The Evolution of the dYdX Chain and DYDX Token
In October 26, 2023, the dYdX Chain and its native Layer 1 token DYDX were introduced, marking a significant transformation for the ecosystem.
Although the original ethDYDX tokens are still in use, a substantial portion – 75.2% of the total volume, has migrated to the dYdX Chain, signifying a rapid shift to the new platform.
The Transition from ethDYDX to DYDX
The dYdX Foundation initially launched ethDYDX (then known as DYDX) on August 3, 2021, as a governance-focused token exclusively for the dYdX Layer 2 protocol on Ethereum (ETH) – dYdX v3.
EthDYDX empowered the community to oversee various aspects of dYdX v3, nurturing an environment centered around governance, incentives, and staking.
- The community’s decision to embrace the new DYDX as the Layer 1 token for the dYdX Chain led to the deployment of the wethDYDX Smart Contract and the bridge.dydx.trade interface.
The Security Framework of the dYdX Chain
Utilizing a Proof-of-Stake (PoS) security model, the dYdX Chain requires token holders to stake their DYDX with Validators to enhance the network’s security.
Presently, approximately 149 million DYDX tokens (representing 14.9% of the total supply) are staked with active Validators on the dYdX Chain.
- In a move to boost Validator decentralization and fortify network security, the community opted to liquid-stake 20 million DYDX with Stride on April 6, mitigating the risk of malicious attacks.
The rewards earned from staking are automatically compounded in USD Coin (USDC) and converted into DYDX by the Stride protocol for additional staking rewards, underscoring the community’s dedication to securing the dYdX Chain.
Benefits of Staking on dYdX
All fees collected by the protocol are distributed among DYDX stakers who contribute to the network’s security by staking their tokens with dYdX Chain Validators.
This incentivizes stakers and opens up various possibilities such as reinvesting USDC rewards in cryptocurrencies or other assets, or using USDC as collateral for trading on the dYdX Chain.
- With over $120 billion in total trading volume and more than $20 million in USDC distributed to stakers, the dYdX Chain has established itself as a robust ecosystem.
The Decentralized Structure of the dYdX Chain
The launch of the dYdX Chain represented a crucial step in dYdX’s decentralization journey.
Unlike dYdX v3, which operated as a non-custodial hybrid Layer 2 DEX on Ethereum with a centralized orderbook and matching engine, the dYdX Chain stands as a fully decentralized Layer 1 network with 60 active Validators.
- With enhanced governance mechanisms and streamlined market listing procedures, the dYdX Chain offers a more decentralized and accessible environment for its community members.
Hot Take: The Future of dYdX Chain and DYDX Token
The evolution of the dYdX Chain and the introduction of the DYDX token herald a new era for the platform, emphasizing decentralization, security, and community governance.
By prioritizing network security, incentivizing stakers, and fostering a robust ecosystem, the dYdX Chain is poised for further growth and innovation in the decentralized finance space.
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