The Ethereum Layer-2 crypto platform dYdX has proposed to develop a dYdX chain – V4. The new chain will be a standalone blockchain compatible with the Cosmos SDK and Tendermint Proof-of-Stake (PoS) consensus protocol.

dYdX Ready for V4 Upgrade

The Ethereum-based crypto derivative is working on becoming fully decentralized with the V4 protocol. The platform will no longer receive transaction fees after fully implementing the update. The V4 is the beginning of the full decentralization of the dYdX platform.

This would further bring about scalability and optimum performance, coupled with the customizable features of the Cosmos SDK.

Introducing Cosmos

The Cosmo’s Chain is a unique technology that helps develop standalone blockchains. Cosmo’s has cross-chain features offering complete decentralization and customization. In addition, Cosmos Chains are part of the Tendermint PoS consensus.

Is a Standalone Cosmos Blockchain Necessary?

dYdX is a platform for pursuing disruptive innovations. The Ethereum L2 protocol is committed to improving its platform. As a result, it has explored the landscape of current and emerging blockchain technologies.

The dYdX team decided Cosmos is the perfect fit for upgrading its platform to a fully decentralized system.

The only barrier that would impact the adoption of V4 is full decentralization. And further decentralization of a platform will scale other components of the network. However, the dYdX team observed that both Layer-1 and Layer-2 are not enough to handle the throughput for the platform’s operation.

The dYdX needs an off-chain protocol to meet the demands of the platform. Other off-chain networks were insufficient to run the system to its desired level.

This is where the team decides to look at Cosmos, and it is what the dYdX needs to develop a blockchain for the V4 update.

Furthermore, by integrating other crucial components into the V4 upgrade, the platform will have an orderbook consistently with each other. Orders will be paired together on a real-time basis by the network.

Once the requirements for the dYdX V4 update are complete, there will be a high-performing throughput for the protocol, accelerating the decentralization. Cosmos is extremely beneficial to the V4 chain as it will help remove gas fees.

Part of the compliance for Ethereum-hosted crypto derivatives is that transaction fees are often the point of contention in the network.

The DeFi space is rapidly growing and has brought innovative financial benefits to users compared to the traditional financial system. However, the one stumbling block to more DeFi adoption is the lack of decentralization of most service providers.

In other words, a scenario where a team of developers decides on behalf of the larger DeFi community is not encouraging. And the centralization of digital finance comes with risks that most are coming to terms with. Decentralization is the way forward for DeFi platforms to scale their operations. 

Interestingly, it is not yet gloomy for decentralized finance as many crypto entities are embracing the move toward decentralization. And dYdX is the latest Ethereum-based platform to embrace full decentralization.

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