The collapse of Luna's price does not mean the Terra blockchain itself was a failure. Regular users of Terra experienced its smooth and responsive interface. In fact, among blockchains with a total value locked (TVL) exceeding $10 billion, Terra was the only one that did not suffer downtime or network congestion. This was not due to superior technology but because of its closed ecosystem—much like how iOS often runs more smoothly than Android. Unlike other major chains hosting hundreds of apps, Terra had only three core applications until recently: Anchor, Mirror, and Terraswap. These formed the entire ecosystem, all centered around supporting UST.
Regardless of Luna and UST’s eventual outcome, one thing is clear: a self-contained blockchain can deliver exceptionally seamless user experiences. For applications like futures trading—where speed and responsiveness are critical—this advantage is significant. This is the core argument for dYdX migrating to its own chain (this also applies to gaming, where several developers are exploring dedicated blockchains for their titles).
Currently, dYdX offers the best trading experience among decentralized exchanges (DEXs), but it still lags behind leading centralized exchanges (CEXs), largely due to performance constraints. While rollups might eventually meet dYdX’s technical requirements, the timeline remains uncertain. Even if rollups become sufficiently scalable, would sharing block space with hundreds of other applications really improve performance? A dedicated chain offers exclusive resources and far greater control.
That said, moving away from StarkWare could reduce security. dYdX has not experienced any fund breaches so far, but operating its own chain may increase vulnerability. However, since the entire chain would serve dYdX exclusively, soft forks or chain rollbacks could be deployed more easily to address exploits.
A relevant model is Thorchain (RUNE), a blockchain supporting a single application—the Thorchain DEX. Users must provide RUNE as one asset in every liquidity pool, and node operators must stake RUNE worth twice the pool value. This means that for every $1 billion in liquidity, $3 billion in RUNE is locked. If dYdX adopts a similar tokenomic design, it could significantly enhance value capture for the DYDX token.
Why Cosmos Was the Obvious Choice
The dYdX team has not elaborated extensively on why they chose Cosmos, only stating it was the best option available. The reasoning, however, is fairly straightforward.
When an application decides to build its own chain, interoperability and cross-chain functionality become essential. This doesn’t mean relying on third-party bridges, but building within an ecosystem that natively supports inter-chain communication, like Polkadot or Cosmos. Currently, the leading frameworks with strong developer adoption are Polkadot, Cosmos, and Avalanche.
Polkadot and Cosmos both offer software development kits—Substrate SDK and Cosmos SDK, respectively—that allow teams to build custom blockchains. These can be connected to the main network or run independently. Avalanche also allows the creation of subnets through its Platform Chain (P-Chain), though full interoperability between subnets is not yet fully realized.
The key difference is in security models: Polkadot offers shared security but is less flexible and slower to develop, whereas Cosmos allows chains to manage their own security, offering greater agility. With dYdX aiming to launch its chain by year-end, Avalanche wasn’t ready, and Polkadot’s requirements were too rigid. Cosmos emerged as the most practical choice.
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The Future of Application-Specific Blockchains
dYdX’s migration could mark the beginning of a broader trend. More applications may choose to launch their own blockchains, selecting from several paths: developing a rollup on Ethereum, building with Substrate SDK for Polkadot, or using Cosmos SDK like dYdX. Cosmos SDK is known for its ease of use, Substrate offers a balance of simplicity and shared security, while rollups provide high security but are complex to implement—so much so that few applications have attempted to build their own.
Ethereum has been able to develop rollups at a measured pace, relying on its vibrant ecosystem. But if well-funded application teams lose patience—as Antonio’s comments hint—the pressure on Ethereum to deliver will intensify.
Frequently Asked Questions
What are the benefits of dYdX building its own chain?
A dedicated blockchain can offer better performance, lower latency, and greater control over the network. This is crucial for trading platforms that require high-speed execution and a seamless user experience.
Will moving to Cosmos reduce dYdX’s security?
While operating an independent chain involves assuming more security responsibility, it also allows for faster response to issues, including the possibility of chain rollbacks in case of critical vulnerabilities.
How might this change affect DYDX token holders?
If dYdX adopts a token model similar to Thorchain, the utility and demand for DYDX could increase significantly, especially if the token is used for staking, fees, or liquidity provision.
Can other DeFi applications follow a similar path?
Yes, any application that requires high throughput, low latency, or specialized features may consider launching its own chain. This is especially relevant for gaming, high-frequency trading, and large-scale DeFi protocols.
What distinguishes Cosmos from other blockchain frameworks?
Cosmos offers greater flexibility and faster development cycles compared to Polkadot or Ethereum rollups, making it attractive for projects that want to launch quickly and maintain control over their chain’s governance and security.
Is Ethereum’s rollup strategy at risk if more apps leave?
If major applications migrate to other ecosystems, Ethereum may face increased pressure to accelerate rollup development and improve scalability to retain projects.