A Comparison of dYdX and ApeX

Perpetual exchanges are an integral part of the cryptocurrency industry. They allow for advanced market-making, hedging via shorting and arbitraging. As self-custody is the cornerstone of the development of cryptocurrencies and blockchain technology, it stands to reason that decentralized perpetual exchanges would surface to fulfill the market demand for a perpetual exchange that allows users to custody their assets. However, perpetual exchanges facilitate thousands, if not millions, of trades daily, making it extremely difficult to build an actual on-chain perpetual exchange.

One of the many approaches to building a self-custodial perpetual exchange is to use validity proofs. This involves batching a series of transactions into a single Ethereum transaction by using the validity proof to prove that the single transaction is indeed the outcome of all other batched transactions. The specifics of how validity proofs work are covered in an earlier research piece.