dYdX, an Ethereum layer-2 crypto derivatives platform, has announced that it will become fully decentralized by year-end. Decentralization will be boosted after implementing the V4 upgrade.
dYdX to become fully decentralized by the end of the year
The dYdX exchange mainly deals in perpetual contracts. Perpetual contracts are derivatives products that do not have an expiry date but follow the same concept as futures and spot margin trading.
Currently, only select features of the dYdX exchange, such as Ethereum smart contracts, are decentralized. Governance and staking features also add to the protocol’s decentralized nature. The protocol’s “orderbook and matching engine” are centralized as they are managed by dYdX Trading Inc, the firm behind the development of the protocol.
The dYdX exchange revealed an upcoming V4 upgrade on Twitter, saying it would make the platform 100% decentralized by the end of the year. “You are not ready,” the tweet said.
dYdX’s V4 upgrade
dYdX released a blog post saying that the main focus in achieving decentralization would be on the orderbook and its matching engine. The team further said that the top challenges will be increasing the transaction processing power, finality and fairness in a decentralized manner.
The derivatives exchange explained that the objective behind achieving 100% decentralization was to gain the “fundamental improvement” gained by decentralized finance services compared to centralized services.
The blog post read that “With V4, dYdX will become fully decentralized. There will no longer be central points of control or failure of the protocol; all aspects of the protocol that can be controlled will be fully controlled by the community.” It added that “DeFi offers a massive improvement in transparency. For the first time, the financial system itself is no longer a black box to users. With DeFi, users can trust code instead of corporations.”
Following the implementation of the V4 upgrade, dYdX will receive no trading fees. Moreover, the platform plans to release new products and services, including synthetics and margin trading.
The decentralized finance sector has grown significantly for offering some superior benefits compared to the traditional finance system. However, most projects are not 100% decentralized because there is a team of developers behind the project that make some decisions on behalf of the community. The team mainly remains active during the early stages of the project, which comes with centralized risks.
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