Layer 2 projects have taken off dramatically in the industry with projects like Optimism and Arbitrum enjoying their fair share of the limelight. With benefits ranging from reduced gas rates to instant transaction confirmation, there has been significant transactional activity on these solutions, and right now another Layer 2-based exchange is up to the task. The demand to use “Ethereum” L2 seems overwhelming as Arbitrum’s TVL rises from $ 238 million to $ 2.5 billion in less than 5 days, being a prime example.
dYdX; the next big DEX?
The native chain L2 dYdX is a non-custodial decentralized exchange that runs on audited smart contracts on Ethereum. To expand trading, both dYdX and StarkWare have created a protocol for cross-margin perpetuals, and right now the numbers speak for themselves.
After the launch of its recent liquidity mining program, daily volumes on the platform skyrocketed to $ 600 million. At the time of publication, the 24-hour trading volume stood at $ 340 million.
However, comprehensive growth can be identified in the chart below.
As seen, the total locked value (TVL) on dYdX has catapulted to $ 520 million after falling below $ 200 million during the first week of August. Now recently, it was observed that the daily perpetual swap trading volume averaged $ 1 billion in recent days, reaching as high as $ 2.5 billion during the fourth week of August.
Is the rally sustainable or momentary?
All of these stats are impressive on paper and with regards to the overall Layer 2 resurgence, it appears to be sustainable too, but that development should always be approached with a grain of salt. The digital asset industry is notorious for its constant domino effects, and the development of Layer 2 of Arbitrum, Optimism, and other protocols could be playing a role for dYdX as well.
Also, the spike in the past two days could be due to the fact that the exchange launched its governance token with the latest airdrop surpassing $ 100,000 in valuation. You may have created the immediate flow of users entering the space, with the native chain exploding in terms of activity.
While Layer 2 solutions are seemingly the answer to everything right now, investing in such projects could lead to a massive collapse if the collective L2 market is not calibrated with some form of market protection.
This is a machine translation of our English version.