With the launch of Full Trading, three different reward mechanisms are now enabled on the dYdX Chain: (1) Staking Rewards, (2) Trading Rewards, and (3) a 6-month Launch Incentive Program.
Staking Rewards are distributed predominantly in USDC and are able to be manually claimed by Stakers on a per-block basis (a block is being produced on the dYdX Chain approximately every 1.08 seconds, according to Mintscan). Learn how to claim Staking Rewards by reading this guide.
Trading Rewards are denominated in DYDX and are automatically distributed to the eligible dYdX Chain address on a per-block basis. There is no need for traders to wait or to manually claim their DYDX-denominated Trading Rewards.
50,000 DYDX per day in Trading Rewards are currently available to be earned by traders on the dYdX Chain.
Chaos Labs’ community-approved 6-month Launch Incentive Program aims to kick-start liquidity in the dYdX Chain and reward traders for early adoption. Over $20M in DYDX will be distributed as part of the 6-month Launch Incentive Program. Rewards are retroactively distributed subject to a dYdX Chain governance vote.
Staking Rewards and Trading Rewards are distributed on a per-block basis.
The dYdX community, through dYdX Chain governance, has voted to activate Trading Rewards and a 6-month Launch Incentive Program. This marks the dYdX Chain moving from the Beta stage to Full Trading. We encourage the dYdX community to review the blog posts published by the dYdX Operations subDAO about the Alpha Stage, the Beta Stage, and Full Trading.
In furtherance of its mission to support and promote the dYdX ecosystem by enabling communities, developers, and decentralized governance, the dYdX Foundation is releasing this blog post to provide an overview of the different reward and fee mechanisms currently enabled on the dYdX Chain, highlight how these rewards and fees work, spotlight the 6-month Launch Incentive Program proposed by Chaos Labs and endorsed by the community, and provide an overview of how to claim and receive different types of dYdX Chain rewards.
The Cosmos x/distribution module is a simple mechanism to allocate protocol rewards to Validators and Stakers.
On the dYdX Chain, all transaction fees (trading fees denominated in USDC, DYDX-denominated gas fees from transactions, and USDC-denominated gas fees from transactions) collected by the protocol are distributed to Validators and Stakers (i.e., DYDX token holders that stake their DYDX to dYdX Chain Validators).
Fees will accrue in the Distribution ModuleAccounteach block. Each block a DYDX Staker may claim their portion of Staking Rewards. Staking Rewards must be claimed manually by Stakers (either programmatically or through a designated staking dashboard such as Keplr or Leap, with other options potentially becoming available in the future). If a DYDX Staker does not claim Staking Rewards, their respective rewards will accrue in the Distribution ModuleAccount.
For any Staking Rewards distributed by the protocol to Stakers, Validators have the ability to set a specific commission rate, which ranges from a minimum of 5% to a maximum of 100% and applies to each Validator’s Stakers. This commission will be deducted from the Staking Rewards distributed by the protocol to those Stakers and retained by the relevant Validator.
Currently, according to Minstcan, the average Validator commission rate on the dYdX Chain is 6.08%.
How are Staking Rewards calculated?
More information about how Staking Rewards are calculated is available here.
Additionally, there is the Community Taxparameter. At the launch of the dYdX Chain, the Community Tax parameter was set to 0%. However, over time the dYdX Community may decide to change this parameter through dYdX Chain governance.
Stakers have the flexibility to stake any quantity of DYDX tokens to one or more dYdX Chain Validators in the active set to begin accruing rewards in exchange for contributing to the security of the protocol. If you want to learn how to stake DYDX you can read the dYdX Foundation educational guide. After initiating a staking transaction, there is a one-block delay before the delegation becomes effective, followed by an additional block before rewards start being generated.
It’s important to know that, while staked (“bonded”), DYDX tokens are not transferable. If a delegator wishes to stake their bonded DYDX tokens to a new validator, they must initiate (1) a transaction to redelegate their DYDX tokens, or (2) a transaction to un-bond their DYDX tokens, wait the 30-day un-bonding period, and initiate a transaction to stake to a new dYdX Chain Validator.
Following the recent launch of Full Trading on the dYdX Chain, DYDX-denominated Trading Rewards are being automatically distributed by the protocol to traders.
As laid out in the Rewards and Parameters blog, there are a few guiding principles relating to Trading Rewards in the dYdX v4 open-source software that are worth noting:
Self-trading should not be profitable
Any distributed rewards should be proportional to fees paid to the protocol
Trading rewards should be deterministic
Trading rewards should be settled and distributed every block
Trading rewards should limit the protocol overspending on trading activity
These guiding principles highlight how Trading Rewards are initially treated on the dYdX Chain. Trading rewards on the dYdX Chain are allocated in DYDX and automatically distributed each block.
Immediately following the execution of each trade, the dYdX Chain protocol calculates the amount of trading rewards related to such trade. The dydx.trade user interface displays the maximum potential rewards for a given trade size before the trade occurs. It's important to note that users can accumulate trading rewards from 0-100% of the net trading fees of a fill, paid in DYDX, but not exceeding this limit. This percentage of net trading fees covered by trading rewards is ultimately determined by the “C” constant, which is explained below, and is expected to remain under 100% though this is subject to dYdX community governance.
How are Trading Rewards calculated?
Trader ‘X’’s reward score in a given block is defined as:
Let ‘S’ be the sum of all the reward scores across all traders for a given block. S is given by:
For every block, the amount ‘A’ of the native token that is distributed to traders is defined as:
The calculation of Trading Rewards in the dYdX Chain is governed by a set of parameters, including a constant, “C”. Recently, the dYdX community voted to set the trading rewards constant “C” to 0.33 (and subsequently increase it to 0.66 and 0.90 in the future).
It's important to understand that the Trading Rewards formula is subject to modification by the dYdX community through dYdX Chain governance.
Here is a visual summary of the Trading Rewards architecture in the dYdX Chain
Read the dYdX Trading, Inc. blog for further insights and details on Trading Rewards.
6-month Launch Incentive Program
The dYdX community voted in support of launching a 6-month Launch Incentive Program to distribute ~$20M in DYDX rewards to active users of the dYdX Chain.
The 6-month Launch Incentive Program has a number of key goals:
Stimulate liquidity on the dYdX Chain
Reward positive and meaningful contributions from users
Transparently allocate rewards in a staged manner and according to community approval
Initially, the Incentive program is aimed at rewarding a diverse range of participants who trade on the dYdX Chain. The Launch Incentive Program may expand and include other activities on the dYdX Chain, such as governance participation, staking and/or deposits.
During the 6-Month Launch Incentive Program there are likely to be 4-5 ‘Trading Seasons’, with specific amounts of DYDX distributed each season. The dYdX community will vote on each distribution of DYDX rewards per ‘Trading Season’. The initial season is likely to test and analyze user behavior ensuring a minimal chance of wash trading. Further seasons could ramp up the distribution and allocation of rewards. Reward distribution will have a tiered approach, with higher tiers receiving higher rewards.
Chaos Labs has released a dYdX Chain Analytics and Risk Portal and a Reward Leaderboard Portal to educate the dYdX community and to provide transparency to prospective rewards recipients. At the end of each Trading Season, Chaos Labs will publish a report with highlights, learnings, and recommendations about the potential distribution of rewards for future trading seasons.
For more detailed information about the 6-month Launch Incentive Program, visit the Chaos Labs detailed blog and read the dYdX Trading - “Trading & Launch Rewards Now Live on dYdX Chain” blog.
Staking Rewards, Trading Rewards and 6 Month Launch Incentive Rewards
The 6-month Launch Incentive Program will run in parallel to Staking Rewards and Trading Rewards, allowing early adopters of the dYdX Chain to benefit from a diverse set of rewards and incentive mechanisms:
Stakers of the DYDX token qualify to receive Staking Rewards (denominated predominantly in USDC) in exchange for contributing to the security of the protocol;
Traders, the core users of the protocol, may qualify to receive Trading Rewards (denominated in DYDX); and
During the six months following the activation of Full Trading on the dYdX Chain, users of the dYdX Chain may also benefit from the 6-month Launch Incentive Program, which will distribute additional DYDX tokens among dYdX Chain users.
It is important to note that the distribution of DYDX each season under the 6-month Launch Incentive Program is subject to a dYdX Chain governance proposal.
How do Users Claim Staking Rewards and receive Trading Rewards?
To learn more about how to claim Staking Rewards, you can read this simple how-to-claim educational guide on the dYdX Foundation’s website.
Claiming Staking Rewards
1(a) You can claim your rewards by clicking ‘Claim Reward’ on the top-right hand corner of the page which will prompt a transaction from Keplr or Leap Wallet to approve.
With Full Trading enabled on the dYdX Chain by a recent governance vote, Trading Rewards and the 6-month Launch Incentive Program are now active.
Trading Rewards are automatically distributed, according to the above calculations, to a trader’s dYdX Chain address on a per-block basis.
Reward Distribution on the dYdX Chain
All rewards (including USDC + DYDX Staking Rewards) are distributed to eligible dYdX Chain addresses.
USDC Staking Rewards are Noble USDC tokens (in the dYdX Chain). Users can use CCTP, IBC or any other bridging mechanisms to bridge those USDC tokens from the dYdX Chain to other networks.
Following the recent success of the second on-chain governance vote on the dYdX Chain, Trading Rewards have been enabled and the 6-month Launch Incentive Program proposed by Chaos Labs has been endorsed by the community.
With this, the dYdX Chain is well equipped with a diverse set of incentive and rewards mechanisms, comprising (1) Staking Rewards, which aggregate USDC-denominated trading fees paid by traders in USDC- and/or DYDX-denominated transaction fees, that are distributed to Validators and Stakers of the DYDX token in exchange for contributing to the security of the protocol, (2) Trading Rewards, denominated in DYDX and automatically distributed by the protocol to traders, and (3) the 6-month Launch Incentive Program, which, for a limited period of time, rewards early adopters of the dYdX Chain protocol with DYDX tokens for their meaningful contributions to the adoption and growth of the network.
The dYdX Chain’s fee structure is a complex and integral component of its ecosystem, designed to foster network health, reward participation, and ensure equitable distribution of fees. This examination of the fee and reward dynamics within the dYdX Chain will hopefully provide a greater understanding for all stakeholders involved in the dYdX Chain protocol.
dYdX Foundation’s purpose is to support the current implementation and any future implementations of the dYdX protocol and to foster community-driven growth in the dYdX ecosystem.
The dYdX Chain software is solely open-source software to be used or implemented by any party in accordance with the applicable license. At no time should the dYdX Chain software be deemed to be a product or service provided or made available in any way by the dYdX Foundation. Interactions with the dYdX Chain software are permissionless and disintermediated, subject to the terms of the applicable licenses and code. Users who interact with the dYdX Chain software (or any implementations thereof) will not be interacting with the dYdX Foundation in any way whatsoever. The dYdX Foundation has no control of any kind over the use that people make of the dYdX Chain software, including, without limitation, with regard to: (i) potential deployments of such software, (ii) potential adaptations, forks or modified versions of such software, and their deployment, or (iii) users’ interactions with such software or deployments of such software. The dYdX Foundation does not make any representations, warranties or covenants in connection with the dYdX Chain software (or any implementations thereof), including (without limitation) with regard to the technical properties and performance of such software, as well as its actual or potential usefulness or suitability for any particular purpose. The dYdX Foundation will not operate any part of the dYdX Chain software (or any implementations, versions or adaptations thereof) nor will it be responsible for their continued availability.
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 Foundation makes no recommendation as to how to vote on any proposal in dYdX governance, or to take any action whatsoever. The dYdX community is sovereign to make decisions freely and at its sole discretion, in accordance with the governance rules, principles, and mechanisms adopted by the dYdX DAO. dYdX 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 alter or update any information in this post in the future and assumes no obligation to publicly disclose any such change. 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. The dYdX Foundation makes no guarantees and is under no obligation to undertake any of the activities contemplated herein.
About the dYdX Foundation
Legitimacy and 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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