• Is the derivatives market being changed by this Ethereum-based Layer-2 exchange?

  • Layer 2 projects have exploded in popularity in the industry, with companies like Optimism and Arbitrum taking center stage. There has been significant transactional activity on these solutions, with benefits ranging from reduced gas fees to instant transaction confirmation, and another Layer 2 based exchange is rising to the occasion right now. Arbitrum’s TVL rose from $238 million to $2.5 billion in less than 5 days, demonstrating the overwhelming demand for “Ethereum” L2.

    Is dYdX going to be the next big DEX?

    The L2 native chain dYdX is a non-custodial decentralized exchange based on Ethereum’s audited smart contracts. Both dYdX and StarkWare have built a protocol for cross-margin perpetuals to expand trading, and the numbers are currently speaking for themselves.

    The platform’s daily volumes increased to $600 million after the launch of its recent liquidity mining program. The 24-hour trading volume was $340 million at the time of publication.

    The chart below, on the other hand, shows the overall growth.

    The total value locked (TVL) in dYdX has risen to $520 million from under $200 million during the first week of August, as seen. The daily perpetual swap trading volume has recently been observed to average $1 billion over the past few days, peaking at $2.5 billion in the fourth week of August.

    Is the rally long-term or only temporary?

    On paper, these figures are impressive, and the overall Layer 2 resurgence appears to be sustainable as well, but such developments should always be taken with a grain of salt. The digital asset industry is notorious for its constant domino effects, and the layer 2 development of Arbitrum, Optimism, and other protocols could be playing a role in dYdX’s development as well.

    Furthermore, the recent increase could be due to the fact that the exchange released its governance token, with the most recent airdrop exceeding $100,000 in value. It’s possible that it caused an immediate influx of users into the space, with the native chain’s activity exploding.

    While Layer 2 solutions appear to be the answer to everything at the moment, if the collective L2 market is not calibrated with some form of market protection, investing in such projects could result in a massive collapse.

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