On December 27th, the dYdX Foundation hosted a discussion on Discord regarding general updates, current governance proposals and an Epoch 4 review. The discussion was followed by a community hangout and AMA with the dYdX Trading team.
A redacted transcript is available below:
David (dYdX Foundation): With that, we'll get started. So, a typical kind of format the same as every other Epoch review. We'll spend the next 15-20 minutes just walking through key highlights from Epoch 4, and then we'll open it up to the community AMA section. Today, on stage, you have myself, David Gogel from the dYdX Foundation and then Corey, Paul, and Marc from the dYdX Trading team. And then, excited to have Josh who will be our moderator and is part of the dYdX Foundation team as well. We'll kick things off with Epoch 4 highlights, walking through various KPIs and metrics over the course of Epoch 4, which ended last week. Total volume on the layer 2 protocol over the course of the Epoch surpassed $61 billion, with average daily volume at around $2.2 billion. This volume relative to Epoch 3 declined slightly, in line with broader volumes in the market. Ending open interest also declined to about $1 billion, while total value locked increased to $943 million.
Over the course of Epoch 4, there were 7,200 unique wallets that earned 5.8 million $DYDX through various trading, liquidity provider, and staking rewards. In total, there are now about 43,000 unique wallets that have previously earned $DYDX rewards from retroactive trading and liquidity mining rewards programs. Today, there are about 21,000 unique wallets that currently hold $DYDX and about 1000 unique wallets that currently hold $stkDYDX.
In terms of the liquidity provider rewards, there were 15 addresses that were eligible for LP rewards over the course of Epoch 4, with the majority earned by two market makers. This is a trend that we've continued to see. Competition in the pool is still strong and we are seeing a lot more market makers participate and earn rewards, especially after the last proposal to reduce the maker volume threshold to 1%, which occurred in a prior Epoch. Looking forward, in Epoch 5 there are 16 addresses - 13 existing market makers and then 3 new market makers - that did more than 1% of maker volume over the course of Epoch 4. And therefore, are now eligible to participate in the LP rewards program over the course of Epoch 5.
With regards to the Liquidity Staking Pool, there was 711 million $USDC staked to this pool over the course of Epoch 4 from 862 unique stakers. 4 market makers have successfully tested and borrowed $USDC from the staking pool. We did see large requests to withdraw over the course of Epoch 4. At the start of Epoch 5, there is now 502 million $USDC staked to the pool and earning $DYDX rewards. A large whale continues to account for a majority of the $USDC staked here, but it is encouraging to see a lot of different stakers, 862 unique stakers staked $USDC to this pool, and we are starting to see market makers use that capital to drive more liquidity to the broader dYdX markets.
With regards to the Safety Module, we saw at the end of Epoch 4, 36 million $DYDX staked from 1,025 unique stakers to the Safety Module. Over the course of the last Epoch, there was a lot of community feedback with regards to venture investors staking their locked $DYDX tokens to this pool. That feedback was communicated to those venture investors who requested to withdraw locked $DYDX to the staking pool, and so at the start of Epoch 5, there is about 11 million $DYDX staked to the pool earning $DYDX rewards. So that explains the big shift between 36 million $DYDX staked at the end of the last Epoch versus 11 million $DYDX staked at the start of the current Epoch. In terms of circulating supply, after the rewards will be claimable later tomorrow, there will be 7.76% of the total $DYDX supply, which will be considered liquid, and so this excludes the unearned retroactive rewards that were transferred to the treasury as well as the $DYDX vested into the community treasury. When you include the liquid and vested supply in the community treasury, there's now 10.61% of $DYDX, which we consider as being liquid and circulating.
With regards to governance, last Epoch, we saw a lot of really active discussions and proposals throughout the forums. Most notably, the community voted strongly in favor of launching the dYdX Grants Program, which was submitted by Reverie. A Snapshot vote was held, which had kind of overwhelming support, we encourage everyone in the community to take a look at the Snapshot and the discussion on Commonwealth, but just to summarize Reverie's proposal calls for $6.25 million in $DYDX of community treasury funds to be allocated, to launch the dYdX grants committee multi-sig to fund a list of potential ideas that help drive the overall ecosystem. There's an active list of projects and ideas that the Reverie team has submitted in the form of RFPs that really help drive broader ecosystem growth and generally speaking it was great to see the community have a very active discussion, provide feedback, and participate in the off-chain vote.
Just as a reminder, this type of governance decision will require an on-chain vote and the Reverie team has indicated that they are planning to submit an on-chain vote to fund this Grants Program in the near future, or at the start of early next year. So that was one major development on the governance side, over the course of the last Epoch.
The other major governance update relates to the community voting strongly in favor of adjusting the trading and the liquidity provider rewards formulas to increase rewards for stakers of $DYDX. Again, there was a vote on Snapshot where a lot of smaller token holders participated, over 300 or so, unique voters voted in favor of passing this proposal. This proposal basically changed the formulas for trading rewards and LP rewards, and now includes an incentive to hold $stkDYDX as a way to earn a booster on trading and LP rewards.
So overall, these are two prime examples of broad community feedback and just the types of governance proposals that help drive the community and governance over the protocol forward. These are also both great templates for other community members who are interested in participating in governance to really understand how to draft a proposal and submit a proposal throughout the overall life cycle. And so, I encourage everyone to take a look at those threads and keep an eye out for any future proposals that will get submitted over the course of Epoch 5. And then lastly, just in terms of logistics, Epoch 4 ended on December 21st at 3:00 PM UTC. As per usual, every Epoch lasts exactly 28 days. Epoch 4 rewards will be claimable on the website on December 29th at approximately midnight or 12:08 AM UTC, that's exactly 7 days after the end of the Epoch, plus a 9 hour delay. Once tokens have been claimed, they can be transferred, staked to the Safety Module, or delegated to dYdX governance. Excited to again see this adjustment to the trading rewards and LP rewards to now factor in $stkDYDX. And just a reminder that as you claim your rewards, rewards that are earned can be claimed in perpetuity. You can wait for gas fees to be lower, but the rewards will be claimable in approximately 30 hours from this current moment.
So that's it. Overall, really strong results over the course of Epoch 4. I think continued to be encouraged by community participation and driving growth for the overall protocol. Results, whether volumes or number of active users over the course of Epoch 4 are slightly down relative to Epoch 3, but I think that is very much in line with broader market trends and overall I continue to be encouraged by the level of engagement and all of the exciting products and announcements that are in the pipeline for Q1 2022.
That concludes at least the prepared remarks here. As per usual, we'll be posting the Epoch 4 review blog post on our blog if it's not up there already. And then, we'll also be recording this AMA and providing a transcript on our blog as well. At this time, if anyone from the audience has any questions, feel free to write them in either the discussions channel or in the Epoch 4 review and community AMA channel and we'll be happy to address any of those. Also, if anyone has any questions and wants to be brought on stage, happy to do that as well.
So, I see one question here, will options be available on dYdX? I think Corey, maybe you want to take this and talk a little bit about the product and what's in store there.
Corey (dYdX Trading): Yeah absolutely. So, I'd say at the moment the trading team is focused on creating the best product possible for perpetuals, as we look towards the next version of the protocol, options are certainly on the table. And I think ideally we kind of want dYdX to be the go-to place to trade all types of derivative contracts. So options, data futures, things like that, but at the moment perpetuals only, and yeah, all the other types of derivative contracts are more of a longer-term project.
David (dYdX Foundation): Awesome. Another question is: when is it expected for the Grants Program to kick-off? So, I addressed this a little bit in the prepared remarks, but the Grants Program is really following the full life cycle of a proposal. There is really extensive documentation on GitBook and on Commonwealth for this type of proposal. There was an active discussion on Commonwealth and then there was a dYdX request for comments, i.e., a DRC, that was submitted, and then a Snapshot poll was submitted, which is an off-chain gasless poll, but that does poll existing token holders at the time of the snapshot, again that passed with overwhelming support. The last step for this type of proposal to get funded is for any community member, but probably Reverie who was really the driver of this proposal to submit a dYdX improvement proposal, i.e., a DIP, which is a formal on-chain proposal. Again, this type of proposal requires a transfer of $DYDX from the community treasury to a multi-sig. And so, for that type of proposal, you need an on-chain vote to make the change or to call to the smart contract. Again, it's really up to the Reverie team on when they want to submit the proposal, but given the holiday, we expect that to be early in the new year. So probably sometime next week or after that, but really excited by the level of enthusiasm so far and excited to see what the community decides to vote on in that ultimate outcome. Again, this type of proposal would require a Short Timelock vote. So that's a 4-day voting period, 5 million $DYDX to submit the proposal, and then a 20 million $DYDX quorum. So, this type of vote does require an on-chain vote, but we expect that to happen in the near future.
Next question is any updates on the research on decentralization, any plans to include the broader community in the process. Corey, do you want to take this one?
Corey (dYdX Trading): Sorry, can you repeat the question one more time?
David (dYdX Foundation): Any updates on the research on decentralization, any plans to include the broader community in the process?
Corey (dYdX Trading): Got it. Yeah. So the decentralization research is definitely coming along. I'd say the research team continues to look at a few different options at the moment. In terms of working with the broader community on this, initially, it will probably be dYdX working with a variety of top researchers, both internal and external in the space. And then once we've kind of finalized the plans and have made quite a lot of progress on the development side of things, we will then start to include the community and get people kind of rallying around it and then share a lot more info once it's available.
David (dYdX Foundation): Next question is: when are new markets being added? Yes. Over the course of Epoch 4, we did see a few new contracts being added or a few new markets. Generally speaking, new markets are at this point in the hands of the community. Any new market has to be added to the smart contract and to the protocol. There is a thread on Commonwealth discussing a process for adding new markets. So far, there have just been a lot of one-off threads on adding new markets without necessarily adding kind of a business case around that. Ultimately, we encourage the community to continue to prioritize and vote and discuss which assets should be listed. Ultimately, the goal here is to list the markets that people want to trade, to have consistent feedback from users, and to ensure that there is active volume in those markets. I encourage you to take a look at the post on Commonwealth that lays out a structure and an approach for the community to list new markets and what that could look like. I think one additional thread that I would encourage you to look at is the thread that Wintermute put together. A recommendation for putting together a committee to evaluate new markets and how prioritize that. Again, the Foundation really is neutral in terms of what the approach should be but encourages the community to have discussions around what's the best process to add new markets to the smart contract and what that could look like.
Corey (dYdX Trading): Yeah. And just to piggyback on that, there are some contracts that are already on the smart contract, so we'll probably relaunch or start to launch more of these starting early next year. Again, all of those markets are in the Commonwealth post that David was referring to. So there are some that we don't need actual votes on yet. We'll start to add more of those in early next year. But yeah, as David noted for the newer markets we'll definitely need to formulate the process with the community, and those will all have to go through votes.
David (dYdX Foundation): Again, if anyone has any questions, feel free to raise your hand and we'll bring you up on stage, feel free to write them directly in the Epoch 4 review and community AMA discussion thread. I think we've addressed most of the ones that have come through so far, but this really is your opportunity to have an open and frank discussion with the team. So, again, if anything comes up, feel free to ping any of the admins on Discord. A recording of this will be posted on our blog. Certainly, if anyone in the community has any feedback around running these community AMAs or anything that we can do to improve transparency please reach out. Also, we welcome any feedback to increase engagement and help address questions that keep coming up.
One more question: are you able to provide examples of the data futures you just referenced? I'm not exactly sure what that question means.
Got it. I think the question relates to creating a new listings group, which is a thread on Commonwealth. Again, this thread was submitted by Evgeny at Wintermute calling for creating a new listings group. DollarBill (Community Member), I encourage you to read through the posts and ask Evgeny directly what he means here. Again, Wintermute and the community are really driving this process. So best to ask the source directly for clarification here. There's an attempt by Wintermute to try to create a process around adding new markets. Ultimately, there are various factors that they're considering, i.e., there are regulatory approvals from dYdX Trading Inc. around what markets to list. There are overall commercials around where is there public interests, and so for that, is this a market where there's active trading volume specifically in perpetuals? The third point is really around market making support, again, for any new market that's added, how much liquidity is available for that market and whether market makers are actively willing to trade that market is another factor. And then lastly, for any market added on dYdX, you need Oracle data and a reliable Oracle source to price the market. So really encourage the community to think through these 4 different factors, which are all considerations for adding new markets and putting together more thorough analysis around how to prioritize adding new markets. Again, there is a process that kind of has to be followed, but ultimately open to and encourage the community to spearhead and drive this process and think through and analyze the issues in an open format on Commonwealth.
The last thing I'll mention is dYdX Trading is running a content competition that was extended until December 31st. So, there are still 4 more days, you can submit different pieces of content and earn large sums in $USDC for creating content about dYdX. So I definitely encourage everyone to take a look at that. And then lastly again, Epoch 4 ended last week, the rewards will be claimable on the governance dashboard in about 30 hours or so. Again, that's 7 days after the end of the Epoch plus a 9 hour delay. And then again once tokens have been claimed, they can be transferred, staked, or delegated to dYdX governance.
Seeing one more question. Corey, this one is probably best for you: are there going to be any more trading competitions?
Corey (dYdX Trading): Yeah, absolutely. We definitely are going to launch more trading competitions. In terms of new products, we're actually pretty excited about a new product that we've been actively working on, which will likely launch either late January or early February. And this will be related to trading competitions. We're really excited about launching it and think everyone else will be as well. So stay tuned for that.
David (dYdX Foundation): Cool, great questions everyone. We're at the half-hour mark, I think it seems like we've gone through all kinds of all the community questions here. Again, if anything else comes up, feel free to ping any of the admins on Discord or ask any questions on Commonwealth. You know, we'll be hosting these Community AMA calls at the end of every Epoch, and with that wish everyone a very happy New Year, happy holidays, and enjoy hopefully a little time off before a very exciting New Year. With that, thanks everyone!
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