dYdX — The Rise of App Chains
I wrote about it a few months ago, looks like the next narrative begins
As over-excited investors in the past cycles realise having a layer 1 chain by itself isn’t really a big deal, you need users — app chains will rise in the narrative dominance.
UNI-chain has been a rumoured topic for a while but dYdX decided to front-run and make it official. I had quite a few thoughts running in my head when I read it. Let’s dig in.
First up: dYdX is breaking up with Starkware. That’s probably the key thing that wasn’t explicitly said through the post. As a flagship project on their ecosystem, this makes me question the defensibility or viability of Starkware longer term. Think about it, there are only two key scenarios that went on here:
Starkware genuinely isn’t the best to achieve full decentralisation. Could be likely, but I don’t fully buy it.
The terms on which Starkware engaged with dYdX weren’t scalable or profitable and dYdX realised that having their own chain releases them from those terms AND allows them to cash in on the hype of their own token and get investors excited.
Out of the two, it feels clear which one is the real reason here. I don’t blame them, I personally think it’s a great move. The reason why I think this is more likely to work for dYdX than Uniswap or another protocol is because dYdX doesn’t really rely on composability. It just needs to do the job of being the best margin platform in town and doing it really well. For Uniswap, which relies on composability, it wouldn’t play as well — especially given how janky bridging technology is.
A good thread on the whole topic of security can be read here:
The other thing that made me think was the move to Cosmos which sounds like is heading in the right direction as an ecosystem but is unlikely to capture the value of this move. If they got their token model together I would think that they have something special on their hands but until then it feels like more charity by one set of token holders to another set. Such is crypto.
Anyways, still early days since it’s been a common theme for DeFi teams to announce a chain and then time passes by. I’m pretty confident that dYdX will execute since they’re one of the best in town and they have the incentive of full decentralisation == turn on fee switch.
So much is happening and moving, I love bear markets.