What is DYDX? Everything you need to know about the token

A crossing from Ethereum to Cosmos for DYDX

On October 26, 2023, at 5:00 p.m. UTC, the dYdX chain was born, launching its very first block. DYdX has operated its own chain within the Cosmos ecosystem, going beyond its initial deployment on Ethereum. This development marked a major step in its development. This is to aim to take advantage of the interconnectivity and efficiency of the Cosmos network.

The Proof-of-Stake (PoS) blockchain, built on the Cosmos SDK and using CometBFT for consensus, adopted DYDX as its primary token, serving as a key to secure the network. This is a way to reward stakers for securing the chain and enabling community-focused governance. Its holders can delegate their assets to or become validators, which strengthens the security of the blockchain. Additionally, they have the power to shape the future of the dYdX channel by voting on key proposals. But still, on node software updates to community fund allocations.

The migration from Ethereum to the dYdX chain involved a one-way bridge smart contract, where ethDYDX tokens were locked, and corresponding DYDX tokens on the dYdX chain were assigned to users. This process was designed to be permissionless and automated, ensuring a seamless transition for token holders.

Main differences and new features

Staking and security

The DYDX token introduces a deeper level of engagement for its holders, allowing them to improve network security through an active staking mechanism. This participation can take two forms: holders can either play the role of validators themselves, or delegate their issues to existing validators. The system design strengthens the network defense mechanisms. As the volume of tokens staked increases, a broad range of validators significantly strengthens the network’s resilience against coordinated attacks.

DYdX distributes 100% of protocol fees to stakers in USDC instead of the native token. This is a very unique model with many tangible use cases. To date, holders have staked 148.83 million DYDX with a rate of return of 17.88%.

Governance

The migration to dYdX V4 heralds a change towards a more democratic governance system. This will allow DYDX holders to directly influence the future of the network by submitting proposals and voting. Unlike the latest version of the protocol, holders only need 2,000 DYDX and a small amount of gas fees to vote. This development significantly improves the functionality of the token, which abandons its traditional role to play a key role in the strategic development of the dYdX chain. Since the start of 2024, the number of governance votes stands at 52, compared to 30 for the whole of 2023.

DeFi community governance plays a crucial role in democratizing financial systems, allowing token holders to directly influence decisions and policies. This commitment aligns the development of the platform with the needs of its users, which promotes transparency and trust. Additionally, pooling collective wisdom and resources can intensify security and innovation.

Economic and reward mechanisms

As noted, the dYdX on-chain economic framework rewards validators and stakers by paying them 100% of the protocol fees. This reward system motivates continued participation and supports the expansion and long-term viability of the network. It also ensures a steady development trajectory and strengthens security through widespread and committed support from stakeholders.

As of this writing, the protocol has distributed $19.7 million to 18,800 stakers.

DYDX Tokenomics

Tokenomics refers to the economics of a cryptocurrency. It details how a token is issued, distributed and managed within its ecosystem. It encompasses the token offering, distribution mechanism and incentives for holders. Understanding tokenomics is essential to assessing the long-term viability of a token. But also to understand the potential impact on the success of the project and its value for investors.

The total supply of DYDX tokens is limited to 1 billion. Currently, the circulating supply is 464,677,529 at the time of writing. The latest circulating supply statistics can be found on CoinMarketCap.

After the launch of ethDYDX, several proposals (DIP 14, DIP 16, DIP 17, DIP 24) adjusted these initial allocations. This change reflects the dynamics of the project’s distribution strategy. This is to support its ecosystem and governance framework.

Currently the allocation includes

• 27.7% to investors
• 15.3% to employees and consultants of dYdX Trading or the Foundation
• 7.0% to future employees and consultants of dYdX
• 14.5% for user trading rewards
• 5.0% for retroactive rewards
• 3.3% for liquidity provider rewards
• 26.1% for the community treasury
• 0.6% for the liquidity reserve
• 0.5% for the security reserve

The transition of the DYDX token to the dYdX chain significantly strengthens its characteristics and overall value. This change aligns with the DeFi sector’s desire to have platforms that are more scalable, secure and driven by their communities. Unlike ethDYDX, which was used solely as a governance token, DYDX allows its holders to play larger roles in governing, staking, and ensuring network security. This marks a notable evolution from its initial configuration on Ethereum.

Where to buy DYDX

You can buy the DYDX native token on centralized (CEX) and decentralized (DEX) platforms.

Notable options include:

• OKX – one of the largest centralized exchanges where DYDX is available for trading.
• KuCoin – another major centralized exchange offering DYDX trading pairs.
• Osmosis – a leading decentralized exchange based on Cosmos. Here you can trade DYDX directly from your wallet without the need for an intermediary.

These platforms offer different trading options, such as spot trading on centralized exchanges and direct wallet-to-wallet trading on platforms such as Osmosis. Be sure to review the features and security measures of each platform before transacting. For a more comprehensive list of where to buy DYDX and detailed market information, you can refer to CoinMarketCap’s market page.