Rapid Insights: dYdX v4

Since the launch of its StarkEx-powered perpetual futures product in 2021, dYdX has processed over $1T of trading volume (Figure 1). Despite its success, the protocol in its current form still relies on several centralized components and is still well below the scalability requirements that would be demanded of a full-featured central limit order book (CLOB). dYdX v4 aims to take the protocol to full decentralization while also boosting scalability by multiple orders of magnitude. 

The current dYdX orderbook processes ~1000 order placement/cancellation transactions (offchain) and 10 trade settlements (onchain) per second. Additionally, order matching lives centrally inside the frontend trading interface, which frequently suffers from performance issues during high-traffic trading sessions. These considerations underscore the need for dYdX to migrate the matching engine to a more decentralized architecture.