After rigorous testing and numerous iterations, dYdX is soon making its transformational shift to the Cosmos ecosystem, unveiling its fourth and latest version as a standalone blockchain known as dYdX Chain, built using the Cosmos SDK. We’re proud to be joining the network as a genesis validator, enabling staking for dYdX's token, DYDX.
Since its inception, dYdX has been instrumental in facilitating over $1 billion in daily trading volume, achieving a remarkable milestone by surpassing $1 trillion in total trading volume through smart contracts on the Ethereum blockchain. Looking ahead, the exchange will implement a unique off-chain, in-memory order book trading system that will be overseen by a network of validators.
This article delves deeper into what this entails for stakers and offers insights into the workings of dYdX v4.
dYdX stands out as the leading decentralized exchange (DEX), specializing in the trading of derivative products known as "perpetuals." Perpetuals allow users to take leveraged long or short positions on crypto assets. In contrast to Uniswap and other DEXs, dYdX distinguishes itself by not relying on an automated market maker (AMM) to facilitate trading. Instead, it employs a traditional orderbook and matching model to cater to the needs and expectations of sophisticated traders and institutions. We've explored the key distinctions between AMMs and order book trading here.
In its initial launch in 2017, dYdX was introduced as an Ethereum Layer 1 application. However, the chain's limited scalability became evident, with users facing exorbitant gas fees for even simple trades.
To enhance scalability, dYdX transitioned to an Ethereum-based Layer 2 solution employing StarkX/StarkNet technology. This shift significantly reduced gas fees, vastly improving the user experience. Yet, it led to a higher degree of centralization within dYdX.
To address this centralization concern and advance decentralization, dYdX made the strategic choice to transition to its blockchain, built using the Cosmos SDK. This imminent transition, on the verge of completion and soon to go live, represents the DEX’s fourth and latest version, known as the dYdX Chain and will feature a decentralized, off-chain order book capable of seamlessly scaling with the platform’s growth.
As part of the Cosmos ecosystem, dYdX stands to gain the full advantage of decentralization, along with an array of unique features such as extensive customizability and scalability. We’ve delved into the specific reasons behind dYdX’s choice of Cosmos in the following section.
dYdX's decision to migrate from Ethereum to Cosmos stems from a strategic choice to utilize the unique capabilities of Cosmos technology, which offers a distinct advantage in building new layer-1 blockchains. Cosmos' Tendermint proof-of-stake consensus engine provides the foundation to develop a standalone, application specific blockchain with cross-chain capabilities, and makes it possible to fully customize how the chain functions.
Unlike Ethereum, where network congestion can be a concern, Cosmos’ app-specific chains function independently, and each Cosmos chain operates with its network of validators and token. This move permits blockchains to have faster transaction processing while maintaining decentralization, thus positioning Cosmos as the ideal choice for dYdX’s requirements, which demand high throughput - roughly, 10 operations per second and 1,000 orders/cancellations per second. Currently, Cosmos can process up to 10,000 transactions per second, or TPS, compared to Ethereum's 15-25 TPS.
A recent twitter thread by dYdX succinctly described the key separators between Layer 2s/Roll ups and standalone app-chains, and reiterated their decision to choose the latter. Read it here.
While on-chain orderbook DEXs offers a high level of transparency and decentralization, it comes at the cost of potentially higher transaction fees and slower transaction speeds. With each transaction requiring on-chain validation, the underlying network’s throughput can become a bottleneck, thus affecting the overall network efficiency.
In contrast, on dYdX v4, each validator will maintain an off-chain in-memory order book. When a new order is placed, it is initially routed to a validator that is randomly chosen. Subsequently, this validator disseminates the transaction to other validators to ensure the order book remains up to date. This alleviates the pressure on the network, allowing the chain to achieve significantly higher throughput for the order book while retaining decentralization.
The transaction flow roughly looks this -
Total supply: 1,000,000,000 DYDX tokens
50% of tokens go to the dYdX community which will comprise liquidity providers, traders, stakeholders, and users who complete trading milestones. A portion of this share goes to the community treasury.
27.73% of the tokens go to investors.
15.27% of tokens are allocated to the official team members of dYdX including founders, advisors, employees, and others.
7% of the tokens are reserved for consultants and employees who will join the platform in the future.
We’ve had extensive involvement with dydX v4 since inception as well as the Cosmos ecosystem in general. We received a grant from dYdX to write an in-depth research report (available here) that examines the implications of Maximum Extractable Value (MEV) within the context of dYdX v4 from a validator's perspective. Additionally, we were on all three testnets and actively contributed through debugging and sharing validator best practices.
dYdX occupies a unique position as a decentralized solution that directly competes with centralized exchanges in terms of its order book model, trading volume, and user experience aligns with our vision for the future of decentralized finance. Furthermore, we share dYdX's philosophy of prioritizing the creation of the best possible product, making our support for their forward-looking vision a natural choice.
Chorus One has been more than just a player in the Cosmos space. With our $30M venture arm, Chorus Ventures, we have actively invested in promising projects such as Celestia, Osmosis, Agoric and more, which keeps us well-connected to the ecosystem. We're also deeply engaged with the community, publish research reports, and extensively cover Cosmos in our blog.
Chorus One is the only node operator with a dedicated in-house quant team focussing on MEV. MEV refers to the maximum value that can be extracted from block production in excess of the standard block reward and gas fees by including, excluding, and changing the order of transactions in a block.
Because of our MEV expertise, we were provided a grant by dYdX to work on a research paper that goes into the territories of cross-chain arbitrage and also explores the subject of negating MEV externalities in a fully decentralized, validator-driven order book.
The report entails comprehensive insights on MEV’s impact on the new chain and trading, cross-chain MEV opportunities, user welfare, and centralization risks, ultimately providing practical solutions for mitigating validator-driven MEV risks. Read the report here.
Chorus One is the most active node operator on Cosmos where on-chain governance is enabled.
We have published a detailed research report last year on Cosmos’ governance, which elaborates on Cosmos’ validator participation, voting trends, controversial proposals, and why Chorus One is one of the most active node operators in the Cosmos ecosystem.
In the report, we conducted a governance performance comparison against the top 5 validators by stake on 13 chains from April 2022 to November 2022, which includes Akash, Axelar, Cosmos Hub, Evmos, injective, Juno, Kava, Osmosis, Persistence, Regen, Secret, Sommelier, Stargaze.
As illustrated in the chart below, our voting activity exceeded that of the average top 5 validators by 30%. However, it's crucial to note that the top 5 validators can vary significantly on each chain.
Out of the 13 networks studied, we achieved a 100% voting record in two networks, and in one network, Kava, we surpassed the average by approximately 90%, as demonstrated in the graph below. We consistently exceeded the average participation rates of the Top 5 validators on 11 out of 13 networks
*Since DYDX inflation goes to traders, dYdX stakers, in contrast, will receive 100% of the trading fees that are paid out in USDC.
To learn more about staking DYDX with Chorus One, don’t hesitate to reach out to us at staking@chorus.one. For any support queries, visit here.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 45+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
The Graph (GRT) is a decentralized indexing protocol for querying networks like Ethereum and IPFS. The protocol lets anyone make blockchain data easily accessible by building and publishing public APIs called subgraphs.
The Graph has decided to move the protocol to Arbitrum since bringing the protocol smart contracts onto a Layer 2 network allows for gas savings (up to 26x), faster transactions and still being able to ultimately rely on the security inherited from Ethereum.
For example, Indexers could open and close allocations to index a greater number of subgraphs with higher frequency, developers could deploy and update subgraphs with greater ease, delegators could delegate $GRT with increased frequency, and curators could add or remove signal to a larger number of subgraphs - all actions previously considered too cost-prohibitive to perform frequently due to gas.
You can delegate anytime over the next few weeks.
Currently, the reward share is 50% on Ethereum and 50% on Arbitrum.
Rest assured that your funds will be completely safe after the migration, and any unclaimed rewards will also move to Arbitrum, once you have moved your delegation.
4. You will then be taken to the following page. Here, Click on ‘Transfer Delegation’.
5. The Receiving Arbitrum One Wallet Address will already contain the same address as your current Ethereum wallet.
6. For your convenience, consider sending a small amount of ETH to this wallet address through the official Arbitrum bridge at https://bridge.arbitrum.io if you lack ETH to cover gas expenses. As an optional precaution, you can perform any transaction with the wallet to verify your control over it.
7. Then, click on the ‘Transfer delegation’ button. Your transfer will be initiated.
8. You will then see a countdown appear. Once the countdown reaches Zero, the migration will be completed, and your delegations will have moved to Arbitrum!
Note - Going forward, you will still be able to manage your delegations from this portal. Just make sure you're on the correct network, "Arbitrum One".
Here’s a walkthrough guide by The Graph Foundation to help you with the migration.
Additionally, if you have any questions, we are happy to answer them on our telegram channel at https://t.me/chorusone
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 45+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
Ensuring the security of our customers' assets and information has always been our foremost priority at Chorus One. Today, we are excited to announce a significant milestone in our ongoing commitment to establishing world-class security measures for our customers: the attainment of the ISO 27001:2022 certification.
The ISO 27001 certification is a globally recognized standard designed to safeguard critical information assets, including employee and customer data. More precisely, ISO 27001 outlines specific requirements for the creation, maintenance, and continual improvement of an Information Security Management System (ISMS).
As a customer, when you entrust a third party like Chorus One with your data, it's imperative that they are not only certified but also compliant with the ISO 27001 standard. This certification ensures that the provider's processes and data controls undergo regular and independent audits, providing you with the highest level of assurance that your information will remain safeguarded.
Given the escalating prevalence of cybercrime and the constant emergence of new threats in the industry, managing cyber-risks can appear daunting. By prioritizing information security and business continuity, we aim to offer our users the peace of mind that their investments are secure, even in the face of adversity. With this certification, we're better prepared than ever to offer our customers the safest way to earn returns on digital assets through simplified staking.
"Attaining the ISO 27001 Certification represents a significant milestone in Chorus One's commitment to building trust with our partners. It offers the highest assurance that our staking infrastructure, operations, and systems adhere to world-class security standards. While not a mandatory requirement, we have chosen to obtain this certification as a testament to how seriously we take the security of our customers." - Brian Fabian Crain, CEO, Chorus One
To gain a more comprehensive understanding of Chorus One's security framework and practices, visit our dedicated security page.
If you'd like to learn more about how we provide the safest and easiest means to maximize yields on your assets, don't hesitate to reach out to us at staking@chorus.one.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 45+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
We are excited to announce our partnership as Mainnet Alpha operators with Obol Network!
In April of this year, the Obol Network achieved a significant milestone with the launch of its Alpha phase, which witnessed the deployment of the first Mainnet Distributed Validators (DV) by the staking community. The foundation for this initiative was laid by the core team in December 2022 when they deployed the very first Mainnet DV. Since then, more than 45 organizations have joined in, running Distributed Validators on the Ethereum Mainnet in either solo or multi-org clusters.
In a nutshell, Obol Network is an ecosystem designed for trust-minimized staking, enabling anyone to create, test, operate, and coordinate distributed validators, with a primary focus on Ethereum staking solutions.
Presently, there is no way to operate validators in a high-availability environment without introducing the risk of slashing. Each validator operates as a single entity with its private key, and the high barriers to entry for running validators can naturally lead to stake centralization within the ecosystem.
This is where Obol steps in.
The Obol Labs takes the lead in addressing these challenges, particularly working to address stake centralization by improving the scalability and resiliency of Ethereum consensus. Obol has developed Distributed Validator Technology (DVT) to enable multiple nodes to function collectively as a single validator on Ethereum. Through Obol’s distributed validator client, ‘Charon’, multiple nodes work together by combining their partial signatures into a full signature for the distributed validator and coming to consensus.
DVT ensures fault tolerance as long as a specific threshold of active nodes is met (e.g., 3 out of 4, 5 out of 7, 7 out of 10, etc.). This approach enhances security, offers near-perfect performance, and eliminates the vulnerability of a single point of failure in validator nodes by distributing responsibilities across multiple nodes. Additionally, each node within a DV cluster can be run by different individuals or groups, thereby improving byzantine fault tolerance. As a result, DVs strengthen resilience while reducing security risks. In addition, this approach also reduces the risk of stake centralization by lowering entry barriers, enabling a broader participation in running validators effectively.
As we approach the full Ethereum mainnet deployment of Obol, Chorus One, alongside other players, have launched an Obol DV on Mainnet in their Alpha Phase. We are also continuing to test DVs on the Görli testnet to ensure support for varying node counts and the expansion of clusters to accommodate a growing number of validators. Within this comprehensive evaluation, we are closely examining crucial metrics such as the efficiency of validator duties, occurrences of missed duties, and inclusion distances, among other vital aspects, including the potential impact of MEV-boost on these configurations.
Our shared dedication to gathering this essential data is geared towards empowering stakeholders to confidently deploy distributed validators on the Ethereum mainnet. Furthermore, through our collaborative efforts, we aim to cultivate a deeper appreciation for the significance of DVT within the broader ecosystem. Together, we are committed to spearheading the adoption of decentralized staking, propelling Ethereum staking to new heights and ensuring it's more efficient, secure, and scalable than ever before.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 40+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
