dYdX launches Layer 2 mainnet, quickly understand new features and characteristics

This article was published on Ethereum Enthusiasts, original title: 《Announcement | dYdX Launches Layer 2 Mainnet》，Author: dYdX, Translation & Proofreading: Min Min & A Jian

Our brand new Layer 2 mainnet for full-margin perpetual contracts is now live and open to all traders who meet our terms of use. To increase trading volume, dYdX and StarkWare have collaborated to build the full-margin perpetual contract Layer 2 protocol based on the StarkEx scalability engine ("Layer 2") and dYdX's Perpetual smart contracts. This protocol not only saves gas fees for users but also reduces trading fees and minimum trading limits.

In February, we launched the Alpha beta version on the Ethereum blockchain, available only for users, liquidity providers, and strategic partners to experience. Over the next few weeks, we thoroughly tested the system's stability, collected user feedback, and launched many new features. At that time, the number of registrations reached 110,000, with a total of 25,000 transactions completed and a trading volume of up to $90 million. Today, we are excited to announce the official launch of the new Layer 2 protocol mainnet.

The enthusiasm of users for decentralized perpetual contract trading has amazed us. Cryptocurrency is global, and our international user base has grown rapidly. After completing our Series B funding, we announced our strategic goal to invest in overseas growth markets (such as Asia) and focus on the Greater China region. Approximately 78% of users on our waiting list are from Asia. The largest number of logged-in users comes from China, followed by Hong Kong, Russia, Singapore, Japan, Vietnam, Ukraine, the UK, Taiwan, South Korea, and India.

To facilitate the transition to our Layer 2 protocol, we have built a brand new full-margin perpetual contract product and trading system from scratch. This product features a newly improved user interface, supporting complete instant trading and all the advanced features required by perpetual contract traders. In the Alpha version, we also built the following additional features:

More Token Pair Trading

With the full-margin model and enhanced scalability, we can create more markets on dYdX. Our Alpha version supports perpetual contracts for BTC-USD, ETH-USD, and LINK-USD token pairs. We plan to support AAVE-USD and UNI-USD token pairs, as well as many other token pairs in the near future. We will focus on DeFi tokens and high-volume token pairs. Click here to view the complete list of token pairs supported by our perpetual contracts.

Fast Withdrawals

The fast withdrawal feature allows users to receive funds immediately without waiting for Layer 2 transactions to be packaged onto the Ethereum blockchain. Users need to pay a higher gas fee and 0.1% of the withdrawal amount for fast withdrawals. The maximum amount for fast withdrawals is $25,000.

0x API Integration

Currently, all our perpetual contracts use USDC as the margin and settlement currency. However, once dYdX integrates the 0x API, users will be able to deposit and withdraw other assets in their perpetual contract accounts. Click here for more details.

Media Coverage

You can read about our Layer 2 protocol in CoinDesk, The Block, ChainNews, ODaily, or Forklog, and learn more through recent reports or podcasts from Laura Shin's Unchained Podcast, StarkWare, The DeFiant, CoinDesk TV, KryptoSeoul, Korea Economic Daily, and Software Engineering Daily.

Start Trading

Click here to start your perpetual contract trading journey. Developers can check our latest API documentation and audited smart contracts.

This product is not available to traders in the United States and restricted countries/regions. Please refer to the "Terms of Use." Before using this product, you need to read and agree to our "Privacy Policy."

FAQ

What will happen to perpetual contracts on Layer 1?

Perpetual contracts on Layer 1 will continue until April 20, 2021. At that time, users will need to close their perpetual contracts on the Layer 1 protocol and then reopen them on our Layer 2 protocol.

What is Layer 2?

StarkWare's zkSTARKS technology is a ZK-Rollup technology that greatly enhances dYdX's trading settlement capacity while relying on the underlying Ethereum blockchain for security. After integrating StarkWare, dYdX can combine STARK proofs with on-chain data availability, achieving complete non-custodial functionality. The Layer 2 system settles transactions and periodically sends zero-knowledge proofs to smart contracts on Ethereum to prove that state transitions in the StarkWare Layer 2 system are valid.

Why is dYdX moving to Layer 2?

Ethereum can process about 15 transactions per second, which is far from sufficient to support the hyper-growth of DeFi. Over the past few months, gas fees on Ethereum have skyrocketed, significantly increasing trading costs for traders. With the Layer 2 network, dYdX can reduce trading fees to levels comparable to centralized exchanges.

In addition to lowering trading costs, Layer 2 brings many other benefits. With StarkWare's Layer 2 network, dYdX can now greatly enhance the trading experience, far surpassing other DeFi projects.

What does Layer 2 mean for traders?

Lower Trading Fees

As Layer 2 significantly improves scalability, we can pass on the benefits to traders by comprehensively lowering trading fees. Most importantly, users no longer need to pay gas fees when trading!

We will release a trading fee schedule that is competitive with centralized exchanges. Click here to view our latest Layer 2 perpetual contract fee schedule.

Lower Trading Limits

Given the significant reduction in trading costs, we have relaxed the minimum trading amount restrictions to facilitate small trades for dYdX users. Click here to view our minimum trading amounts.

Full Margin Model

Traders can use a single margin account to trade across multiple perpetual contract markets, greatly improving capital efficiency and simplifying the trading experience while achieving multi-token pair trading. Traders can exchange most ERC 20 assets for USDC via the 0x API and then trade across all markets offered by dYdX using the same account. Click here to learn more about the full margin model.

Instant Trade Settlement

With StarkWare's Layer 2 network and dYdX's off-chain matching engine, trades can be executed instantly. Trading on dYdX will become as fast as trading on centralized exchanges.

Faster Price Input Mechanism

The price input mechanism uses signatures compatible with STARK proofs to verify prices. This allows smart contracts to use already signed prices directly without waiting for transactions to be on-chain. On Ethereum, updates to the price input mechanism can be delayed by several minutes, while on StarkWare's Layer 2 network, the delay can be reduced to within 1 second.

We currently use Chainlink's price input mechanism network to provide secure price feeds for our Layer 2 protocol. Chainlink has integrated with StarkWare, allowing Chainlink Network's price input functionality to serve more high-performance Layer 2 solutions. Soon, other price input mechanism providers like MakerDAO may be deployed in some markets.

Higher Leverage & Lower Liquidation Penalties

Due to the performance improvements of the price input mechanism, liquidations will become safer and faster. This means we can increase leverage while reducing liquidation penalties. In some perpetual contract markets on dYdX, users can trade with leverage of up to 25 times. Click here to learn about dYdX's maximum leverage.

Stronger Privacy

With the help of ZK-Rollup, not all transaction details will be published on-chain, except for balance changes. Therefore, privacy is greatly enhanced, and traders do not need to worry about others mimicking their trading strategies or monitoring their trading activities.