The dYdX protocol token, $DYDX, is now live. The initial distribution will occur over the following 28 days. $DYDX will become transferrable at approximately 15:00 UTC on September 8th, 2021.
The token has been deployed to Ethereum at 0x92D6C1e31e14520e676a687F0a93788B716BEff5. Alongside the launch of $DYDX, we are also releasing:
- A new governance product available at dydx.community
- Retroactive mining rewards for past users of dYdX protocols
- Liquidity mining rewards for traders & liquidity providers on dYdX’s Layer 2 Perpetuals
- A liquidity staking pool where $USDC stakers can earn rewards for providing liquidity
- A safety staking pool where $DYDX stakers can earn rewards for securing the system
- Trading fee discounts based on $DYDX holdings
$DYDX cannot be accessed in the US or other restricted locations. Individuals based in, incorporated in, or living in the United States are not allowed to obtain a distribution of, nor engage with $DYDX. Trading fee reductions can be modified by dYdX Trading, Inc. at any time.
Community & Growth
dYdX is the top provider of trustless and open protocols for sophisticated crypto-financial products. Over the past three years, they have processed $11 billion worth of transactions in perpetuals, margin, and spot trading made by 64,000 different customers. Additionally, more than $250 billion in borrowing and flash transactions have been initiated from dYdX liquidity pools.
In February 2021, a Layer 2 protocol for cross-margined perpetuals was launched by dYdX and StarkWare. It utilized Starkware’s scalability engine (StarkEx) and dYdX’s Perpetuals smart contracts. This enabled traders to trade with no gas costs, resulting in lower trading fees and smaller minimum trade sizes.
The launch of the dYdX Layer 2 protocol brought a heightened attention to international expansion beyond the United States. Since its launch, this Layer 2 protocol has achieved success in providing non-custodial, sophisticated financial services:
The establishment of the dYdX Foundation has put the dYdX Layer 2 protocol in an ideal position to be developed and expanded by its community with the aim of turning it into one of the most significant cryptoasset exchanges governed by that same community.
Introducing dYdX token
The dYdX Layer 2 protocol, with its top-notch product and impressive organic growth, is now ready to transition to the next step of its progress: placing power in the hands of the community through the introduction of $DYDX.
The $DYDX token is a governance tool that allows the dYdX Protocol community to own and manage the Layer 2 protocol. By allowing everyone to share control, incentives between traders, liquidity suppliers, and partners of the Layer 2 protocol are aligned. This token also creates an environment where staking, rewards and governance can be used to increase decentralization of the dYdX Layer 2 protocol. To encourage liquidity and security on this layer two system two staking pools have been created in conjunction with $DYDX. Rewards programs for trading, supplying liquidity on this layer two platform as well as past usage of all dYdX protocols will help grow adoption of it too.
Allocations
A total of 1,000,000,000 $DYDX have been minted, and will become accessible over five (5) years, starting on August 3rd, 2021 at 15:00:00 UTC. The initial five-year allocation of the total supply of $DYDX is as follows:
50.00%or500,000,000to the community as follows:
25.00%or250,000,000to users who trade on the Layer 2 Perpetuals Protocol, based on a combination of fees paid and open interest7.50%or75,000,000to past users who complete certain trading milestones on the Layer 2 protocol7.50%or75,000,000to liquidity providers based on a formula rewarding a combination of uptime, two-sided depth, bid-ask spreads, and the number of markets supported5.00%or50,000,000to a community treasury2.50%or25,000,000to users staking $USDC to a liquidity staking pool2.50%or25,000,000to users staking $DYDX to a safety staking pool27.73%or277,295,070to past investors of dYdX Trading15.27%or152,704,930to founders, employees, advisors, and consultants of dYdX Trading or the Foundation7.00%or70,000,000to future employees and consultants of dYdX Trading or the Foundation
The Protocol’s resources will be ensured for the community to keep contributing to it after five years, through a yearly inflation rate of no more than 2.00%, which will raise the supply of $DYDX.
$DYDX holders are the ones who decide how the community allocation is employed in the future, even though it was initially established as mentioned above.
Initial 5 Years
10 Years Inflation
Rewards & Staking Pools
The $DYDX governance token can be earned in one of two ways: rewards from using the Protocol, or through staking $USDC or $DYDX to pools.
All rewards & staking contracts operate on 28-day cycles, referred to as epochs.
During each epoch, all $DYDX earned from retroactive, trading, or liquidity mining rewards will only become transferrable at the end of the epoch. During each epoch, all $DYDX earned from safety or liquidity staking pools can be withdrawn at any time.
On September 8, 2021, eight (8) days after the end of Epoch 0, the initial transfer restrictions will be lifted and approximately 8.11% of the $DYDX supply will become liquid. The following chart shows the total liquid supply over time.
Retroactive Mining
The success of the dYdX Layer 2 protocol is the result of thousands of community members who have been trading on the dYdX Layer 2 protocol and its predecessors over the past three years.
$DYDX has been allocated to historical users of all dYdX protocols based on a snapshot ending July 26, 2021, at 00:00:00 UTC. There are five allocation tiers that depend on the usage across all dYdX protocols. In line with restrictions on the availability of $DYDX and the dYdX Layer 2 protocol in the United States, retroactive mining is not available to users located in, or incorporated or otherwise established in, or a resident of, the United States or any other prohibited jurisdiction. Any accounts that were clearly associated with bot activity speculating on a future airdrop are also excluded from retroactive rewards.
To claim $DYDX, historical users must meet the following milestones on the Layer 2 protocol within the first 28-day epoch, referred to as Epoch 0.
Any historical volume on the dYdX Layer 2 protocol counts towards a user’s claim milestone. Any unearned $DYDX at the end of Epoch 0 will be forfeited and automatically distributed to the community treasury.
More details regarding the retroactive mining rewards can be found here.
Trading Rewards
Amounts of $DYDX will be distributed to traders based on a formula that rewards a combination of fees paid and open interest on the dYdX Layer 2 protocol. The DYDX will be distributed on a 28-day epoch basis over five years and are not subject to any vesting or lockups. 3,835,616 $DYDX will be distributed per epoch. More details regarding the formula for trading rewards can be found here.
Liquidity Provider Rewards
To incentivize market liquidity, $DYDX will be distributed to liquidity providers based on a formula that rewards participation in markets, two-sided depth, bid-ask spread, and uptime on the dYdX Layer 2 protocol. Any Ethereum address can earn these rewards, subject to a minimum maker volume threshold of 5% of maker volume in the preceding epoch. The $DYDX will be distributed on a 28-day epoch basis over five years and are not subject to any vesting or lockups. 1,150,685 $DYDX will be distributed per epoch. More details regarding the formula for calculations can be found here.
Staking Pools
The Liquidity Staking Pool is now live, and is accessible here. This pool will run until August 3, 2026 at 15:00 UTC.
The Safety Staking Pool will automatically go live on the Protocol at the end of the first epoch, and will be accessible here. This pool will run until September 8, 2026 at 15:00 UTC.
Liquidity Pool
To further liquidity network effects and incentivize professional market makers, $DYDX will be distributed to users who stake $USDC to the Liquidity Staking Pool. Known and community-approved market makers will use the staked $USDC to make markets on the dYdX Layer 2 protocol, furthering liquidity available across the markets. The market makers will not be able to withdraw the $USDC from the Protocol, requiring them to use it only in the Protocol. However, a portion of staked $USDC could be lost if a market maker were to lose funds and be unable to replenish the liquidity staking pool.
Stakers will receive $DYDX, distributed continuously according to each staker’s portion of the total $USDC in the pool. Stakers must request to unstake funds at least 14 days before the end of the epoch in order to be able to withdraw funds after the end of that epoch. If stakers do not request to withdraw, their staked $USDC is rolled over into the next epoch. More details can be found here.
The initial approved market makers include Wintermute, Amber Group, Kronos, Sixtant, and DAT Trading who have been actively market-making on the Layer 2 protocol since launch.
Safety Pool
User safety & protection have been of key focus since the launch of the Layer 2 protocol. For this reason, $DYDX will be distributed to users who stake $DYDX to the safety pool to create an additional safety net for users of the Layer 2 protocol. Stakers’ decision to lock $DYDX into the Safety Pool could result in a shortfall event, which may result in the potential slashing of staked funds at the discretion of $DYDX governance. Stakers will receive $DYDX continuously proportional to their portion of the total $DYDX in the pool.
Stakers must request to unstake funds at least 14 days before the end of the epoch in order to be able to withdraw funds after the end of that epoch. If stakers do not request to withdraw, their staked $DYDX is rolled over into the next epoch. The Safety pool will go live upon the $DYDX becoming transferrable on September 8th, 2021 at 15:00 UTC. More details can be found here.
Community Treasury
The community treasury will retain $DYDX to use as holders decide, whether it be for grants, new liquidity mining pools, or any other program. $DYDX will vest to the community treasury on a continuous basis over the course of five years. A governance vote will be required to spend any $DYDX from the community treasury. More details can be found here.
If governance decides to enact perpetual inflation, after 5 years any newly minted $DYDX will vest to the community treasury.
A community-managed treasury opens up a world of possibilities. We hope to see various experiments and initiatives, including ecosystem grants, which can foster the dYdX Layer 2 protocol’s ecosystem growth.
Investors, Existing & Future Employees, Consultants
Stockholders, directors, officers, employees, and consultants of dYdX Trading and the dYdX Foundation will be issued $DYDX. All $DYDX distributed to them initially will be subject to contractual agreements off-chain requiring a lockup in which 30% of that $DYDX will unlock in 18 months, 40% will unlock equally from month 19 through month 24, 20% will unlock equally from month 25 through month 36, and 10% will unlock equally from month 37 through month 48. All employees and consultants also will be subject to various vesting schedules that could result in them losing their rights to $DYDX. No employee’s or consultant’s receipt of $DYDX is, or will in the future be, based on providing services related to the dYdX Layer 2 protocol or other services that may benefit the dYdX Layer 2 protocol. Instead, employees and consultants may receive $DYDX for services that benefit only dYdX Trading, the dYdX Foundation or another party.
Regardless of any lockup on $DYDX, investors and prior employees or consultants of dYdX Trading or the dYdX Foundation may use $DYDX to make proposals, delegate votes, or vote on proposals related to the Layer 2 protocol. Current employees and consultants of dYdX Trading or the dYdX Foundation will initially not make any proposals or participate in any votes but may do so in the future. Current employees and consultants of dYdX Trading or the Foundation may delegate votes without attempting to influence voting outcomes.
Although finding ways to coordinate a large group of $DYDX holders is difficult, the $DYDX community should learn from coordination efforts in other communities to further the development and growth of the Layer 2 protocol. While the dYdX Foundation will provide tools to assist with that coordination, the community should not expect it to have a key role in that process.
Governance
$DYDX grants holders the right to propose and vote on changes to the Layer 2 protocol. $DYDX governance is based on the AAVE governance contracts, and supports voting based on token holdings.
Proposals must pass a given threshold and percent of yes votes based on the type of proposal. $DYDX tokens can be used to make or vote on governance proposals, or be delegated to other Ethereum addresses.
In the meantime, $DYDX holders will have immediate and irreversible control over:
- Allocating community treasury funds
- New token listings on the Layer 2 protocol
- Risk parameters for the Layer 2 protocol
- Capital allocations to market makers in liquidity staking pool
- Adding new market makers to the liquidity staking pool
- Determining safety staking pool payouts in the event of a loss
- Changing any of the rewards and pools existing at launch
- Governance contracts themselves
There are four types of proposals with different parameters that affect the length and execution of a proposal. An executor must validate each type of proposal:
- The Short timelock executor can execute proposals that generally change Rewards and Incentive contracts or the Community Treasury that require quick intervention.
- The Long timelock executor can execute proposals that change parts of the Protocol that affect governance consensus.
- The Merkle-pauser executor can execute proposals that freeze the Merkle root, which is updated periodically with each user’s cumulative reward balance, allowing new rewards to be distributed to users over time, in case the proposed root is incorrect or malicious.
- The Starkware executor can execute proposals that generally change parts of the Protocol that currently require intervention from Starkware.
The initial governance parameters are as follows:
All $DYDX holders are responsible for ensuring that governance decisions are made in compliance with applicable laws and regulations. The community is encouraged to consult knowledgeable legal and regulatory professionals before implementing any specific proposal.
