We are hiring!Join L2BEAT

dYdX logodYdX




dYdX aims to build a powerful and professional exchange for trading crypto assets where users can truly own their trades and, eventually, the exchange itself.

If you find something wrong on this page you can submit an issue or edit the information.

Risk analysis

Sequencer failureState validationData availabilityUpgradeabilityValidator failure

State validation

ZK proofs (ST)

ZK-STARKS are zero knowledge proofs that ensure state correctness.

Data availability

On chain

All of the data needed for proof construction is published on chain.



The code that secures the system can be changed arbitrarily and without notice.

Sequencer failure

Force trade/exit to L1

The user can force the sequencer to include a trade or withdrawal transaction by submitting a request through L1. The user is required to find a counterparty for the trade by out of system means. If the sequencer is down, the user can use the exit hatch to withdraw funds.

Validator failure

Escape hatch (MP)

Users are able to trustlessly exit their collateral by submitting a merkle proof of funds. Positions will be closed using average price from the last batch state update.


Validity proofs ensure state correctness

Each update to the system state must be accompanied by a ZK Proof that ensures that the new state was derived by correctly applying a series of valid user transactions to the previous state. Once the proof is processed on the Ethereum blockchain the L2 block is instantly finalized. The system state is represented using Merkle roots.

  1. Enforcing Consistency on the On-Chain State - StarkEx documentation

Zero knowledge STARK cryptography is used

Despite their production use ZK-STARKs proof systems are still relatively new, complex and they rely on the proper implementation of the polynomial constraints used to check validity of the Execution Trace.

  • Funds can be lost if the proof system is implemented incorrectly.

  1. STARK Core Engine Deep Dive

All data required for proofs is published on chain

All the relevant data that is used to recover the L2 balances Merkle Tree is published on-chain as calldata. This includes, in addition to the proven new state, the complete list of differences of the users' balances from the previous state.

  1. ZK-Rollup - StarkEx documentation
  2. UpdatePerpetualState.sol#L82 - Etherscan source code


The system has a centralized operator

The operator is the only entity that can propose blocks. A live and trustworthy operator is vital to the health of the system. Typically, the Operator is the hot wallet of the StarkEx service submitting state updates for which proofs have been already submitted and verified.

  • MEV can be extracted if the operator exploits their centralized position and frontruns user transactions.

  1. Operator - StarkEx documentation

Users can force exit the system

Force exit allows the users to escape censorship by withdrawing their funds. The system allows users to force the withdrawal of funds by submitting a request directly to the contract on-chain. The request must be served within a defined time period. If this does not happen, the system will halt regular operation and permit trustless withdrawal of funds. Perpetual positions can also be force closed before withdrawing, however this requires the user to find the counterparty for the trade themselves.

  • Users can be censored if the operator refuses to include their transactions. They can still exit the system.

  • Funds can be lost if the user is unable to find the counterparty for the force trade.

  1. Censorship Prevention - StarkEx documentation
  2. Forced Trade - StarkEx documentation


Regular exit

The user initiates the withdrawal by submitting a transaction on L2. When the block containing that transaction is proven the funds become available for withdrawal on L1. Finally the user submits an L1 transaction to claim the funds. This transaction does not require a merkle proof.

  1. Withdrawal - StarkEx documentation

Forced exit

If the user experiences censorship from the operator with regular exit they can submit their withdrawal requests directly on L1. The system is then obliged to service this request. Once the force operation is submitted if the request is serviced the operation follows the flow of a regular exit.

  1. Forced Operations - StarkEx documentation
  2. Forced Withdrawal - StarkEx documentation
  3. Full Withdrawal - StarkEx documentation

Emergency exit

If enough time passes and the forced exit is still ignored the user can put the system into a frozen state, disallowing further state updates. In that case everybody can withdraw by submitting a merkle proof of their funds with their L1 transaction.

  1. Forced Operations - StarkEx documentation
  2. Forced Withdrawal - StarkEx documentation
  3. Full Withdrawal - StarkEx documentation

Permissioned Addresses

The system uses the following set of permissioned addresses:

dYdX Governance 0x7E9B…18D2

Defines rules of governance via the dYdX token. Can upgrade implementation of the rollup, potentially gaining access to all funds stored in the bridge. Currently there is no delay before the upgrade, so the users will not have time to migrate.

GpsStatementVerifier Governor 0x3DE5…F5C6

Can upgrade implementation of Verifier, potentially with code approving fraudulent state. Currently there is no delay before the upgrade, so the users will not have time to migrate.

Operator 0x8129…390a

Allowed to update state of the rollup. When Operator is down the state cannot be updated.

Smart Contracts

A diagram of the smart contract architecture
A diagram of the smart contract architecture

The system consists of the following smart contracts:

Main contract of dYdX exchange. Updates dYdX state and verifies its integrity using STARK Verifier. Allows users to deposit and withdraw tokens via normal and emergency modes. This contract stores the following tokens: USDC.

STARK Verifier. In contrast to Sorare, ImmutableX, rhino.fi and StarkNet which use common SHARP Prover, dYdX uses seperate Prover/Verifier.

MemoryPageFactRegistry 0xEfbC…Cef8

Contract storing CAIRO Program Output, in case of dYdX, it stores state diffs of dYdX Exchange.

FriStatementContract 0xf6b8…E1B1

Part of STARK Verifier.

MerkleStatementContract 0x0d62…a830

Part of STARK Verifier.

The current deployment carries some associated risks:

  • Funds can be stolen if a contract receives a malicious code upgrade. There is no delay on code upgrades (CRITICAL).


dYdX v4 announcement

2022 Jun 22nd

dYdX V4 will be developed as a standalone blockchain based on the Cosmos SDK.

Learn more

dYdX Foundation

2021 Aug 3rd

Independent foundation was created to participate in the Protocol governance.

Learn more

Public launch

2021 Apr 6th

Layer 2 cross-margined Perpetuals are now live in production for all traders.

Learn more