dYdX, a decentralized layer-2 exchange (DEX), has taken a seemingly monumental step by releasing its code as open-source as it prepares for the implementation of Version 4. The exchange currently has a Total Value Locked (TVL) of over $353 million according to DeFiLlama.
In a post on October 24th, dYdX plans to operate its standalone blockchain on Cosmos and migrate away from Ethereum for security. The standalone blockchain, dYdX Chain, will be built using the Cosmos Software Developer Kit (SDK) and will be based on the Tendermint proof-of-stake consensus algorithm.
Projects often release their code as open-source on blockchain platforms, allowing the public to examine how smart contracts work. By releasing their code, the protocol contributes to building trust among users and community members, increasing security, and promoting decentralization. This is particularly important for DEXs, which handle sensitive financial data to enable trustworthy trading for all users.
dYdX founder Antonio Juliano has already announced that the exchange's developer, dYdX Trading Inc., will update its bylaws to become a nonprofit organization. The exchange developers will work on an open project without benefiting directly from it. While the platform will remain a for-profit public benefit corporation, the founder and board will "act not just to maximize shareholder value but also in the interest of the general public."
However, the Layer-2 protocol must be approved by the community through a vote before transitioning to Version 4 on Cosmos. After that, dYdX will be fully open-source and decentralized, with the community taking over the protocol's development through a governance vote of the dYdX Foundation.
With Version 4, dYdX will establish an off-chain order book and release a scalable matching engine that can process more transactions. The development team believes that these improvements will "dramatically" enhance the protocol, all while operating on Cosmos, a scalable Layer-1 and interoperable blockchain, without charging any trading fees.
These enhancements will make dYdX trading more efficient. Various features such as batch execution and limit orders will go live. At the same time, dYdX Version 4 will support trading in new asset classes such as stocks, commodities, and real estate, making the protocol more versatile.
Ahead of this transition, the exchange's native token has been trading at all-time highs in the second half of 2023. Notably, the token has broken resistance levels from July to October 2023 as trading volumes increase. Moreover, analyzing the daily chart, bullish bars along the upper Bollinger Band indicate strong upward momentum. The range around $3.25 and $3.5, which marks the first-quarter 2023 highs, could be an immediate target for optimistic bulls.
Overall, dYdX's decision to release its code as open-source and prepare for Version 4 represents a significant move towards decentralization and transparency in the world of decentralized exchanges. The introduction of new features and asset classes with Version 4, combined with the bullish performance of its native token, indicates a promising future for dYdX and its growing user base.
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