The decentralized exchange dYdX has officially entered a new phase with its v4 upgrade, now operating as dYdX Chain on the Cosmos network. This marks a pivotal shift from its previous StarkEx-based v3 iteration, introducing a more decentralized, efficient, and community-driven trading ecosystem.
Current State: Dual Operation of v3 and v4
- dYdX v3: Hosted on StarkEx, remains the primary platform for most trading volume.
dYdX v4: Built using Cosmos SDK and Tendermint, now in Beta with active trading functionalities.
Why the dual operation?- Ensures continuity for existing v3 users.
- Allows gradual migration while testing v4’s capabilities.
Despite v4’s nascent stage, DYDX token prices surged 54.45% in a week, reflecting market optimism. Daily trading volume averages $17B, outpacing previous months’ peaks (CoinGecko).
Why Investors Are Bullish on DYDX
1. Profit-Sharing Model
v4 introduces a groundbreaking incentive:
- 100% of trading fees (denominated in USDC) are distributed to DYDX stakers and validators.
- Contrasts with v3, where fees were retained by dYdX Trading Inc.
This shift mirrors debates around governance tokens like UNI—should they merely vote or also share revenue?
👉 Read more about Cosmos staking rewards
2. Enhanced Profitability via Orderbook Design
- No passive LPs: Unlike GMX, dYdX’s orderbook model eliminates intermediary costs, maximizing fee allocation to stakers.
- Market maker incentives: Unallocated DYDX rewards active participants.
Key metric:
- P/F ratio (Price-to-Fees): 6.6 (based on $1.05B projected annual fees).
- Estimated staking yield: 14.6%.
Caveats: Assumes full v3 migration and ignores low circulating supply (<20% of total DYDX).
Strategies Driving v3-to-v4 Migration
1. $20M DYDX Incentive Fund
- Approved via governance vote.
- Managed by Chaos Labs to prevent wash trading and ensure transparent rewards.
2. Trading Rewards & Fee Discounts
- New reward module: Distributes DYDX per block based on fees generated.
- Maker fee discounts: 1 bps (0.01%) for first 120 days (lower than v3’s 2 bps).
3. Phasing Out v3 Incentives
- Epoch 30 (Nov 21): Begin reducing v3 rewards.
- Epoch 32 (Jan 16, 2025): Fully discontinue v3 rewards.
4. Live v4 Staking
- DYDX can now be bridged to Cosmos and staked via Keplr Wallet.
- APR data pending.
Cosmos Ecosystem Support
Native USDC Integration
- Circle’s CCTP enables cross-chain USDC transfers to Noble → dYdX Chain via IBC.
Liquid Staking (stDYDX)
- Stride (90% market share in Cosmos liquid staking) will launch stDYDX, auto-compounding USDC rewards.
DeFi Use Cases
- Levana: DYDX/USDC LP pools (APR: 104–195%).
- Shade Protocol: SILK/DYDX pools (APR: 74%).
FAQs
1. Why migrate to v4?
- Higher fee earnings for stakers, governance rights, and long-term ecosystem growth.
2. Will v3 become obsolete?
- Yes, incentives end by January 2025, pushing volume to v4.
3. How to stake DYDX on Cosmos?
- Use Keplr Wallet after bridging tokens from Ethereum.
4. What’s DYDX’s max supply?
- 1B tokens; current circulating supply ~200M.
Conclusion
dYdX v4’s appchain model on Cosmos aligns with Web3’s decentralization ethos. With USDC fee sharing, robust incentives, and Cosmos ecosystem backing, DYDX is poised for sustained growth—if migration succeeds.