Ever since the dYdX Chain went live, the DYDX token has seen its use cases grow to encompass Staking, Governance, and Security. After a successful vote by the dYdX community, the dYdX Chain and its native Layer 1 coin, DYDX, launched on October 26th, 2023. Even though there are still some original ethDYDX tokens in circulation, the rapid migration of 75.2% of the total ethDYDX to the dYdX Chain indicates a change towards the new ecosystem.
The DYDX evolution and the new use cases
In order to secure and stabilise the infrastructure, reward the community with a unique USDC staking mechanism, and enable decentralised governance of a fully permissionless and disintermediated DeFi platform, the dYdX Chain uses the Layer-1 coin DYDX.
A dramatic shift occurred with the community-driven launch of DYDX, elevating the token from its previous state as a governance-only function to that of a dynamic, multi-functional asset. This improvement it central to the dYdX Chain’s security, staking, and governance functionalities. After six months of availability, we look at the value of the DYDX token and the ways in which its users are utilising its features.
On-chain security
The dYdX Chain uses a Proof-of-stake (PoS) security protocol, which means that in order to strengthen the network’s security and stability, token holders are required to stake their DYDX to Validators. Staking and decentralisation of the validator set is key to ensuring that the chain remains resilient and strong.
The dYdX Chain now has 149 million DYDX staked to active set validators, which accounts for about 14.9 percent of the total supply. The user community has appreciated the benefits of staking, and this has seen a steady growth in the staking of DYDX since the token’s launch in October 2023.
To strengthen network security, mitigate the possibility of hostile assaults, and boost Validator decentralisation, the dYdX Community decided to liquid-stake 20M DYDX with Stride on April 6, 2024. At regular intervals, the Stride protocol will convert staking rewards into DYDX, auto-compound USDC, and then stake the resulting DYDX to produce more staking rewards.
There is a strong correlation between the number of staked token and network’s resilience, security, and attack vulnerability. Staking together in this way demonstrates the community’s commitment to keeping the network’s trading platform safe, decentralised, and free of intermediaries, which will be essential for its future development.
Investing for Profits
In a signnificant move, the dYdX Chain implemented a staking incentive mechanism after its introduction. DYDX Stakers, who stake their tokens to dYdX Chain Validators, contribute to the network’s security and receive 100% of the protocol’s fees, paid in USDC. Stakers have several real-world applications thanks to this technique, which also encourages security provisioning. To be more specific, they can easily trade on the dYdX Chain using USDC as collateral or reinvest their staking profits into other cryptocurrencies or assets.
More than $20 million USDC has been distributed to Stakers who secure the network. In addition, the cumulative trading volume on the dYdX Chain has gone past $120 billion. As of this writing, the number of stakers earning USDC rewards number more than 18,991 DYDX. Furthermore, the DYDX staking APR stands at 18% as of 26 April 2024, as reported by Mintscan.
It is getting better by the day, as the protocol generated over $4.5M USDC in staking rewards in February 2024 and $6.7M USDC in March 2024. That represents a 163% and 147% month-over-month rise, respectively, in the distribution of staking benefits to DYDX Stakers.
Staking incentives and APRs can alter depending on a number of things, such as the quantity of DYDX staked, the amount of activity on the network, and other market dynamics.
Full decentralization in the dYdX Chain
The dYdX protocol reached a major turning point in its decentralisation journey with the birth of the dYdX Chain. dYdX v3 was an Ethereum-based non-custodial hybrid Layer 2 DEX with a matching engine and centralised orderbook. Holders of ethDYDX tokens had the opportunity to propose changes to specific parameters on dYdX v3. The dYdX Chain, on the other hand, is a fully decentralized Layer 1 network that has 60 validators running matching engines and in-memory orderbooks.