dYdX exchange launches testnet for ‘fully decentralized’ version 4

Crypto exchange dYdX has launched a public testnet of its V4 iteration, according to a July 5 announcement from the exchange’s development team. This marks the completion of “milestone 4” out of five, paving the way for a future V4 mainnet launch.

Once implemented on mainnet, V4 is expected to allow for “full decentralization” of the exchange.

dYdX is a crypto exchange built on Ethereum and StarkEx networks. Because it does not take custody of users’ funds, it is generally considered to be a decentralized exchange (DEX). However, it does feature a centralized order book and matching engine that allows market makers to place limit orders. This contrasts with automated market-maker DEXs like Uniswap that employ on-chain pricing algorithms to match buyers and sellers.

Version 4 of dYdX will eliminate this centralized order book and matching engine, making the exchange fully decentralized, but without relying on an automated market-maker. According to the protocol’s documentation, it will do this by running parts of the app on a separate dYdX network with its own validators, allowing the order book to be stored on-chain.

Related: GMX and dYdX go head-to-head for the top decentralized derivatives position

According to the announcement, users can request testnet funds to try out the app as of 17:00 UTC on July 5, allowing them to place virtual trades, view profit and loss, and perform other basic functions of the exchange. The ability to test bridging from one network to another has not yet been implemented, but will come “over the course of the public testnet.”

Once the testnet phase is completed, the protocol’s team plans to implement the fifth milestone of the roadmap, which will integrate stablecoins into dYdX and will add support for Cosmos Inter-Blockchain Communication (IBC) so that Cosmos users will have access to the app. V4 is expected to launch after this final milestone is completed.

dYdX announced in April that it would wind down its services in Canada due to regulatory issues. In September 2022, it offered a $25 bonus to new users if they proved they weren’t bots, causing some pushback from privacy advocates. The promotion was later abandoned.

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