The central theses
- dYdX has released a new version of its derivatives trading platform that offers low fees and shorter confirmation times.
- The new version is designed to handle scalability, one of the biggest challenges for decentralized finance (DeFi).
- This version reduces the barrier to entry by removing the onboarding process that other exchanges require.
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According to a project announcement today, dYdX has launched its Layer 2 perpetual swap platform.
The Layer 2 service is now active
dYdX launched its closed alpha in February and reported widespread adoption: “We had 110,000 users signed up for the waiting list and users were trading over 25,000 trades with a volume of $ 90,000,000,” wrote dYdx in its most recent Announcement.
Now the perpetual Layer 2 contract swap has left its completed alpha test phase and is live on StarkEx. As a Layer 2 service, dYdX promotes low fees and instant trades.
With dYdX, users of conventional browser wallets such as MetaMask can start trading without first depositing tokens on a bridge and without establishing a connection to an alternative network.
Users have access to quick withdrawals that access their Ethereum mainnet wallets directly. To keep costs down, users on the platform will have to pay liquidity fees instead of Ethereum’s native gas fees.
The dYdX trading platform settles all open-ended contracts with USDC for an unlimited period. Deposits must also be USDC. However, thanks to the integration into the 0x API, users can store other assets. Deposits and withdrawals are subject to Ethereum’s gas fees.
dYdX is powered by StarkEx, a Layer 2 scaling solution developed by StarkWare Industries to help Ethereum dApps such as cryptocurrency exchanges and gaming platforms improve their user experience (UX) with minimal changes to the code.
StarkEx uses ZK rollups that bundle hundreds of transfers in each transaction. Knowledge-free evidence is also used to reduce the consumption of costly Ethereum resources like mining power.
The need for Layer 2 solutions
Ethereum’s Layer 1 decentralized exchanges are grappling with prohibitively high gas fees. This has curbed the growth of the decentralized exchanges, making them impractical for small businesses.
Ethereum 2.0, which is being rolled out gradually, is reducing the fees for Layer 1 exchanges and apps. Meanwhile, Layer 2 solutions are making DEXs more affordable for users by relieving some of the transaction load that Ethereum is currently experiencing.
Disclaimer: At the time of writing, this author owned Bitcoin, Ethereum, Litecoin, Tezos, ADA, and AAVE.
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