The dYdX protocol token (DYDX) is the governance token of the dYdX community, which can be used to receive mining rewards, participate in staking pools, receive transaction discounts on the dYdX exchange.
How does dYdX (DYDX) work?
According to the official website, the dYdX exchange has established itself as a significant player in the crypto world as the platform boasts a destination for approximately 64,000 traders, reaching a total volume of $11 billion across the world. Futures and Margin platforms, they are having $250 billion in fast trades from dYdX liquidity pools.
Furthermore, the platform also cooperates with the StarkWare layer 2 scaling solution. The company uses StarkEx, a layer 2 scalable tool that aims to improve non-custodial trading on dYdX. Simply put, the impact will be similar to the upcoming ETH 2.0 upgrade, as gas fees will be reduced to zero, minimum transaction sizes will be reduced and transaction fees will be lower.
The purpose of dYdX is to provide secure transaction services with low cost and gas. To achieve this, the platform is now moving to layer 2 with the help of StarkWare to increase transaction processing.
According to the official website, dYdX made such a decision because:
“Ethereum can handle around 15 transactions per second (TPS), which is not enough to support the rapid growth of DeFi, NFT, etc. While Ethereum 2.0 will theoretically increase network speed to 100,000 TPS but have to wait a little longer for the base class extension to complete. Meanwhile, layer 2 scaling solutions (in the form of Rollups) free up Ethereum’s base layer by reducing execution load, resulting in reduced gas fees and increased throughput without increasing network load. The partnership between dYdX and StarkWare will combine STARK proofs for data integrity with on-chain data availability to ensure a completely non-custodial protocol.”
Unique Features of dYdX (DYDX)
The dYdX platform offers two types of staking pools.
– Safe Pool: The secure pool works exactly as its name suggests, creating a safe net for users to stake DYDX tokens. The secure pool ensures that DYDX users who have staked tokens continue to receive a reward proportionate to their stake in the pool. However, users must wait 14 days if they want to unstake and must submit a request before the current epoch (period) ends.
– Liquidity pool: The liquidity pool has two main goals of providing a liquidity network effect and incentivizing professional market makers to invest in the platform. Market makers will create many new markets on the layer 2 dYdX protocol and stakers receive DYDX in proportion to the number of tokens staked in the liquidity pool. They can unstake after the 14 day period and during the active epoch. Currently, Amber Group, Sixtant, Wintermute and DAT Trading are market makers on the layer 2 dYdX protocol.
DYDX holders can become part of the governance process and recommend layer 2 protocol changes. Some of the changes that DYDX holders can vote on include:
– Determine payments to the safe pool if loss or damage occurs.
– Set risk parameters for layer 2 protocols.
– Vote on the listing of new tokens to the layer 2 protocol.
– Management contracts.
– Market maker election will be added to the liquidity staking pool.
Rewards for Holder DYDX
The dYdX platform offers three types of rewards to DYDX holders.
Retroactive Mining Rewards
Retroactive mining rewards are distributed to dYdX users who make transactions on the dYdX layer 2 protocol and users who have been using the platform for a long time.
The amount of rewards a user earns depends on their overall activity and level. Retroactive mining rewards can now be claimed as the initial transfer restrictions are removed.
Note, retroactive mining is not available to US users due to government restrictions.
Trading rewards will be distributed to incentivize traders to use the dYdX layer 2 protocol. These rewards will also be used to grow the popularity of dYdX and accelerate market liquidity.
Any trader who is trading on the layer 2 dYdX protocol is eligible to earn the DYDX trading bonus. The amount of the reward depends on several factors, the main of which are trading activity and volume.
Reward for liquidity providers
Users with an active Ethereum address can get a liquidity provider reward when they maintain a minimum maker volume of 5% during the previous epoch. DYDX tokens will be rewarded to the liquidity provider after 28 days and the process lasts for 5 years. The main purpose of providing this type of bonus is to speed up the DYDX liquidity in the market in the long run.
Showcase transaction fee
Transaction fee discount rate by levels
DYDX holders will receive a transaction fee discount based on the number of tokens they have in their wallet. For example, if a user holds ≥10,000 DYDX, they will receive a 15% discount on trading fees.
A total of 1,000,000,000 DYDX will be distributed over a 5-year period. In there:
– 50% of tokens are transferred to the dYdX community including liquidity providers, traders, stakeholders and users who complete transaction milestones. A portion of this section will also go to the community coffers.
– 27.73% of tokens go to previously active investors.
– 15.27% tokens are allocated to official dYdX team members including founders, advisors, employees and others.
– 7% of tokens are reserved for future consultants and employees who join the platform.
New information is being updated.
According to Coinmarketcap
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