap is also making the same transition.