Dymension (DYM): Scaling and Connecting With RollApps

Over the last couple of years, modular development has emerged as a clear trend within the blockchain industry. Modular designs typically separate different blockchain layers — application, data availability and settlement — into distinct, independently functioning modules to address the limitations of traditional monolithic designs. Recognizing the inherent inflexibility of all-in-one, conventional Layer 1 blockchain frameworks, such as Bitcoin (BTC) and Ethereum (ETH), developers are increasingly adopting the modular approach to enhance functionality and scalability, as well as to speed up network development and deployment.

Now, a newly launched platform called Dymension (DYM) has extended the principles of modularity to blockchain rollups, or “RollApps,” using the project’s terminology. Serving as an internet of RollApp networks, Dymension provides foundational security and consensus mechanisms to facilitate the operation of these application-specific chains.

Built upon the Cosmos SDK framework, Dymension leverages Cosmos's Inter-Blockchain Communication (IBC) protocol to enable interoperability and cross-chain communication among diverse Layer 1 and Layer 2 networks. Through its innovative approach, Dymension aims to become a leader in the niche of modular rollup solutions. For developers and app operators, the platform offers scalability, flexibility and low latency and execution costs — a combination that few other projects can match.

Key Takeaways:

• Dymension (DYM) is a modular blockchain platform that facilitates the development and launch of application-specific Layer 2 rollups called RollApps.

• The platform’s Dymension Hub acts as a settlement layer for RollApps, validating transaction blocks and helping achieve network consensus. RollApps also use external providers such as Celestia (TIA) for their data availability layer, with only the application layer handled directly by an individual RollApp.

• In early 2024, Dymension conducted one of the largest recent airdrop campaigns, distributing up to 70 million of its DYM tokens (reportedly valued at the time at $390 million) to more than 1 million users across several blockchains and Layer 2 protocols.

What Is Dymension?

Dymension (DYM) is a Layer 1 modular blockchain platform that supports the development and deployment of RollApps — Layer 2 networks that use Dymension’s underlying consensus mechanism while having their own custom execution logic. The platform acts as a hub that developers can use to launch optimistic rollups, or RollApps, using the principles of modularity. These RollApps use Dymension’s validator network to secure their operations and achieve consensus. Dymension also offers these RollApps the ability to externally source their data availability layer via providers like Celestia (TIA) and Near (NEAR).

Dymension’s testnet operations were launched in early 2023, and the testnet has been used to deploy over 15,000 RollApps so far. In early February 2024, the platform launched its mainnet along with its native token — DYM.

Dymension's RollApps are Layer 2 platforms that are launched with a single application in mind. These are what are known as application-specific chains, and they differ from standard rollups designed to host various decentralized apps (DApps). RollApps provide tremendous cost and scalability benefits as compared to directly transacting on a Layer 1 chain.

Dymension is built upon the Cosmos SDK, one of the industry's most popular blockchain development frameworks. The platform has also introduced its own development framework, the RollApp Development Kit (RDK), which extends the functionality offered by the Cosmos SDK to facilitate streamlined, modular RollApp development. A key element that Dymension has inherited from Cosmos is the IBC cross-chain protocol. Using IBC, Dymension’s RollApps can communicate with one another across the entire Dymension network, as well as establish connections with other IBC-capable Cosmos (ATOM) chains.

How Does Dymension Work?

In order to understand Dymension's architecture and working mechanism, it's useful to revisit the topic of blockchain layers. A typical blockchain has three core layers working in unison to ensure its operations:

1. Settlement layer. This layer handles the fundamental aspects of blockchain transactions, including consensus mechanisms and transaction validation. It ensures the integrity and immutability of the ledger, and is critical to a blockchain’s overall network security.
2. Data availability layer.The data availability layer ensures that data related to transactions, blocks and smart contracts is accessible and verifiable across a blockchain’s network.
3. Application layer. The application layer handles the execution of the actual transaction logic, smart contracts and blockchain-hosted protocols. It provides the interface and functionality for users to interact with a blockchain's apps.

Dymension procures the settlement layer for RollApps via the Dymension Hub, a Cosmos SDK proof of stake (PoS) chain comprising a network of validators that provide block validation services. As such, RollApps don’t need to onboard and maintain their own validator nodes.

The data availability layer for RollApps is sourced via external providers like Celestia. Celestia. Also a decentralized platform for modular blockchain development, Celestia is a leading provider of data availability services. It’s not the only platform that offers an outsourced data availability layer, though it’s perhaps the best-known provider in this niche. In line with the principles of modularity, Dymension offers RollApps a choice of different data availability providers, depending upon their operational needs.

Having externalized their settlement layers (via the Dymension Hub) and data availability layers (via a provider integrated with the Dymension platform), RollApps can focus on running their own, domain-specific application layers.

While the Dymension Hub provides consensus and security for the platform, the process of launching new RollApps is facilitated through the platform's RollApp Development Kit, which contains prepackaged modules designed to expedite the RollApp launch process. For instance, there are modules for common operations such as token management and account creation. These ready-to-use modules contribute significantly to the efficiency and flexibility of RollApp development and deployment via the Dymension platform.

Dymension Key Features

RollApps

RollApps on Dymension represent Layer 2 chains tailored specifically for single DApp use cases. They function similarly to the independent app-specific appchains in the Cosmos ecosystem. However, RollApps typically have lower latency and computational costs, because they use rollup technology and externalize their settlement and data availability layers.

Sequencers are a critical component of RollApps. These are specialized nodes responsible for compiling transaction blocks and communicating with Dymension Hub validators to process blocks and achieve consensus. To be a Sequencer, you have to bond DYM tokens or stake a native RollApp token. Each RollApp may be operated by one or more Sequencers.

RollApps also feature another type of specialized node, known as "Governors," alongside Sequencers. These entities are responsible for on-chain governance and the rule-setting mechanism. To enhance security and decentralization, Sequencers and Governors function as separate entities. Governors derive their voting power from stakes delegated to them by token holders on the platform.

Dymension Hub

The actual Dymension settlement layer is referred to as the Dymension Hub. It serves as a shared settlement layer utilized by all RollApps operating on the platform. Made up of validator nodes, it’s responsible for processing and verifying transaction blocks that the RollApp Sequencers submit. The Hub is the primary mechanism ensuring on-chain consensus and network integrity.

Validators derive their block processing rights from the stakes delegated to them by token holders on the platform. Users can stake funds on their preferred validator, typically based on factors such as the commission paid out by the validator or, in the case of decentralization purists, the desire to support smaller validators. Standard commission rates typically range from 5% to 10%, depending upon the validator.

The Dymension Hub also hosts an embedded automated market maker (AMM) designed to facilitate shared liquidity, token swaps, asset routing and price discovery across the entire network of RollApps. Equipped with embedded oracles, the AMM is a particularly valuable resource for RollApps operating within the decentralized finance (DeFi) niche. The oracles enable DeFi RollApps to track and update token prices in real time.

What Is the DYM Token?

The DYM token is the Dymension platform's native cryptocurrency. Its main functions in the ecosystem include:

1. Network fee payments. While individual RollApps may introduce application-specific fees in their own custom tokens, the underlying gas fees charged by the Dymension Hub are denominated in DYM.
2. Facilitating token burns. DYM's functional mechanism includes token burn events, whereby some fees levied on the platform are converted into DYM tokens and burned to reduce the emission rate. One such fee is the Validating Bridge Fee, incurred when users withdraw funds from a RollApp via the built-in AMM. The other fee type associated with the burn events is the Protocol Swap Fee. These fees are charged by the AMM for token swaps, routing and oracle provision services.
3. Staking and stake delegation. Sequencers on RollApps and validators operating within the Dymension Hub stake DYM to secure the right to conduct their activities. DYM holders can delegate their funds to preferred validators and receive part of the staking rewards generated by these nodes.
4. Block reward payments. Validators within the Dymension Hub receive rewards in DYM for their block-processing activities.

Dymension (DYM) Tokenomics

DYM is a supply-capped token with a maximum and total supply of 1 billion. As of Feb 16, 2024, the token has been on the market for 10 days and has a circulating supply of 146 million, of which close to half (70 million) were distributed in January and February as part of the platform’s Genesis airdrop, known as Rolldrop. Recipients of the airdrop included more than 1 million addresses across a number of blockchain platforms, primarily Celestia, Arbitrum (ARB), Optimism (OP), Cosmos [Cosmos Hub and Osmosis (OSMO)], and Solana (SOL).

The entire supply of DYM will be released over a period of five years, by early 2029, with the final distribution shares per the chart below.

Dymension Crypto Price Prediction

As of Feb 22, 2024, the DYM token is trading at $7.04, which is 16.8% lower than its all-time high of $8.50 on Feb 14, 2024, and about 100% higher than its all-time low of $3.54, registered on the day of the token’s launch (Feb 6, 2024).

The long-term outlook for DYM is mostly bullish, with PricePrediction expecting it to trade at $16.90 in 2025 and break past $100 to hit $122.50 in 2030, and DigitalCoinPrice forecasting the token will reach $18.24 in 2025 and $53.60 in 2030.

Where to Buy Dymension (DYM)

The DYM token is available on Bybit via the DYM/USDT Spot pair. If you don’t have an account on Bybit, you can easily register for one and trade DYM and hundreds of other cryptocurrencies offered in the Spot and Derivatives markets.

From Feb 21 to Mar 7, 2024, you can also participate in two Bybit events and earn a share of the 49,960 DYM prize pool. The first is a 14,960 DYM Token Splash/Deposit to Earn event where the first 4,500 new users can earn 2.88 DYM, and up to 2,000 existing users can acquire 1 DYM. The second event entails a 32,000 DYM airdrop, with 20,000 participants randomly chosen to receive 1.6 DYM each.

Closing Thoughts

With the recent launch of the DYM token and mainnet, Dymension is taking its first steps in the modular blockchain market. However, even at this early stage, the platform's modular RollApp proposition is attracting considerable interest within the industry. The DYM token has demonstrated a confident growth trajectory since its launch day, and the project has captured early attention, thanks to its expansive and widely communicated airdrop — the Rolldrop — which reached over a million users and was estimated to be valued at around $390 million.

While Dymension might not be the first platform to enter the modular blockchain game, it's certainly among the pioneers of modularity, as applied to rollup technology and application-specific Layer 2 chains. Its highly efficient, low-latency and cost-effective RollApps set it apart in a niche where competition will likely intensify this year.

The adoption of Dymension by the developer community over a longer-term period is, of course, not a certainty. However, early indicators are encouraging. As the platform matures, it could quickly develop into a leader in the modular rollup market. With access to the broader Cosmos ecosystem via the IBC protocol, Dymension's RollApps will undoubtedly be of interest to multi-chain DApp operators as well.

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