dYdX maintains a leading position in the field of Decentralization Perptual Futures

The competition in the decentralized Perpetual Futures market is becoming increasingly fierce, yet dYdX still firmly holds the position of industry leader. According to statistics from data platforms, as of January 24, 2024, even considering only the data from the Starkware Layer 2 network (dYdX v3), dYdX's trading volume 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 with various incentives in place, there may be greater room for development in the future.

dYdX v4, also known as dYdX Chain, was officially launched on October 26, 2023. This version achieves complete Decentralization, including an order book and matching engine, while starting to distribute transaction fees to DYDX token stakers.

dYdX Chain: Truly Achieving Complete Decentralization

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 had previously developed a decentralized search engine full-time.

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

Starting from v3, dYdX established an order book-based trading system. By using Starkware to build Ethereum Layer 2 products and issuing DYDX tokens, dYdX's trading volume has experienced explosive growth, surpassing a total trading volume of $1 trillion on July 14, 2023.

Currently, dYdX Chain is an independent blockchain that uses the Cosmos SDK and Tendermint PoS consensus protocol. It went live on October 26, 2023, and supports 2000 transactions per second.

Compared to v3, dYdX Chain (v4) has truly achieved complete Decentralization. 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 coins listed are determined by on-chain governance.

Fee Allocation Mechanism

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

Fees accumulate gradually per block, with an average of one block generated every 1.08 seconds, and users need to manually claim rewards. Since rewards primarily come from USDC, even if not claimed in a timely manner, they will not be affected by market fluctuations.

Data shows that a total of 2.51 million USDC and 126 DYDX rewards were distributed over the past 30 days. Validators will charge a commission of 5%-100%, and users can stake DYDX to active validators through their wallets to receive rewards. Currently, there are 60 active validators.

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

Some hardware wallets have integrated with related software wallets, allowing users of hardware wallets to connect to Cosmos applications for staking and other operations. In addition, top liquid staking service providers in the Cosmos ecosystem have also launched DYDX's liquid staking service.

Multiple measures to promote trading volume growth

Official data shows that certain metrics of dYdX v4 have already surpassed v3. In the past 24 hours, the trading volume of v4 was $688 million, while v3 was $546 million; the number of trade orders for v4 was 635,791, compared to 161,337 for v3. However, in terms of open contracts, v4 ($38.88 million) still lags behind v3 ($251 million).

dYdX has taken a series of measures to promote the development of v4. Before the launch of dYdX Chain, an incentive plan was prepared to facilitate the transition of trading volume from v3 to v4. At the same time, the existing incentives on v3 will gradually be phased out.

The dYdX DAO operates a 6-month launch incentive program authorized by governance, allocating $20 million worth of DYDX tokens to early adopters of the dYdX Chain. The entire program is divided into 4 phases (Trading Seasons), and Season 2 is currently ongoing. Users earn points by trading on dYdX, and DYDX rewards are distributed based on points at the end of each Season.

To attract trading volume and liquidity, dYdX Chain also offers trading fee discounts. Overall trading fees are slightly lower than those of some centralized exchanges. For Makers, the maximum fee after the first 120 days is 0.01%; for Takers, the maximum fee is 0.05%.

Users can trade through various wallets and deposit via multiple networks. In the future, with the issuance of native USDC, deposits on dYdX will be more convenient. In the dYdX Chain environment, market order transactions are also smoother than before.

Summary

As a leader in the field of Decentralization Perptual Futures, dYdX Chain has gradually demonstrated stronger competitiveness than version v3 since its launch, with recent trading volumes of v4 even surpassing v3.

The dYdX Chain has achieved full Decentralization, including the front end and matching engine. In particular, trading fees are now fully allocated to DYDX stakers and validators. Currently, a series of incentives are driving the growth of v4 trading volume, such as Maker rebates, trading rewards, performance rewards, and more, which may further enhance trading volume and open interest on the dYdX Chain.