This article takes you to understand the dYdX economic mechanism

With the evolution of DeFi, crypto derivatives trading will be the next important trend.

Like Perpetual, dYdX is also a DeFi derivatives trading platform. The trading volume of the two perpetual contracts is among the top in the DeFi field. According to the trading volume of the past 24 hours at the time of writing: dYdX’s trading volume is approximately US$623 million, the number of trading orders exceeds 130,000, and the open contract position exceeds US$1.9. Perpetual’s transaction volume is approximately 239 million U.S. dollars, the number of transactions is approximately 51,000, and the agreement capture fee on the day is 238,000 U.S. dollars.

This article takes you to understand the dYdX economic mechanism

(DYdX’s transaction volume in the past 24 hours at the time of writing, from the dYdX website)

This article takes you to understand the dYdX economic mechanism

(Perpetual’s transaction volume in the past 24 hours at the time of writing, from the DuneAnalytics website)

dYdX’s recent rapid increase in trading volume is largely due to its token incentives. Blue Fox Note began to pay attention to dYdX in 2019. It has not adopted a token incentive mechanism before. However, with the rapid rise of its competitors, it is inevitable that dYdX will adopt token incentives unless it is a cornerstone.

In addition, the dYdX project currently has perpetual contracts and leveraged transactions. Its perpetual contracts are built on StarkWare. StarkWare is an L2 solution that is superior to L1 in terms of transaction speed and cost. This is also an important basis for the rapid increase in dYdX transaction volume.

The main purpose of DYDX

dYdX’s token DYDX is mainly a governance token, which can be used to make community decisions on its development. At the same time, it can be used as a fee discount for user transactions on its platform, as shown in the figure below:

This article takes you to understand the dYdX economic mechanism

(Discount relationship between trader’s wallet balance and transaction fee, dYdX website)

However, the DYDX token has not yet captured the cost, and the follow-up community is required to determine its direction. In comparison, the token PERP of the Perpetual protocol can capture transaction fees. For details, refer to “Perpetual’s Curie”.

The release of DYDX

A total of 1 billion DYDX tokens will be released in 5 years. After that, there may be 2% additional issuance every year, but the specific decision will be made by the community, which will also happen after 5 years. In the five-year release ratio, liquidity provision and pledge will receive a total of 10% token rewards (2.5% pledge, 7.5% liquidity provision); community treasury 5%; retrospective reward 7.5%; transaction reward 25 %. The remaining 50% is allocated to investors and teams.

This article takes you to understand the dYdX economic mechanism

(Token distribution of DYDX, dYdX website)

At the beginning, it is expected that 55,680,000 will enter circulation, accounting for about 5.56% of the total, most of which are users of retrospective mining (dYdX has been used before and a certain amount of transactions have been completed within the specified time). According to the data from its control panel, the actual total circulation at the time of writing was 33,201,266, which accounted for 3.33% of the total. As users receive, the circulation will continue to increase, but only for the current situation, the growth rate is not counted. Big.

This article takes you to understand the dYdX economic mechanism

(Total circulation of DYDX at the time of writing, dYdX website)

DYDX is to promote its liquidity and trading network

DYDX’s contribution to its ecological development is that it promotes the development of its network through transaction rewards and liquidity bet rewards. This is nothing new in itself, and many previous DeFi projects have similar incentives. DYDX token rewards will bring more users to trade and bring more people to provide liquidity. Better liquidity brings more traders. Some traders are for rewards, some traders are for a better trading experience, or both.

At present, dYdX motivates about 5 million DYDX per month, which is more than 60 million US dollars according to the current value. Of course, there will be a certain balance between these. As more traders and liquidity providers enter, the proportion of divisible rewards will decrease and the cost of obtaining rewards will increase. As the rate of return reaches a certain equilibrium, liquid miners or traders may enter other platforms, such as Perpetual, and eventually an equilibrium will be formed.

In addition, the behavior of these traders or liquid pawnbrokers who have received token rewards will also have a greater impact on prices. Whether these users are selling users, holding users, or transaction users (because of the importance of holding transaction discounts), the proportion and behavior of different types of users will have a direct impact on their future ecological development.


Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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