On October 4th, the dYdX Foundation hosted a discussion on Discord regarding general updates, current governance proposals, and an Epoch 14 review. The discussion was followed by a community hangout and AMA with the dYdX Foundation team.
James (dYdX Foundation): I guess we can get it started. Thanks, everyone for tuning into this Epoch 14 Review and AMA. As usual, both dYdX Trading and the dYdX Foundation are always trying to become more transparent with our thoughts relating to all things dYdX and the Foundation, so hopefully, this helps and the questions that you guys have gets brought up each week and hopefully, you guys can raise your hand at the end and ask some questions that you may have.
I think we're going to keep the same format as the last Epoch review. The deck's being shared in Discord, so I encourage all of you to read through this. Hopefully, all of you have managed to have a look through that, which gives you an understanding of the key metrics, data points, and everything interesting in Epoch 14. As usual for this, if you don't want to ask a question and you just want to post a comment that we can read out, keep it in the general Discord channel, and after those questions are asked, I'll open up the stage for the AMA.
Here today from the Foundation are me, David, and Cliffton. Carl from the dYdX Grants team is here, and Corey from dYdX Trading is here to address some of those trading questions. Additionally, if there's anything that you like or dislike about this Epoch review or the structure of the mid-Epoch report, then let us know your thoughts and we'll try and change that.
Cool. We can get straight into the questions. Corey, I can see that the community's had a few questions for you with the trading team. We can start with the first one. I know that this one gets asked in every Epoch review, but I think it's pertinent to everything V4. How's V4 progressing? Are there any milestones being hit? On a scale of 0 to 10, how confident are the team at hitting these milestones laid out in the blog post?
Corey (dYdX Trading): Basically, things are continuing as we had laid out for the most part. If we look at the milestones that we outlined in the previous blog post, we're still amid milestone two, so we're still wrapping this up. Milestone two is the internal test net. I'd say we're 90% done with milestone two, so I think this will probably be completed within the next two to three weeks. For milestone three, we're still aiming to complete by the end of the year. This is going to be a private test net, and we're going to be getting started on that pretty soon.
James (dYdX Foundation): Awesome. That sounds great. I'm looking forward to seeing that being hit, and more being produced in the blog post. Moving back to V3 then, are there any new initiatives that are happening that the community can be excited about?
Corey (dYdX Trading): As you guys know, we're spending a lot more time working on V4, so moving forward there will probably be less and less improvement specifically on V3 over the next few months. Something notable that did launch today was the Fiat On-ramp, and so now users, both new and existing, can deposit money to dYdX with a banxa integration. We're pretty excited about launching this. I think it could be good for people who don't have a whole web3 wallet set up quite yet, to easily onboard to dYdX. I'm sure for some people it may be easier to deposit USDC to dYdX via a credit card as well, so that's a new feature that we launched today. Feel free to go check that out.
James (dYdX Foundation): Cool. That's great. Is there a blog post out at all, or is that just integrated directly within the wallet? Does it go straight into Layer 2, how does that work specifically?
Corey (dYdX Trading): Basically, the way it works is you onboard to dYdX the same as usual. It's integrated with the front end, and then there's a button that says Deposit Fiat. You click that button and it links you to banxa, and then banxa will then send that money to your Layer-2 account.
James (dYdX Foundation): Cool. Awesome. Thanks, Corey. Last couple of pre-populated questions. You can see previously that the decision was made to reduce rewards for trading leagues, what was the reason here, and how has this affected volume, if any?
Corey (dYdX Trading): Trading leagues, it's something that was pretty novel at the time, I would say it was successful when we launched it, but there wasn't necessarily a really strong signal that it was driving much volume to the exchange or much new user acquisition. A little bit sad to wind down $USDC rewards. Having said that, trading leagues do still exist as a product, and you could still win Hedgies each week, and have bragging rights as you level up each week in Trading Leagues. There wasn't any strong data that suggested that it was worth the monetary costs that we were putting into it. For that reason, we wound down the $USDC rewards specifically. It has not affected volume or user numbers really at all, so I think looking back it was probably the right choice to wind that down.
James (dYdX Foundation): Cool, thanks for that Corey. The last couple of questions, this one more so towards the crypto market and how dYdX is trying to manage this. The crypto markets are down, sentiment's down, how is dYdX planning on riding this storm?
Corey (dYdX Trading): I think the good thing about dYdX is we've seen a lot of different cycles in crypto thus far. We started in 2017, and we've seen a lot of boom-and-bust cycles already in crypto. So for us, it's business as usual, we'll continue to keep building on the product. We're spending a lot of time on V4, and we take a long-term outlook on the crypto market. We're going to continue building the best products out there, and we're excited for V4 to come around, and whether or not it's a bull or bear market, we'll continue grinding on.
James (dYdX Foundation): Good to hear. The last question was to do with the recent onboarding of some high-profile Twitter affiliates. What's the thought process behind this, and is this more of a focus for the future of dYdX?
Corey (dYdX Trading): Good question. It's something that we have been doing a little bit more of obviously, as you can tell from various influencers, who have recently partnered with us. We'll see how much volume per se, or new user acquisition it drives to the protocol. We'll probably have these relationships with these people that are public already for the next few months. Evaluate whether or not they're actually driving any meaningful flow to the exchange, and then reevaluate. TBD there on if we want to scale that out over time or not, depending on how these guys perform.
James (dYdX Foundation): Thanks for that, Corey. Appreciate all those questions being answered. Let's move on to the Foundation team. David and Cliff, I guess this is for either of you. Are there any new Foundation initiatives that we're excited about that are coming towards the end of this year?
David (dYdX Foundation): I think we've seen a lot of really great governance proposals and activities on our forums, and we're excited to continue to support community members who are iterating on different types of ideas. I think just in the last two weeks we've seen several on-chain and off-chain governance proposals, and I'm excited to see the results of those materialize. I think there's been a few active threads, notably from Anchorage and from TrueFi, which also demonstrate greater participation from other established players within the ecosystem, so I'm excited to continue to see the community debate those proposals and see what comes out of those. I think as we move to the last quarter of this year, the Foundation team is focused on trying to catalyze the community to focus on launching and growing the dYdX DAO. Obviously, with V4 coming over the next few months, at that point the community will have full control over all aspects of the protocol, and so the Foundation team is currently focused on educating the community at large about V4 and what a potential migration could look like. Then it’s making sure that the best community can be entrusted with control of the next version of the protocol. We're currently heading iterating and thinking through different ideas, and then working with community members who've reached out to try to support them through their governance life cycle.
Lastly, for us, we're excited to see Grants v1.5 fully funded, and starting to see really interesting community members and projects getting funded via grants, and then helping to support the dYdX Grants team, and potential grantees also navigate the current V3 architecture and then V4 down the road.
James (dYdX Foundation): Awesome, thanks for that, David. We've got a few more questions that have come in. One is, can we briefly touch on the changes that are going to be occurring in Epochs 14 and 15?
David (dYdX Foundation): Yeah, Cliff, do you want to take this one?
Cliffton (dYdX Foundation): Yeah sure, so as David mentioned, we have been pretty active on the governance front, and we've had two on-chain proposals recently go live. The first would be the winding down of the Liquidity Module and the Borrowing pool, and the second would be the reduction of trading awards by 25%. To touch on the first proposal, the Liquidity Module has effectively been wound down, and rewards for staking $USDC have been set to zero. The blackout period has also been set to three days, so if you're looking to unstake your $USDC, you have until October 22nd at 3:00 PM UTC to do so, just because the blackout period has been reduced, again, to three days, and staking $USDC will no longer bring about any rewards. That's the first change that's going to be effective immediately.
The second change is, right now, being queued, and we'll have about seven days to implement it. This is the reduction of trading awards by 25%. This is a follow-up to an initial snapshot post that SLN Capital put out, which includes two components. The first component is to simplify the trading awards formula to just be based on volumes. So where w=f, that has been implemented at the start of we believe Epoch 13. The second component was that they were kind enough to raise a governance proposal for this to reduce trading rewards by 25%. That has since passed the community vote and is now in the queuing process, so the ones that have been executed will go live immediately as well. All these changes can be seen on your trading dashboard where you can see the trading awards, and this will be evidenced by a rewards reduction of 25%. We also, on our end, make sure that all the documentation is updated. Those two are the most effective changes that will be made in Epoch 14.
There's also one piece and that's on the Liquidity Provider rewards. We've revised a couple of weights for BTC and ETH, so we've increased the weightage on volume just because they're more mature markets and we have redirected these rewards towards alternative markets just to encourage liquidity there and that has passed an off-chain vote. These three are the main changes that are happening in this Epoch. David, is there anything you'd like to add?
David (dYdX Foundation): No, I think that was a great overview.
James (dYdX Foundation): Are there any interesting proposals that are currently on Commonwealth that the community should be paying attention to additionally?
Cliffton (dYdX Foundation): Yeah, so David did mention this, but we have one proposal by Anchorage going on which they are proposing to lend out the dYdX community tokens to market makers to increase liquidity on the platform. So I guess the benefits of this are to essentially drive some diversification towards the treasury and of course to improve some form of liquidity for all markets from the market makers' side because they can actually borrow and then take advantage of our fee structure to pay fewer fees. So that proposal has been up I believe three weeks ago and that’s had good traction on feedback. Most are questioning whether market makers will actually take advantage of this and just stake to the safety module and profit off the arbitrage. So we are going to be hosting an AMA on Thursday with the Anchorage team, so I would highly encourage everyone to check that out on Twitter Spaces.
One other proposal is from TrueFi. TrueFi is looking to launch lines of credit for liquidity providers as well. So it's almost taking over the borrowing pool process. They have hosted an AMA previously where the community asked them great questions. So the next step for them is to hash out what this function would look like. This function would be spearheaded by the community where a few leading community members will be looking to be onboarded to TrueFi. Questions such as what is the maximum capital that each market maker or LP would be willing to take, what qualities and characteristics would one need to have to be qualified to borrow from the boring pool. So yeah, I think it's going to be a multi-sig function where there's going to be five community members who will be overseeing this proposal. I’m sure more details on how this will be structured will be released soon from the Anchorage team
James (dYdX Foundation): Nice. Awesome. Thanks for that Cliff. The next question which I could probably take is, are there any future trader community-run programs that people can get involved with?
I think right now we're still in the kind of speculative and planning stage, but we're thinking about version two of an ambassador program, whether that be users in high numbers (e.g. 500) or we do a really small one (e.g. 4-6). Again, it'll probably be community driven in that sense without any kind of Foundation holding. There are other things that we are in the planning stages of, such as having a community cauldron with the community having, I don't know, some role in deciding small amounts of funding for ecosystem development. We are kind of in the early stages of thinking through a potentially dYdX Quills program where we have small pockets of communities internationally running sort some media and marketing initiatives that they may want to come up with. with brand assets that we pre-populated. We’re thinking about other ways that we can try and make things more trader specific and focused as well.
We’re thinking about ways we can create some form of reputation XP points within the ecosystem and encourage anyone who's got any good ideas about, how we can think about community-run, trader-run programs to come forward and potentially apply for a grant or share the ideas with the Foundation on how we can support you. So I guess that's probably everything that's in the pipeline from a trader community-focused program for the time being and encourage anyone to reach out if they want to go through any ideas there. I guess that's it from the foundation questions. Is there anything else you guys want to mention David and Cliff?
David (dYdX Foundation): Yeah, I think the last thing to mention, one initiative I'm particularly excited about that was funded by the grants program is the dYdX Academy. Again, I think there's been some great content and educational videos that have been produced by several community members that I think have been impactful. I am very excited to see the grants program build out a team and structure around that and help scale the academy more broadly. I think that's going to be an extremely important community-driven initiative that'll have a lot of impact on the ecosystem going forward. So I specifically wanted to call that out as well.
James (dYdX Foundation): Awesome, thanks, David. Cool. Okay, just quickly before we get onto Carl. Alucard.eth is going to post the POAP form in the general channel. Can everyone go into the general channel and claim your POAP? If you want it for this AMA, the form will remain there for the next 10 minutes and then be removed. So for those interested, make sure you claim that ASAP. Okay, last but not least, Carl, I guess there are a few questions that have come in for the grants team specifically and I know these are similar week on week, but I think it'll be great to just reiterate what are the grants team on the lookout for I guess the next grant?
Carl (Reverie): Yeah, for sure. Always happy to go over this. So we're still pursuing the initial mission of onboarding new users and expanding the dYdX brand name, while also focusing and exploring on different important research topics that will help the community with decision-making across on-chain parameters. That will be the responsibility of the dYdX community in the new dYdX chain or at least some of that's kind of how we envision this playing out. We're looking for different growth initiatives across international communities and events, workshops, and sponsorships. Excited to partner and collaborate with a variety of different grantees and partners that will follow through with this mission of attracting new users and building on the dYdX brand name.
On the research side, we've already issued a few grants across tokenenomics, fee parameters and exchange parameters, and there are still a ton of topics there that are going to need to be addressed. And we're super eager to work with qualified research participants that are willing to put their heads down and figure out the important questions on behalf of the community so that when the time comes that we have to make these decisions, we have a substantial amount of resources that we can refer to collectively and use as part of our decision making.
These are what we're finding to be the most impactful in this kind of migration state that we find ourselves in. With Grants V1, we were able to work on tooling and more short-term initiatives. But now that we know that the chain is migrating, it is less impactful for us to focus on those types of grants knowing that either they won't be able to port over, and if they do, it'll just require additional work from the grantee that we can't guarantee. For the time being it is more on the growth side of things that we've got our heads at.
James (dYdX Foundation): Awesome, that's great to hear. Is there anything exciting off the top of your mind? How is the cadence of grants that are coming through?
Carl (Reverie): Yeah, for sure. Grant applications and contributor participation does drop in bear markets. People who previously would look to contribute to gain exposure or just gain credentials in spaces drop out and suddenly go back to work. We're still getting a few applicants every day, and we do see substantial opportunities out there. The grants team is doing more outreach as compared to inbound applications. That's the big difference between bear markets versus bull markets. In a bear, we have to do a lot more outreach and try to go out of our way to find the right grantees, whereas in the bull market they typically come to you. There's nothing wrong with that - it's part of the responsibility.
This does mean that we are a little bit more limited at the time, but we still have lots of exciting initiatives and lots of new topics as well that are coming up now with V4 as we get closer. What will MEV look like on the new chain is something that we're thinking about a lot right now and we're seeing comparable solutions and questions being both asked and answered across other Cosmos SDK chains. For example, with Osmosis recently at Cosmoverse, there's a big discussion on how to address that and replicating that for dYdX is going to be super interesting. So we're actively looking for people that can help us answer those questions.
In terms of existing grants, we have David mention the dYdX academy, which is moving along super well, and we are adding more grants to that. We've got the merch grantees who are also really hard at work, and we're adding the merch web store now in our latest round, which will be awesome. It will be a customized web store that'll have token gating for drops dedicated to Hedge holders, drops dedicated to $DYDX holders and priority access to different types of holders and payments through both traditional, and crypto systems. So that it's not just the boring old web store, but this again builds on this dYdX brand that we have.
James (dYdX Foundation): Nice, that's super exciting. Great to hear. I guess that's everything from the community questions I guess. Is there anything else that you'd like to mention at all?
Carl (Reverie): Yeah, for sure. So another thing I’d like to point out is that Shippoor just released an update to their dashboard, which is awesome. They completed that a couple of weeks ago. I have been working with them to give the grants team commit access to the repo so that we can go ahead and keep updating the grants page and as I mentioned in the grants channel, we're still working through that data. The goal here is to provide and leverage the dashboard because it's really clean. I like the way that it looks and I don't think that I could do much better personally. I'm not a web developer so we're just going to leverage that and use it as a kind of auditable source on behalf of the community so that you guys can all verify the transactions that we're doing, point to them and see the payments being issued to the different grantees when they're being completed. You can see how much they're receiving, and then provide an audit source on top of that as a means of improving transparency.
We've seen this mentioned in the community channels as well and we want to make sure that it is being addressed so that people are comfortable with the work that's being done. We use Airtable on the back end but that is hard to share directly with the community. So we built a system that ports over at least the important data into our database that we are now using to build an additional dashboard on top. I can drop a quick link for this one in the grants channel if anybody's interested.
Happy to get more feedback, but the goal here is we heard people wanted to see what the application data looked like and how, who's being approved, and who's being rejected. What sort of categories and everything? So this is going to be live on our website for the time being while we're working on integrations. Hopefully, this will kind of improve transparency - that I know has been kind of a discussion point for the grants program and obviously, we hear the issues. And we want to make sure we're working with people to address those.
James (dYdX Foundation): Nice. Thanks, Carl. That's great. Yeah everyone go check that out. Interesting to see you play more of a role in that transparency side of things. Cool. I guess that's it from all the questions from the team up here. I guess if anyone wants to ask any questions, by all means, raise your hand and we can bring you on stage. We've got about 15 minutes, so yeah, feel free to if you've got any questions. If not, post them in the Epoch 14 AMA channel on Discord or in the general channel and we can answer those over the next 15 minutes. I'll give it a couple of minutes. Cool. RealVovoshka, I'll bring you up.
RealVovoshka (Community Member): Hello guys, do you hear me loud and clear?
James (dYdX Foundation): Good morning. Loud and clear, go ahead.
RealVovoshka (Community Member): Yeah, I have a question. I'm constantly monitoring trading rewards distribution for the last epoch, and I see that one account is getting almost 50% of all trading rewards, which is insane. This one account is getting 1.5 million $DYDX in trading rewards last epoch. Can you comment on that?
James (dYdX Foundation): I don't know if that's a better question for the trading or foundation team. Corey, and David, I'm not sure if anyone wants to answer that specifically, do we need to have a look at this and formulate what the next steps are here?
David (dYdX Foundation): Yeah, I mean I'm happy to take the first stab at it. I don't know specifically the details behind the account but there are no, to my knowledge, any dYdX affiliated traders on the exchange or professional trading desk that are turning in any rewards. More likely than not, it is a market maker that's active on the platform that's optimizing their algorithms for trading rewards. Again, there's been notable changes to the formulas over the last few epochs including, more recently, removing all other factors other than fees to earn rewards. So really it's directly proportional to the number of fees that all of the traders pay.
Again, it's not surprising that it may result in a higher concentration of traders getting rewards on the platform. It's certainly something that I think several community members continue to highlight and flag. But I think again, a lot of these rewards and formulas have been iterative and I think I encourage you and the rest of the community to continue to look at the data which is completely public and to think through whether the reward formulas are incentivizing the right behaviors and if that type of concentration continues to increase. Feel free to propose potential changes to the formula via governance to try to make it more equitable, or distributed but also drive the objectives of increasing volume and fees to the exchange. So at least that's from my standpoint. Corey, I don't know if you have anything to add.
Corey (dYdX Trading): Nope, agree with what you said.
RealVovoshka (Community Member): Okay, I just want to add if this is a market maker, normally with such market maker volume, the fee discount is a hundred percent so they pay no fee. Wintermute is paying around $30,000 fees per epoch, which is low. I, myself, paid much more. This account is not a Market Maker because if you get $1.5 million of reward with their volume, so last epoch I see from the IPFS they got around $5.8 million of fees. This account could pay around $2.5 million and with this amount, it's just impossible for a market maker to pay this kind of fee. How do you comment on that?
David (dYdX Foundation): Yeah, again, I can't speak to their specific strategy, but I think there are different fees for taker fees, and maker fees and then there is sub-account functionality or linked account functionalities, that do allow programmatic traders to link multiple accounts and aggregate rewards to a domain account. They may be trading less volume and paying fees across multiple accounts, but again, I can't really speak to the specifics of their strategy, but that would be my current assumption there.
RealVovoshka (Community Member): So it's good that you mention this linked account functionality because I guess it started from Epoch 12 and it was not publicly posted anywhere on the forums. It was only utilized by a small number of accounts. Even Micah didn't know about this functionality and he's a very technical guy. I mean I mentioned him because he’s been active on Discord and he said that he didn't know about it. As this functionality was added during Epochs 12 and 13, all other accounts got fewer rewards than the estimated rewards for most accounts. So, for Epoch 12 it was around a 7% discrepancy and for Epoch 13 it was around 15%. This is a big problem because it's a big amount of money that other traders didn't receive. After all, they had different trading conditions.
There weren’t any publications about these changes and so it caused a big discrepancy in the Epoch 12 and 13 reward distribution. I wanted to raise this attention to this because it's a lot of tokens for many normal users. I think it's better for dYdX, in my opinion, to somehow make a proposal and compensate people for Epochs 12 and 13. I don't know if other people agree with me or not.
David (dYdX Foundation): Oh yeah, I mean thanks for raising your point of view. Again, feel free to go to the forums and try to get the community to support a proposal. Again, any type of compensation from the treasury would have to go through a governance life cycle and certainly if you and enough other community members feel that that should be the case, then I encourage you to do that. I think going back to your earlier point around just like public disclosure, again our intent here is and continues to be having a level playing ground with all traders on the platform.
Again, no one has privileged access, all documentation is public. I think there's a broader question of whether everyone is made aware of changes to all of the public documentation, but the sub-account functionality and linking accounts have been updated on our governance page and our public docs from day one. And so there were various announcements on Twitter, et cetera as well announcing that. So again, encourage you to continue to make the case and to go directly to governance, but I will state that the documentation was public and we continue to maintain a fair and even plain ground for all traders on the platform.
James (dYdX Foundation): Cool. Thanks for your question, RealVovoshka. Thanks, David. Sweet. I guess we can probably end it there because there are no other questions. Thanks, everyone for tuning in. Keep up the comments and interaction. It's encouraging to see traders passionate about the exchange. We value the support and feedback there. This will as usual be deciphered and posted as soon as we can. There's a long process and background of sending this off to get transcribed, but we'll keep you updated as soon as the blog posts up and this is posted on YouTube and ready.
Thanks for your time, Carl, Cliff, David and Corey and we'll catch you next Epoch review Epoch 15. Thanks all.
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.
Get Involved with the Community
Become a part of our journey to reshape the financial landscape