Everything you need to know about the DYDX token

The DYDX token is an integral part of the dYdX Chain, a network focused on decentralized financial instruments (DeFi) and derivatives. After the transition from Ethereum, it underwent significant changes, gaining new functionality and expanding its scope of application. Here's what you need to know about this token.

From Ethereum to Cosmos

On October 26, 2023, validators created the first block of the dYdX Chain network. DYdX has moved to operate its own blockchain in the Cosmos ecosystem, moving beyond its initial deployment on Ethereum.

The main Proof-of-Stake (PoS) token of the network, built on the basis of the Cosmos SDK and using the CometBFT consensus algorithm, was DYDX. Its owners can delegate their assets to validators or become them, increasing the security of the blockchain, and also determine the direction of development of dYdX Chain by voting on key proposals — from updating node software to distributing community funds.

To transition from Ethereum to dYdX Chain, a one-way bridge smart contract was created, within which ethDYDX tokens were blocked, and the corresponding DYDX tokens on the dYdX chain were distributed among users. The process was fully automated and did not require any permissions, ensuring a smooth transfer of assets.

Key differences and new functionality

Staking and Security

The DYDX token allows holders to increase the security of the network using the staking mechanism, and they can either act as validators themselves or delegate assets to existing validators. The design of the system helps strengthen the network's defense mechanisms: as the number of tokens locked in smart contracts increases, a wide range of validators significantly increases the blockchain's resistance to coordinated attacks.

DYdX distributes 100% of protocol fees to stakers in the USDC stablecoin instead of the native token. To date, holders have staked 148.83 million DYDX at 17.88% APR.

Control

The transition to dYdX V4 marked a transition to a more democratic governance system, giving DYDX holders the opportunity to directly influence the future of the network through proposals and voting. Unlike the latest version of the protocol, holders only need 2,000 DYDX and a small amount to pay for gas to vote.

This evolution has significantly expanded the functionality of the token, allowing it to move away from its traditional role and play a key role in shaping the strategic development of dYdX Chain. Since the start of 2024, the number of votes on governance issues has been 52, compared to 30 for all of 2023.

Community governance plays a critical role in DeFi, democratizing financial systems and giving token holders the ability to directly influence project decisions and policies. This interaction aligns the development of the platform with the needs of its users.

Economic mechanisms and rewards

As mentioned, dYdX Chain's economic model rewards validators and stakers with 100% of the protocol's fees.

Such a system encourages continued participation and ensures the expansion and long-term viability of the network. It also ensures a sustainable development trajectory and enhances security through broad and active stakeholder support.

At the time of writing, the protocol has distributed $19.7 million among 18,800 stakers.

Tokenomics

Tokenomics is an economic model that describes how a token is issued, distributed and managed within an ecosystem. It includes the supply of tokens, the mechanism for their distribution and incentives for holders. Understanding tokenomics is critical to assessing the long-term viability of a token and its potential impact on the success of the project and its value to investors.

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

The initial distribution of tokens after the launch of ethDYDX was adjusted through several proposals (DIP 14, DIP 16, DIP 17, DIP 24). This move reflected the dynamics of the project's strategy to support the ecosystem and governance mechanisms.

Currently the distribution includes:

27.7% to investors 15.3% to dYdX Trading or fund employees and consultants 7.0% to future dYdX employees and consultants 14.5% for user rewards 5.0% for retroactive rewards 3.3% for liquidity provider rewards 26.1 % to Community Treasury 0.6% to Liquidity Staking pool 0.5% to Safety Staking pool DYDX Distribution

DYDX's transition to dYdX Chain, which is now part of the Cosmos ecosystem, has significantly increased its performance and overall value. This move is in line with the entire DeFi sector's desire to create more scalable, secure and community-driven platforms. Unlike ethDYDX, which was used solely as a governance token, DYDX allows its holders to take a more active role, which is a noticeable improvement over its original version.

Where to buy DYDX

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

Among them are the following:

OKX is one of the largest centralized exchanges where DYDX is available. KuCoin is another large centralized exchange offering trading pairs with DYDX. Osmosis is the leading decentralized exchange built on Cosmos. Here you can trade DYDX directly from your wallet without going through a third party.

Before you start trading, be sure to familiarize yourself with the capabilities of each site and the security measures. For a more comprehensive list of platforms where you can buy DYDX, you can refer to the dYdX Chain page on CoinMarketCap.