The current wave of on-chain infrastructure is forcing protocols to revisit foundational questions around sustainability, incentive design, and token utility. At dYdX, staking is not an inflationary subsidy - it’s a direct function of protocol usage. As crypto matures, this distinction matters.

A Fully Sovereign Layer 1

The dYdX Chain is a sovereign Layer 1 built using the Cosmos SDK and fully operated by a decentralised validator set. Unlike earlier iterations (e.g. dYdX v3 on Ethereum L2), the current architecture routes every transaction, every fee, and every governance action on-chain.

At the core of this system is the DYDX token - used for staking, governance, and network alignment.

But staking rewards on dYdX don’t rely on new token emissions. Instead, they’re funded by real protocol activity.

Rewards Powered by Usage, Not Emissions

Rather than issuing new tokens to incentivise participation, the dYdX Chain redirects a portion of trading and gas fees - primarily denominated in USDC - to validators and their stakers.

This has several important consequences:

• No token dilution for the purpose of staking rewards: Token holders aren’t subsidising staking rewards through inflation.
• Real-yield in stablecoins: Staking rewards are paid in USDC, a liquid, stable asset that reflects real economic output.
• Dynamic APR: Staking returns fluctuate with protocol activity - an incentive to support network growth.

Network Alignment in Practice

As of mid-2025, the data reflects growing alignment between protocol usage and token holder participation:

• 306M+ DYDX staked (Source: Mintscan.com)
• 17,700+ unique addresses actively staking
• $53M+ in cumulative USDC distributed as staking rewards

These figures signal a maturing ecosystem where value accrues not just to traders and market makers, but to validators and long-term token holders who underpin the protocol’s infrastructure.

A Coordinated System of Incentives

In traditional proof-of-stake systems, validators are rewarded with newly minted tokens - regardless of whether users actually engage with the network. dYdX takes a different approach.

Here, every staking reward is tied to actual trading volume and usage. That means:

• Traders generate fees through activity.
• Validators secure the chain and process transactions.
• Token holders stake DYDX to validators and share in the protocol's earnings.

It’s a full-circle design - each actor contributes to and benefits from the protocol’s growth.

Key Characteristics of dYdX Staking

• Staking rewards are usage-based: Tied directly to protocol revenue, not block inflation.
• Stablecoin payouts: Earned in USDC, reducing exposure to token volatility.
• Non-custodial delegation: Token holders maintain full custody and can re-delegate at will.
• Governance signalling: Delegation influences validator power, reward distribution, and on-chain governance outcomes.

What to Consider When Staking

Staking on dYdX is permissionless, but not passive. Key considerations include:

• Validator uptime: Missed blocks reduce both protocol performance and rewards.
• Commission rates: Each validator sets their own fee on delegated rewards.
• Governance participation: Many validators actively shape protocol proposals and risk parameters.
• Transparency: Validator performance is publicly verifiable via Mintscan and forum disclosures.

A Model for the Future

In an industry increasingly defined by infrastructure differentiation, yield without dilution is a rare feature. dYdX demonstrates how staking can be structurally aligned with protocol health - rather than subsidised through token issuance.

This model offers an alternative blueprint: a usage-driven, governance-aligned, validator-secured economic loop. It scales with actual demand and reinforces the principle that protocol value should accrue to the network's most critical contributors.