March 29, 2023
June 4, 2025

dYdX v4 and MEV

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dYdX v4 and MEVdYdX v4 and MEV

tldr;

  • dYdX v4 open-source chain software’s fully decentralized and performant in-memory orderbook could lead to MEV extraction; this is being proactively addressed
  • Unlike general purpose smart contract environments, the Cosmos infrastructure enables us to build unique MEV solutions that align a validator’s incentives with a user’s incentives. We are actively working on researching and building these solutions, and plan to allocate significant resources towards doing so going forwards.
  • MEV behavior could be detrimental to the product experience.

v4 and MEV

The dYdX v4 chain open-source software (“dYdX Chain”) is designed to offer users the best trading experience with zero gas fees, low latency, high throughput (similar to a centralized exchange) and deep liquidity. To get there, the dYdX Chain uses an in-memory orderbook where only filled orders are committed to consensus (i.e., off-chain). This could lead to MEV extraction through both novel and well-established vectors, which we are addressing right from the start. We plan to release more specific posts detailing what we are building to address MEV soon.

What is MEV?

MEV refers to profits that validators can earn by reordering or censoring transactions to their advantage. This can have a negative impact on end users as it can adversely affect pricing. When designing dYdX v4, we explored different strategies used in the crypto ecosystem to reduce the MEV risk and protect potential end users.

Ethereum vs App-chains

In the Ethereum ecosystem, a neutral approach is taken towards MEV, and a Proposer-Builder Separation (PBS) approach is used to auction off the block space. PBS mitigates the centralization risks of MEV by requiring searchers to redistribute their MEV profits to participants within the PBS supply chain. However, in PBS, MEV still hurts average users. In contrast, the Cosmos ecosystem, particularly Osmosis, has taken a more opinionated stance towards MEV and aims to mitigate any harmful MEV and capture any benign MEV it generates. For more background, we recommend reading this document by Reverie. This is an example of additional vectors app-chains can take towards addressing MEV. We are actively researching both existing and novel mitigations that are uniquely enabled by dYdX being a sovereign open-source chain software.

Our Choice to Prioritize User Experience

Our goal at dYdX is to offer the best product experience on the dYdX v4 chain software. The decision to use the Cosmos infrastructure enables us to create a fully decentralized exchange while also maintaining high performance. The Cosmos Infrastructure also allows us to build unique MEV solutions into the dYdX v4 chain software. It enables flexibility in orchestrating how blocks are constructed and what MEV looks like on the chain, and all of this can be built into the protocol code itself. We believe that this a better approach as it properly aligns the incentives of a validator and the end user through an on-chain solution. This differs from general-purpose smart contract environments where validators are neutral towards the needs of application users. Our approach could prevent validators from profiting at a user's expense. Such behavior is detrimental to both the protocol and community. As part of this effort, we have been working closely with MEV experts such as Skip Protocol and ChorusOne to develop MEV mitigation strategies for the dYdX v4 chain software. We plan to release more details on this in the coming months leading up to the mainnet open-source software release.

Legitimacy and Disclaimer

© 2025 dYdX International Ltd. All rights reserved.

dYdX is a decentralised, disintermediated and permissionless protocol, and is not available in the U.S. or to U.S. persons as well as for Restricted Persons as set out in the dYdX Software Terms of Use, accessible: https://dydx.exchange/v4-terms. dYdX International Ltd (“DI”) does not develop, control or participate in the operation of any component of the dYdX Protocol (including the MegaVault).

The information provided in this website is for general informational purposes only and DI reserves the right to update, modify, or amend any contents herein, at its sole discretion and without prior notice.  Nothing herein should be used or considered as legal, financial, tax, or any other advice, nor as an instruction or invitation to act in any way by anyone.

Engaging in any activity involving crypto-assets (including trading crypto assets and depositing into the MegaVault) is risky due to high volatility. Returns are not guaranteed and may fluctuate over time depending on multiple factors, and you may lose your entire investment, particularly when using leverage. Investment into crypto-assets may not be regulated and may not be suitable for retail investors. You should perform your own research and due diligence before engaging in any activity involving crypto-assets.

In no event will DI be liable for any loss or damage, including without limitation, indirect or consequential loss or damage, arising from or in connection with the use of this website. By continuing to access this website, you agree to the above and accept the possibility of changes in the information provided.

dYdX is a decentralised, disintermediated and permissionless protocol, and is not available in the U.S. or to U.S. persons as well as for Restricted Persons as set out in the dYdX Software Terms of Use, accessible: https://dydx.exchange/v4-terms. dYdX International Ltd (“DI”) does not develop, control or participate in the operation of any component of the dYdX Protocol (including the MegaVault).

The information provided in this website is for general informational purposes only and DI reserves the right to update, modify, or amend any contents herein, at its sole discretion and without prior notice.  Nothing herein should be used or considered as legal, financial, tax, or any other advice, nor as an instruction or invitation to act in any way by anyone.

Engaging in any activity involving crypto-assets (including trading crypto assets and depositing into the MegaVault) is risky due to high volatility. Returns are not guaranteed and may fluctuate over time depending on multiple factors, and you may lose your entire investment, particularly when using leverage. Investment into crypto-assets may not be regulated and may not be suitable for retail investors. You should perform your own research and due diligence before engaging in any activity involving crypto-assets.

In no event will DI be liable for any loss or damage, including without limitation, indirect or consequential loss or damage, arising from or in connection with the use of this website. By continuing to access this website, you agree to the above and accept the possibility of changes in the information provided.

Leaving site

By clicking ‘Continue’, you will be leaving https://www.dydx.xyz/ and accessing a website made available by a third party using dYdX v4 open-source software that is independent from and unaffiliated with dYdX International Ltd (“DI”). DI does not deploy or run dYdX v4 open-source software for public use, nor does it operate or control any or all parts of the infrastructure. DI is not responsible for any actions taken by independent third parties or for any codes, materials and contents on any third-party websites, including the one you would access by clicking ‘Continue’.

DI’s contents and services are not available to persons who are residents of, are located or incorporated in, or have a registered office in the U.S., Canada or any Restricted Persons as set out in the dYdX v4 open-source software Terms of Use, accessible here.  More details can be found in our Terms of Use. Learn more about dYdX v4 third-party front end options here.