Margin Trading Exchange dYdX to Fully Decentralize in 2022

One of the most widely used exchanges in DeFi plans to fully decentralize by the end of 2022.

By: Owen Fernau Loading...

Margin Trading Exchange dYdX to Fully Decentralize in 2022

Margin trading protocol dYdX announced plans this week to fully decentralize by the end of 2022 as a part of its V4.

It’s a major move for one of crypto’s most widely-used decentralized exchanges.

Right now, dYdX Trading Inc., the company which developed the dYdX protocol, generates revenue through trading fees based on trade volume. But by the end of 2022, “no central party (including dYdX Trading Inc.) will have the ability to receive trading fees on dYdX V4,” the announcement post stated.


While the post makes no mention of the fees going to holders of DYDX, of which over $1B worth was airdropped to users of the protocol last year, it’s hard to imagine them going anywhere else. That is especially the case since DYDX holders will be voting on where the fees go.

DYDX is up 8% in the last 24 hours.

dYdX isn’t the first crypto project to transition from a centralized entity. MakerDAO, DeFi’s most venerable protocol, announced its full decentralization in July of last year.

Matching Engine

dYdX is following in MakerDAO’s footsteps — the DEX announced the dYdX Foundation in August 2021 to propel the protocol towards decentralization. With its recent announcement dYdX is giving itself a deadline as well as specific action items necessary to dissolve all centralized components of the project.

Specifically, dYdX outlined two key components of the protocol which would need to be decentralized — its matching engine and orderbook. Both elements are currently centralized, meaning they don’t run on a blockchain.

At $968M as of Jan. 12, dYdX is actually the No. 2 Layer 2 by total value locked, according to L2BEAT. Layer 2s inherit security from Ethereum’s mainnet blockchain, generally accepted to be the most decentralized smart contract platform, while processing the transactions on a separate solution.