dYdX establishes a leading position in Decentralization Perptual Futures, the Chain version shows potential

The competition in the decentralized Perptual Futures field is becoming increasingly fierce, and dYdX has consistently maintained its leading position in the industry, with recent trading volumes remaining at the top.

Data shows that as of January 24, 2024, even when only considering the data from Starkware Layer 2 (dYdX v3), the trading volume of dYdX is still far greater than that of other derivatives protocols. Currently, the trading volume of dYdX v4 is already comparable to v3, and with the push of incentive measures, there may be more room for growth.

The v4 version of dYdX, namely dYdX Chain, was launched on October 26, 2023. This version achieves complete Decentralization, including an order book and matching engine, while also starting to distribute trading fees to DYDX token stakers.

comprehensive Decentralization of dYdX Chain

dYdX is a leading decentralized Perptual Futures exchange founded by Antonio Juliano in 2017. Before founding dYdX, Antonio worked at a well-known cryptocurrency trading platform and later developed a decentralized search engine full-time, but it had few users.

dYdX's initial product was a margin trading protocol (v1 and v2) that allowed users to trade cryptocurrencies with leverage by borrowing funds. However, this product was inefficient and the Gas fees on Ethereum were expensive.

Starting from v3, dYdX established an order book-based trading system. After building Ethereum Layer 2 products using Starkware and issuing the DYDX token, dYdX's trading volume has increased exponentially, surpassing $1 trillion in total trading volume by July 14, 2023.

The currently officially promoted dYdX Chain is an independent blockchain that uses the Cosmos SDK and Tendermint PoS consensus protocol. It was launched on October 26, 2023, and supports 2000 transactions per second.

Although dYdX v3 also supports high-performance Perptual Futures trading, v4 truly achieves complete Decentralization. In v3, a certain entity company operates the order book and charges trading fees, and the listed tokens are also centrally decided by the development team. In v4, the frontend of dYdX is operated by the dYdX Operations SubDAO, the order book and matching engine are managed by globally distributed active validators, and the listed tokens are determined by on-chain governance.

Fees are allocated to stakers and validators

All fees generated on the dYdX Chain are currently distributed to validators and stakers. These fees include two parts: mainly trading fees denominated in USDC, and additionally Gas fees denominated in DYDX or USDC.

Fees accumulate gradually per block, with an average of one block generated every 1.08 seconds, and users need to manually claim them. Since the rewards mainly come from USDC, even if not claimed in a timely manner, they will not be affected by market fluctuations.

Data shows that a total of 2.51 million USDC and 126 DYDX rewards were distributed over the past 30 days. Validators will charge a commission of 5%-100%, and users can earn rewards by staking DYDX to active validators through specific wallets. Currently, there are 60 active validators.

As of January 24, the average daily staking yield over the past 30 days has ranged from 6.2% to 29.06%, with an average of 14.97%. Currently, the value of staked DYDX is $212 million, remaining stable over the past month.

A certain hardware wallet has been integrated with a specific software wallet, allowing users of the hardware wallet to connect to the Cosmos application through the software wallet for staking and other operations.

In addition, the leading liquidity staking service providers in the Cosmos ecosystem have also launched liquidity staking services for DYDX. Users who stake DYDX through this service will receive stDYDX, and the staking rewards will be automatically reinvested, allowing them to receive more DYDX upon redemption.

Multiple measures to promote the growth of dYdX Chain trading volume

Data shows that dYdX v4 has surpassed v3 in certain metrics. In the past 24 hours, v4's trading volume was $688 million, compared to $546 million for v3; v4 had 635,791 trading orders, while v3 had 161,337 orders. However, in terms of open contracts, v4 ($38.88 million) still lags behind v3 ($251 million).

dYdX has taken a series of measures to promote the development of v4. Before the launch of the dYdX Chain, an incentive program was established, aimed at gradually shifting trading volume from v3 to v4, while gradually reducing incentives on v3.

dYdX DAO has authorized an institution to operate a 6-month launch incentive program, allocating $20 million worth of DYDX tokens to early users of dYdX Chain to encourage users to migrate to v4.

The entire incentive program is divided into 4 phases (Trading Season). Currently, Season 2 is ongoing and will last from February 14 to a day in February 24. Users can earn points by trading on dYdX, and DYDX rewards will be distributed based on points after each Season ends. Each Season will optimize specific incentive measures based on feedback from the previous phase.

To attract trading volume and liquidity, dYdX Chain also offers trading fee discounts. Overall trading fees are slightly lower than those of mainstream centralized exchanges. For Makers, after the first 120 days, the maximum fee is 1 bps (0.01%); for Takers, the maximum fee is 5 bps.

Users can trade through various wallets and make deposits via multiple networks. A certain payment company has issued native USDC through specific channels, making future deposits into dYdX more convenient. In the dYdX Chain environment, trading with market orders is smoother than before.

Summary

As a leader in the decentralized Perptual Futures space, dYdX's Chain version has demonstrated stronger competitiveness than v3 since its launch, and recently, the trading volume of v4 has surpassed that of v3.

The dYdX Chain has achieved comprehensive Decentralization, including the front-end and matching engine. All trading fees are distributed to DYDX stakers and validators. Currently, there are still multiple measures to incentivize the growth of v4 trading volume, such as Maker rebates, trading rewards, and performance rewards, which are expected to further increase the trading volume and open interest on the dYdX Chain.