The cryptocurrency exchange has introduced a testnet featuring an on-chain order book and matching engine, eliminating centralized components present in the mainnet version.
Key Developments
According to a July 5 announcement by the development team, dYdX has rolled out a public testnet for its "v4" upgrade. This completes "Milestone 4" of five planned stages, paving the way for the future mainnet release.
Once implemented, v4 aims to enable the exchange to operate in a fully decentralized manner.
How dYdX v4 Achieves Decentralization
Current Architecture:
- Built on Ethereum and StarkEx.
- Operates as a non-custodial decentralized exchange (DEX) but relies on a centralized order book and matching engine.
- Contrasts with automated market maker (AMM) DEXs like Uniswap, which use on-chain pricing algorithms.
v4 Upgrades:
- Replaces centralized components with on-chain order books and validator-operated matching.
- Runs a portion of the application on a dedicated dYdX network for scalability.
Testnet Features
- Users can request testnet funds to simulate trading, track P&L, and explore core functionalities.
- Cross-network bridging will be enabled later in the testing phase.
Future Roadmap
Milestone 5:
- Integrate stablecoins.
- Add support for Cosmos Inter-Blockchain Communication (IBC) to expand accessibility.
- Mainnet Launch: Follows final milestone completion.
👉 Explore decentralized trading innovations
FAQs
What makes dYdX v4 unique?
Unlike traditional DEXs, v4 combines full decentralization with an on-chain order book—avoiding reliance on AMMs while removing centralized control.
Can users interact with the testnet now?
Yes, virtual trading is live, but bridging between networks is pending.
Why did dYdX phase out centralized elements?
To align with DeFi principles and enhance transparency, security, and user control.
👉 Learn how dYdX compares to other DEXs
Regulatory and Historical Context
- dYdX exited Canada in April due to regulatory challenges.
- A 2022 promotional $25 sign-up bonus faced privacy concerns and was discontinued.