dYdX maintains a leading position in the decentralized Perptual Futures field, and the new on-chain trading platform shows potential.

The competition in the field of Decentralization Perptual Futures is becoming increasingly fierce, while dYdX continues to maintain its industry-leading position, with recent trading volumes remaining at the top. According to statistics from data platforms, as of January 24, 2024, even considering only the data from the Starkware Layer 2 network (dYdX v3), the trading volume of dYdX far exceeds that of other derivatives protocols. It is worth noting that the trading volume of dYdX v4 has already matched that of v3, and under the impetus of supporting incentive measures, its development potential may be even more considerable.

dYdX v4, namely dYdX Chain, was officially launched on October 26, 2023. This version achieves comprehensive Decentralization, including an order book and matching engine, while beginning to distribute trading fees to DYDX token stakers.

Fully Decentralized dYdX Chain

dYdX is a leading decentralized Perptual Futures exchange, founded by Antonio Juliano in 2017. Before founding dYdX, Antonio worked at a well-known cryptocurrency trading platform and attempted to develop a decentralized search engine.

The initial product of dYdX was a margin trading protocol (v1 and v2) that allowed users to engage in leveraged trading of cryptocurrencies by borrowing funds. However, this product was inefficient and affected by high Gas fees on Ethereum.

Since v3, dYdX has established an order book-based trading system. By utilizing Starkware to build an Ethereum Layer 2 solution and issuing the DYDX token, dYdX's trading volume has experienced explosive growth, surpassing $1 trillion in total trading volume by July 14, 2023.

The currently officially promoted dYdX Chain is an independent blockchain that uses the Cosmos SDK and Tendermint PoS consensus protocol, launched on October 26, 2023, supporting 2000 transactions per second.

Although dYdX v3 also supports high-performance Perptual Futures trading, v4 truly achieves complete Decentralization. In v3, a single entity operates the order book for trading, collects transaction fees, and the listed tokens are determined by the development team. However, in v4, the front end of dYdX is operated by the dYdX Operations SubDAO, the order book and matching engine are managed by active validators distributed globally, and the listed tokens are determined by on-chain governance.

All fees are allocated to stakers and validators

All fees generated on the dYdX Chain are currently allocated to validators and stakers. These fees consist of two parts: primarily transaction fees denominated in USDC, and additionally gas fees denominated in DYDX or USDC.

Fees will accumulate gradually based on blocks, with an average of one block produced every 1.08 seconds, and users need to claim manually. Since the rewards mainly come from USDC, even if not claimed in time, they will not be affected by market fluctuations.

According to the data platform statistics, a total of 2.51 million USDC and 126 DYDX rewards were distributed over the past 30 days, with validators receiving a commission ranging from 5% to 100%. Users can earn rewards by staking DYDX to active validators through specific wallets, and there are currently 60 active validators.

As of January 24, the staking yield in the past 30 days has ranged from 6.2% to 29.06%, with an average staking yield of 14.97%. Currently, the value of staked DYDX is $212 million, remaining stable over the past month.

Some hardware wallets have also been integrated with related software wallets, allowing users who store funds in hardware wallets to perform operations such as staking. In addition, leading liquidity staking service providers in the Cosmos ecosystem have also launched liquidity staking services for DYDX, offering users more choices.

Multiple Measures to Incentivize dYdX Chain Trading Volume Growth

The official dYdX website shows that some data for v4 has already surpassed v3. In the past 24 hours, the trading volume for dYdX v4 was $688 million, while v3 was $546 million; the number of trading orders for v4 was 635,791, compared to 161,337 for v3. However, in terms of open contracts, there is still a gap between v4 and v3, with v4 at $38.88 million and v3 at $251 million.

The rise of dYdX v4 is inseparable from a series of incentive measures. Before the launch of dYdX Chain, dYdX had prepared a set of incentive measures to gradually shift trading volume from v3 to v4, and the existing incentives on v3 will gradually cease.

dYdX DAO has authorized a professional institution through governance to implement a 6-month launch incentive program, allocating $20 million worth of DYDX tokens to early adopters of dYdX Chain to encourage users to migrate to v4.

The entire incentive program is divided into 4 stages (Trading Season), and the current one is Season 2, which will last until a day between February 14 and February 24. Trading on dYdX will earn points, and after each Season, DYDX rewards will be distributed based on the points earned. Each Season will also optimize specific incentive measures based on feedback from the previous Season.

To attract trading volume and liquidity, dYdX Chain also offers trading fee discounts, with overall trading fees slightly lower than some mainstream centralized exchanges. For Makers, after the first 120 days, the fee is capped at 1 bps (0.01%); for Takers, the fee is capped at 5 bps.

For the use of dYdX, users can still trade through various wallets and deposit through multiple networks. Some stablecoin issuers have also issued native USDC through specific networks, making future deposits to dYdX more convenient. In the environment of dYdX Chain, trading with market orders is now smoother than before.

Summary

As a leader in the decentralized Perptual Futures field, dYdX's new dYdX Chain has gradually shown stronger competitiveness than the original version since its launch, and the trading volume of v4 has recently surpassed that of v3.

The dYdX Chain has achieved comprehensive Decentralization, including the front end and matching engine, especially concerning trading fees, which have all been allocated to DYDX stakers and validators. There are still a series of measures in place to incentivize the growth of v4 trading volume, such as Maker rebates, trading rewards, and performance rewards, which may further enhance the trading volume and open interest on the dYdX Chain.