[DEFI]
We’ve recently seen the the decentralized exchange DYDX taking centralized decisions regarding tornado cash and the blockchain migration.
They received a lot of criticism from the community, but why did they took those tough decisions ?
Here is a breakdown of the situation
First, dYdX is a decentralized exchange offering lending, borrowing, perpetual futures, margin and spot trading based on #ethereum ecosystem. It’s one of the biggest DEX in DEFI with 38% of the DEX Trading Volume (Messari Report). The protocol operates on the layer 2 from Starkware called Starkex
But decentralized is an abusive term. dYdX uses a hybrid infrastructure model.
“The main components of dYdX that run centrally are the orderbook and matching engine. dYdX’s orderbook trading model has allowed dYdX to grow into the most liquid exchange in all of crypto.”
That means a part of the protocol is runned by dYdX Trading Inc., a company registered in San Francisco which earn money based on the trading fees. So, dYdX Trading is subjected to the USA regulation.
Recently, The treasury departement and the Office of Foreign Assets Control (OFAC) announced sanctions against Tornado Cash.
Considering that dYdX Trading is subjected to the USA regulation, it must respect and apply the the sanctions from the OFAC.
If the protocol were fully decentralized, it wouldn’t happen. This is why one of the main feature of the V4 is the full decentralization.
https://twitter.com/USTreasury/status/1556655337431785472?ref_src=twsrc^tfw|twcamp^tweetembed|twterm^1556655337431785472|twgr^7989d8b57f146122e6feae07376a800f38f11482|twcon^s1_&ref_url=https%3A%2F%2Fcoinacademy.fr%2Factu%2Fdydx-tornado-cash-entretien%2F
The V4 ,scheduled for the end of the year, will migrate the protocol on the #cosmos ecosystem by creating its own blockchain. Several reasons explain this move :