This is the second edition of DYDX Epoch Review, presenting updates from the DYDX community and ecosystem. To stay up to date in real-time, join us on Discord, Twitter, and the Forums.
During Epoch 1, the dYdX Layer 2 protocol became the top decentralized exchange by volume surpassing $10B in daily volume. It was the first time dYdX did more trading volume than several major centralized exchanges. Open Interest and Total Value Locked surged to $486M and $511M, indicating strong capital inflows into Perpetuals markets. Liquidity has started to increase significantly as a result of the market maker rewards and staking programs!
Over 10K unique wallets earned 5.3M $DYDX through trading, liquidity provider, and staking rewards. 28,832 unique addresses have previously claimed $DYDX rewards from retroactive, trading, and liquidity mining rewards. ~17K unique addresses currently hold $DYDX.
Over the course of Epoch 1, $568M $USDC from 1,435 users was staked to the Liquidity Staking Pool. $840M $USDC is currently staked in the Liquidity Staking Pool.
Participation in the dYdX governance process is off to a strong start. 575 and 764 unique wallets cast votes in the first 2 Snapshot proposals. The forum discussions and proposals cover virtually every topic important to an exchange.
An on-chain dYdX Improvement Proposal (DIP) was submitted to restore functionality to the Safety Module, to allow users who are currently staked to recover their funds, and to allow users with staked funds to receive rewards. A 10-day Voting Period on the proposal is now in effect until October 14 at approximately 01:00:46 AM UTC. For the proposal to pass, at least 100 million $DYDX tokens are required to vote, with at least a 100 million $DYDX in vote differential between yes–no votes. Vote here.
8 addresses (5 existing and 3 new) did more than => 5% of maker volume in Epoch 1, and thus are eligible to participate in the Liquidity Provider rewards program in Epoch 2.
In reference to a thread on market maker incentives, Su Zhu from Three Arrows Capital submitted a Snapshot vote to reduce the volume threshold % for market makers to qualify to receive Liquidity Provider Rewards. The majority of the community supports reducing the threshold to 1%.
6.10% of the total $DYDX supply (excluding unearned Retroactive Rewards transferred to the Treasury and the $DYDX vested in the Community Treasury) is considered liquid at the end of Epoch 1.
Epoch 1 ended on September 28, 2021 at 15:00 UTC. All earned $DYDX trading and liquidity provider rewards can be claimed on the governance dashboard on October 6th, 2021 at ~02:12 UTC. The claim time is delayed by ~11 hours from the original announcement due to a bug that has been fixed. Once tokens have been claimed, they can be transferred or delegated to dYdX governance.
for Epoch 1 (Aug 31, 15:00 UTC - Sep 28, 15:00 UTC)
* Data excludes activity from 22 addresses identified as wash trading during Epoch 1.
~16,975 unique addresses currently hold $DYDX and ~28,832 unique addresses have previously claimed $DYDX rewards from retroactive, trading, and liquidity mining rewards
3,835,616 $DYDX were earned over the course of Epoch 1 and will be distributed to 9,979 traders. Trading rewards were distributed proportionally based on a formula rewarding both fees paid and average open interest.
A breakdown of the adjusted trading activity and Trading Rewards distribution can be found below:
dYdX Trading Inc. identified 22 Ethereum addresses that conducted clear wash trading during Epoch 1. These addresses were removed from receiving Trading Rewards for Epoch 1. Their fees paid and open interests were also excluded from the Trading Rewards calculations, so other traders were not diluted. Additionally, these addresses were excluded from and potential eligibility for the Liquidity Provider Rewards program for Epoch 2 and their volume was excluded from calculations as well. Learn more about Wash Trading here.
As an input to the Trading Rewards calculation, users’ fees paid, and average open interest were reset to 0 at the start of Epoch 2.
1,150,685 $DYDX were earned over the course of Epoch 1 and will be distributed to 5 market makers based on a formula rewarding a combination of uptime, two-sided depth, bid-ask spreads, and the number of markets supported.
The following chart displays the rewards distribution by market maker over the course of the epoch:
The Foundation Metrics Page has maker volume charts to see which addresses did >=5% of maker volume in a given epoch:
8 addresses (5 existing and 3 new) did more than =>5% of maker volume in Epoch 1, and thus are eligible to participate in the Liquidity Provider rewards program in Epoch 2.
As an input to the Liquidity Provider Rewards calculation, market maker’s uptime, two-sided depth, bid-ask spreads, and the number of markets supported are reset to 0 at the start of Epoch 2. New market makers providing >=5% of maker volume in Epoch 2 will be eligible to join the pool in Epoch 3.
217 users requested to withdraw before the Blackout Period in Epoch 1. These inactive $USDC funds can now be withdrawn and are no longer earning $DYDX rewards. Users must request to withdraw their funds before the Epoch 2 Blackout Window (last 2 weeks of the epoch) to withdraw their funds starting in Epoch 3.
We are excited by the amount of capital staked in the Liquidity Staking Pool. dYdX Foundation has been working to provide the tooling to facilitate market maker borrowing from the Liquidity Staking Pool. This tooling will become available very soon.
Approximately 766,703$DYDX vested in the Community Treasury over the course of Epoch 1. An additional 24,690,803 unearned $DYDX from the Retroactive Mining rewards program were transferred to the Community Treasury.
We hope to see the community participate more actively in governance and distribute vested $DYDX on an ongoing basis through contributor grants, community initiatives, liquidity mining, and other programs.
Epoch 1 ended on September 28, 2021 at 15:00:00 UTC. All earned $DYDX rewards can be claimed on the governance dashboard on October 6th, 2021 at ~02:12 UTC (7 days after the end of the epoch plus an ~11 hour delay due to a bug that has since been fixed). Once tokens have been claimed, they can be transferred or delegated to dYdX governance.
Epoch 2 has started
Epoch 2 automatically started as Epoch 1 ended. You can start or continue trading or staking to earn rewards for this epoch, which is scheduled to end on October 26 at 15:00 UTC.
6.10% of the total $DYDX supply (excluding unearned Retroactive Rewards transferred to the Treasury and the $DYDX vested in the Community Treasury) is considered liquid at the end of Epoch 1. These earned $DYDX tokens can be claimed in perpetuity.
Claim your $DYDX rewards
The Merkle root has been proposed on-chain and the 7-day waiting period has begun. The Merkle tree data, which is a list of (address, reward) pairs, is available here.
Under the hood, the Merkle Distributor smart contract ($$0x01d3348601968aB85b4bb028979006eac235a588$$) will distribute $DYDX rewards according to a Merkle tree of balances. The tree will be updated at the end Epoch 1 with each user's cumulative reward balance. An update is performed by setting the proposed Merkle root to the latest value returned by the oracle contract. The proposed Merkle root can be made active after a waiting period has elapsed. During the waiting period, dYdX Governance has the opportunity to freeze the Merkle root, in case the proposed root is incorrect or malicious. Root updates can be unpaused by a ShortTimelockExecutor.
All earned $DYDX can be claimed on October 6th, 2021 at ~02:12 UTC. Once tokens have been claimed, they can be transferred or delegated to dYdX governance.
Safety Module Recovery & Staker Compensation
Shortly after the launch of the Safety Module staking pool, the dYdX Foundation discovered an error in the deployment process for the Safety Module smart contract. In response, access to the Safety Module staking pool was temporarily removed from the governance dashboard.
Following the Safety Module outage, the dYdX Foundation released a detailed incident report explaining the cause of the error, the impact to users, a proposed solution, and lessons learned. Read more here.
After robust discussion on the Forums, a community member launched a 5-day poll on Snapshot regarding one aspect of the fix: compensation for stakers. The results of the poll are available here. A minimum of 10K $DYDX tokens was required to submit this off-chain proposal.
In aggregate, 575 $DYDX token holders and delegates voted with 17,112,789 $DYDX. With 413 voters and 16,682,487.634 $DYDX (97.4855% of total) in agreement, there was an overwhelming consensus that stakers should receive 10% of their staked $DYDX as a form of compensation.
The dYdX Foundation later completed and open-sourced a proposed solution to:
🛠️ Restore functionality to the Safety Module
✔️ Allow users who are currently staked to recover their funds
💸 Allow users with staked funds to receive rewards
A community member, Dan Robinson from Paradigm, submitted a pull request to the Pending-DIP branch of the Foundation Github. The Pending-DIP includes a DIP summary, links, motivations, specifications, implementation details, & test cases. Read more here.
An on-chain DIP was later submitted by Dan Robinson from Paradigm which held enough proposition power for the type of proposal (in this case, a Long Timelock.) 20M $DYDX (or having been delegated 20M $DYDX) are required to submit a Long Timelock DIP.
After the on-chain DIP was created, the proposal entered a pending state for a period defined by the Voting Delay, which is currently configured to 6570 blocks or approximately ~1 day. In other words, user snapshots were recorded 1 day after the DIP was created, at which point the proposal transitioned to an active state and the Voting Period began.
A Long Timelock DIP is subject to a:
Voting Period: 10 days
Minimum Quorum: 10% (100M $DYDX)
Minimum Vote Differential: 10% (100M $DYDX)
Robust governance requires the community, including all of you, to be engaged to have the turnout needed to make changes to the staking contract. A 10-day Voting Period on the proposal is now in effect until October 14, 01:00:46 AM UTC. Vote here.
Reducing the volume threshold % for market makers to qualify to receive Liquidity Provider Rewards
In reference to a thread on market maker incentives, Su Zhu from Three Arrows Capital submitted a Snapshot vote to reduce the volume threshold % for market makers to qualify to receive Liquidity Provider Rewards. The Snapshot vote concluded with a record 764 unique voters and 55M $DYDX in agreement. The majority of the community (399 voters & 86% of $DYDX) supported to reduce the threshold to 1%.
The next step requires the community to formalize the change by completing an off-chain DIP and submitting a PR to the Pending-DIP branch of the Foundation Github.
This change does not require an on-chain DIP or another vote. Assuming the off-chain DIP is submitted during Epoch 2, the 1% threshold for eligibility will start in the current Epoch 2 and eligible market makers will start to earn rewards in Epoch 3.
Other forum updates
Other updates from the forums, where longer-form community discussion take place include:
Layer 2 orderbook zoom controls, leverage controls for market orders, the ability to save advanced trade options across different sessions, and more.
For more frequent updates, check out the $$#dev-blog$$ channel on Discord.
New market launches
dYdX Trading, Inc. launched the XMR (XMR-USD) and BCH (BCH-USD) Perpetual Contract markets. Eligible traders outside of the United States can trade with up to 10x leverage, cross margining, and zero gas fees.
Legitimacy & Disclaimer
dYdX Foundation’s purpose is to support and grow the dYdX protocol ecosystem by enabling communities, developers, and decentralized governance.
Nothing in this post should be used or considered as legal, financial, tax, or any other advice, nor as an instruction or invitation to act by anyone. The dYdX community is sovereign to make decisions freely from time to time, in accordance with the governance rules, principles, and mechanisms adopted by the dYdX DAO. Community discussion and interaction on the contents of this post are encouraged. The dYdX Foundation does not directly participate in governance decisions to be made by the dYdX community, including, without limitation, by making and/or voting on governance proposals. The dYdX Foundation may change, update or complement its analysis or opinions expressed in this post in the future and assumes no obligation to publicly disclose any such change or update. This post is solely based on the information available to the dYdX Foundation at the time it is made and should only be read and taken into consideration at the time it is made and on the basis of the circumstances that surround it.
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