Unveiling The Power Of DYDX Token: A 2023 Comprehensive Guide To Its Tokenomics

Key Points:

• The dYdX platform has introduced the DYDX token to incentivize users to participate in the protocol and receive a share of the fees generated from trading activity.
• DYDX tokens can be staked to earn rewards and unlock discounts on trading fees on the dYdX platform, making it a valuable asset for traders and investors.
• The total supply of DYDX tokens is 1 billion, with approximately 250 million currently in circulation.
• As of February 2023, the DYDX token has a market cap of over $4 billion, making it one of the top 50 cryptocurrencies by market cap.
• With plans to expand its offerings to include additional assets and services, the dYdX platform and DYDX token are poised for continued growth in the competitive crypto market.

DYDX token gives its holders voting rights to improve the dYdX Layer 2 Protocol. It also offers staking pools and rewards programs to promote liquidity, safety, and platform adoption. With DYDX, users can participate in the governance process of the dYdX platform, vote on proposals, and influence its future development in a more decentralized and democratic ecosystem.

Over the past three years, dYdX has facilitated over $11 billion in trading volume across perpetuals, margin, and spot trading, with more than 64,000 unique traders participating. In addition, dYdX liquidity pools have originated over $250 billion in borrowing and flash transactions.

Approximately 64,000 valid users were eligible for the retroactive airdrop of DYDX tokens, with a total distribution of 75,000,000 tokens. The average airdrop per user would be approximately 1,171 DYDX tokens. This equates to an average airdrop value of over $3,000 per user at the time of writing.

What is dYdX?

dYdX is a decentralized exchange (DEX) and derivatives trading platform built on the Ethereum blockchain. It allows users to trade various crypto assets such as Bitcoin, Ethereum, and stablecoins with leverage through margin trading and perpetual swaps.

dYdX also offers a non-fungible token (NFT) collection called Hedgies, which are awarded to users based on their trading statistics and community interactions. The platform aims to provide users with a decentralized, transparent, and secure trading experience while reducing counterparty risk and increasing liquidity.

How does dYdX work?

The dYdX platform consists of two main layers that offer different DeFi products. The first layer is the trading layer, which supports margin and perpetual trading. The second layer is the lending layer, which provides access to borrowing and lending pools for several cryptocurrencies. Together, these two layers provide users with a range of DeFi options on the dYdX platform.

Spot and Margin Trading on Layer 1 of Ethereum is a decentralized trading platform operating on the Ethereum blockchain’s smart contracts, eliminating intermediaries. It offers spot and margin trading with up to 5x leverage, supporting three pairs: ETH-DAI, ETH-USDC, and DAI-USDC.

However, on November 1, 2021, at 18:00 UTC, dYdX Layer 1 (Solo) spot and margin trading would transition into Close Only Mode. During this time, new borrowers on the platform would also be disabled.

The perpetual non-custodial trading is conducted on a separate layer-2 blockchain system, which is independent of the previous dYdX protocol on Ethereum. This system uses ZK-Rollups, a layer-2 solution of Ethereum powered by Starkware, to process trades off-chain and submit validity proofs to the Ethereum chain. The benefits of ZK-Rollups include faster validation speeds, lower gas and trading fees, and enhanced privacy for traders as Starkware does not publish all transaction details on-chain.

The perpetual trading product powered by Starkware offers several features, such as leverage up to 25x, cross-margin and off-chain order book, and only accepts USDC as collateral with front-running prevention.

In addition, dYdX provides portfolio management tools for traders to monitor their trades, claim trading rewards, and get fee discounts based on their trading volume. To ensure accurate pricing information, dYdX uses Chainlink and MakerDAO oracle to feed price data through its Smart Contract on the Ethereum blockchain.

DYDX Token

DYDX is a token that gives its holders governance rights over the dYdX Layer 2 Protocol. This means that traders, liquidity providers, and other members of the dYdX community can work together to improve the protocol.

DYDX also enables various features designed to drive the growth and decentralization of dYdX, including staking pools that promote liquidity and safety and rewards programs for trading, liquidity provision, and past usage of the platform. These features are intended to encourage greater adoption of dYdX and create a better overall user experience.

DYDX holders can participate in the governance process of the dYdX platform. This means they can vote on proposals related to the development and improvement of the platform, including changes to its code, new features, and other important decisions. By holding DYDX tokens, users have a say in the direction of the platform and can influence its future development. This creates a more decentralized and community-driven ecosystem where decisions are made transparently and democratically.

Information about DYDX Token

DYDX Key Metrics

• Token Name: dYdX Token.
• Ticker: DYDX.
• Blockchain: Ethereum.
• Token Standard: ERC20.
• Contract: 0x92d6c1e31e14520e676a687f0a93788b716beff5.
• Token Type: Governance.
• Max Supply: 1,000,000,000 DYDX.
• Circulating Supply: 151,641,877 at the time of writing

DYDX Token Allocation

1,000,000,000 $DYDX tokens have been created and will be available over five years, starting August 3rd, 2021, at 15:00:00 UTC. The initial allocation of the total supply of $DYDX for the first five years is as follows:

50.0% (500,000,000 $DYDX) to the community as follows:

• 25.0% (250,000,000 $DYDX) based on the Trading Rewards Formula,
• 7.5% (75,000,000 $DYDX) to past users who complete certain trading milestones on the Layer 2 protocol (Retroactive Mining Rewards),
• 7.5% (75,000,000 $DYDX) based on the Liquidity Provider Rewards Formula(s),
• 5.0% (50,000,000 $DYDX) to a Community Treasury,
• 2.5% (25,000,000 $DYDX) to users staking $USDC to a Liquidity Staking Pool,
• 2.5% (25,000,000 $DYDX) to users staking $DYDX to a Safety Staking Pool,

27.7% (277,295,070 $DYDX) to past investors of dYdX Trading Inc.,

15.3% (152,704,930 $DYDX) to founders, employees, advisors, and consultants of dYdX Trading Inc. or dYdX Foundation, and

7.0% (70,000,000 $DYDX) to future employees and consultants of dYdX Trading Inc. or dYdX Foundation.

Since the launch of $DYDX, the initial allocation has been adjusted through various governance proposals. The current allocation of $DYDX includes:

50.0% (500,000,000 $DYDX) to the community as follows:

• 20.2% (201,883,560 $DYDX) based on the Trading Rewards Formula. In DIP 16, the dYdX community voted in support of reducing trading rewards by 25%. As a result, trading rewards distributed in a given epoch were reduced from 3,835,616 $DYDX to 2,876,712 DYDX in Epoch 15. The remaining 958,904 $DYDX will accrue in the Rewards Treasury and can be used by the dYdX community with a governance vote.
• 5.0% (50,309,197 $DYDX) to past users who complete certain trading milestones on the dYdX Layer 2 Protocol (Retroactive Mining Rewards). After Epoch 0, 24,690,803 unclaimed $DYDX from the Retroactive Mining rewards program were transferred to the Community Treasury.
• 7.5% (75,000,000 $DYDX) based on the Liquidity Provider Rewards Formula(s),
• 16.2% (162,004,734 $DYDX) to the Community Treasury and Rewards Treasury,
• 0.6% (5,753,430 $DYDX) to users staking $USDC to a Liquidity Staking Pool. In DIP 14, the dYdX community voted to set the rewards associated with staking $USDC to 0. The 383,562 $DYDX previously distributed to USDC stakers will accrue in the Rewards Treasury and can be used by the dYdX community with a governance vote.
• 0.5% (5,049,079 $DYDX) to users staking $DYDX to a Safety Staking Pool. In DIP 17, the dYdX community voted to set the rewards associated with staking $DYDX to 0. The 383,562 $DYDX previously distirbuted to $DYDX stakers will accrue in the Rewards Treasury and can be used by the dYdX community with a governance vote.

27.7% (277,295,070 DYDX) to past investors of dYdX Trading Inc.,

15.3% (152,704,930 DYDX) to founders, employees, advisors, and consultants of dYdX Trading Inc. or dYdX Foundation, and

7.0% (70,000,000 DYDX) to future employees and consultants of dYdX Trading Inc. or the dYdX Foundation.

After the first five years following the launch of $DYDX, the governance of the protocol may choose to implement a perpetual inflation rate of up to 2% per year to increase the supply of $DYDX, providing the community with resources to support further development and growth of the protocol. However, this inflation can only be enacted through a governance proposal and is limited to a maximum rate of 2% per year.

DYDX Token Release Schedule

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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