dYdX v3 On Ethereum Shuts Down: It’s a Disaster for Users
dYdX is migrating, fully transitioning from Ethereum to its native chain, the dYdX Chain
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As 99Bitcoins reported last month, traders on the dYdX v3 on Ethereum had until the end of October to withdraw cash and transfer it to the dYdX Chain.
Well, it turns out that some didn’t bother moving funds to their custodial wallets. What was the result? An inconvenience.
Over $70 Million Locked On dYdX v3
🚨 Major shakeup in Ethereum’s Layer 2 ecosystem: dYdX v3, a long-standing decentralized exchange, has shut down, leaving over $70M in user funds not withdrawn.
What happens to assets on an L2 when it stops, and what role does L2BEAT play? 🧵👇
— L2BEAT 💗 (@l2beat) November 5, 2024
According to reports, over $70 million of user funds remain stranded as traders scramble to retrieve their hard-earned assets.
For those new to dYdX, the protocol is a decentralized exchange (DEX) similar to Uniswap, but it allows users to trade on leverage.
It was also among the first Ethereum layer-2s using zk Rollups for privacy, security, and speed on the mainnet.
After building the dYdX Chain, the team decided to retire v3 on Ethereum, marking the end of their operation on the first smart contracts platform.
However, with this transition came a problem for users who hadn’t withdrawn funds earlier.
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So, what happened?
To understand where the problem could be, you should be aware that dYdX v3 launched on a layer-2.
Accordingly, the team had to implement additional mechanisms and procedures to secure user funds and the protocol’s integrity for security.
(Source)
It had to “bridge” to Ethereum and, in doing so, rely on StarkEk’s technology called “Escape Hatch” for extra security.
What “Escape Hatch” does is simple: It acts as a fallback method whenever users want to withdraw funds from Ethereum, even when the protocol is inactive or frozen.
The problem is that withdrawing with “Escape Hatch” activated is complicated and requires asset holders to prove ownership to “escape” the hatch.
(Source)
This complication has inconvenienced users, effectively locking over $70 million of assets in dYdX v3.
The good news is that some users have managed to withdraw funds.
According to L2Beat, over $30 million had been withdrawn, and the number continues to increase when writing on November 5.
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Priority on dYdX Chain
dYdX Chain hosts the latest version of the DEX, and developers plan further to enhance the trader experience on this scalable platform.
It boasts lower fees, faster processing speeds, and a thriving ecosystem. Since launching, dYdX Chain has had an average daily trading volume of over $350 million.
With dYdX v3 exiting, the goal is to activate the “Unlimited” release. Once it goes live, the DEX will list unlimited markets without governance approval.
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