dYdX Declares War On MEV Ahead Of Appchain Migration
Ethereum Users Have Lost $450M to Maximal Extractable Value Since September 2022
By: Samuel Haig •DeFi News
dYdX, the leading decentralized perpetuals exchange, is taking a stand against the insidious practice of Maximal Extractable Value (MEV) ahead of its migration to a Cosmos-based appchain.
On Aug. 21, the dYdX Foundation published a list of preferred practices for dYdX Chain validators and stakers, including ensuring a “fair and honest trading experience” for users by shunning MEV activities that could harm or disadvantage ecosystem participants.
The manifesto warns that validators engaging in malicious MEV will face punishment, alongside encouraging social measures to disincentivize MEV extraction altogether. The foundation added delegates could also face repercussions should they support validators engaging in extractive MEV.
“Aligning on potential good practices for validators could be important in guiding responsible participation and decision-making within the dYdX Chain ecosystem,” the team said.
MEV describes advanced arbitrage techniques used by validators to extract profits by reordering or sandwiching transactions executed by ordinary web3 users. Flashbots, an MEV research team, estimates Ethereum users lost $450M to MEV since The Merge took place last September, and $640M in the two years preceding.
The project’s DYDX token is up 10% over the past 24 hours.
The team launched the second public testnet for dYdX Chain on Aug. 10, introducing more than 30 markets on the platform, distributing testnet tokens to reward users, and several back-end upgrades. The first testnet was sunset on Aug. 7 following a month of operation.
dYdX dominates the perpetual DEX market, hosting $437.3M worth of trades on Aug. 21, according to Token Terminal. It beat out its top two rivals combined by double, with Kwenta hosting $128.6M in daily volume and GMX coming in third with $77.7M.