What Is dYdX (DYDX)? Features, Tokenomics, and Price Prediction
Tech Deep Dives

What Is dYdX (DYDX)? Features, Tokenomics, and Price Prediction

By Hassan Shafiq
1mo ago
6m

CoinMarketCap takes a deep dive into dYdX (DYDX), a crypto trading platform that aims to empower traders worldwide.

What Is dYdX (DYDX)? Features, Tokenomics, and Price Prediction

Table of Contents

dYdX (DYDX) protocol token is the governance token of the dYdX community that can be used to gain mining rewards and participate in staking pools, and receive trading discounts on its exchange.

How Does dYdX (DYDX) Work?

According to the official website, dYdX exchange has already established itself as a big thing in the crypto world as the platform boasts around 64,000 unique traders, $11 billion in total volume across perpetuals and margins, and $250 billion in flash transactions from dYdX liquidity pools
Furthermore, the platform also joined hands with StarkWare which employed StarkEx, a Layer 2 scalability engine that aims to improve the non-custodial trading on dYdX. In simple words, the impact will be similar to the upcoming Eth 2.0 upgrade, as the gas costs will become zero, minimum trade sizes will be reduced, and trading fees will be lower. 
The purpose of dYdX is to provide secure trading services with low gas costs and fees. To achieve this, the platform is now moving towards Layer 2 with the help of StarkWare to increase its trade settlement capacity.

According to the official website, the dYdX platform is making this move because:

‘’Ethereum can process around 15 transactions per second (TPS), which is not enough to support the hypergrowth of DeFi, NFTs, and more. While Ethereum 2.0 will theoretically boost network speeds to 100,000 TPS, base layer scaling is still a while away. In the meantime, Layer 2 scaling solutions — in the forms of Rollups – free up Ethereum's base layer by offloading execution, leading to reduced gas costs and increased throughput without increasing network load. StarkWare’s dYdX integration combines STARK proofs for data integrity with on-chain data availability to ensure a fully non-custodial protocol.’’

Unique Features of dYdX (DYDX)

Staking Pools

There are two types of staking pools offered by the dYdX platform.

1. Safety Pool 

The safety pool does exactly what it sounds like - it creates a safety net for users who stake their DYDX tokens. The safety pool makes sure that the DYDX users with staked funds continue to receive a portion of rewards in proportion to their staked tokens in the pool. However, the users must wait for 14 days if they want to unstake their tokens and also submit a request before the current epoch ends. 

2. Liquidity Pool

The liquidity pool is targeted towards two major goals which are to provide liquidity network effects and encourage professional market makers to invest in the platform. Market makers will create new markets on the dYdX Layer 2 protocol and stakers will receive DYDX in proportion to their staked tokens in the liquidity pool which can be unstaked after a period of 14 days and during the ongoing epoch period. At present, the market makers on the dYdX Layer 2 protocol include Amber Group, Sixtant, Wintermute, and DAT Trading. 

Governance

The holders of DYDX tokens can be a part of the governance process and propose changes to the layer-2 protocol. Some of the things on which DYDX holders can vote include:

  • Defining safety staking pool payouts if a loss happens;    
  • Setting risk parameters for the Layer 2 protocol;    
  • Vote on the inclusion of new token listings on the Layer 2 protocol;    
  • Govern contracts;    
  • Vote on market makers that will be added to the liquidity staking pool;

Rewards for DYDX Holders

There are three types of rewards offered by the dYdX platform to DYDX token holders:

1. Retroactive Mining Rewards

The retroactive mining rewards are distributed among dYdX users who perform trading on the dYdX's Layer 2 protocol and those users who have been using the platform for a long time. 
The amount of rewards that the users can earn depends on their overall activity and the tier to which they belong. The rewards associated with retroactive mining can now be claimed as the initial transfer restrictions are lifted.
Note: The retroactive mining feature is not available to the residents of the United States due to official restrictions. 

2. Trading Rewards

Trading rewards will be distributed to encourage crypto traders to use the dYdX layer-2 Protocol. These rewards will also be used to grow the popularity of dYdX and speed up the market liquidity process.

Any trader who is trading on the dYdX layer-2 protocol is eligible to earn DYDX trading rewards. The amount of rewards depends on several factors, with the main ones being the trading activity and volume.

3. Liquidity Provider Rewards

Users with an active Ethereum address can gain liquidy provider rewards when they maintain a minimum maker volume of 5% in the previous epoch. The DYDX tokens will be rewarded to liquidity providers after a period of 28 days and this process will run for five years. The main purpose of offering these rewards is to accelerate the market liquidity of DYDX in the long run. 

Discounts on Trading Fees

The DYDX token holders will receive trading fee discounts based on the number of tokens that they hold in their wallets. For example, if a user holds ≥10,000 tokens, they will receive a 15% discount on trading fees.

dYdX (DYDX) Tokenomics

There are a total of 1,000,000,000 DYDX tokens that will be distributed over a period of five years. Here's a breakdown of the DYDX token:
  • 50% of tokens will go to the dYdX community which will comprise liquidity providers, traders, stakeholders, and users who complete trading milestones. A portion of this share will also go to the community treasury. 
  • 27.73% of the tokens will go to previously active investors. 
  • 15.27% of tokens will be allocated to the official team members of dYdX including founders, advisors, employees, and others. 
  • 7% of the tokens will be reserved for consultants and employees who will join the platform in the future.

dYdX (DYDX) Price

dYdX (DYDX) is now trading at, as of Sept. 13, 2021. Its 24-hour trading volume on exchanges is around $342,044,120.

dYdX (DYDX) Price Prediction and Future Outlook

As of Sept. 13, 2021, dYdX (DYDX) is trading at $10.02. Whether dYdX (DYDX) will hit $50 in the near future depends on a lot of factors.  
The dYdX trading platform decided to launch its token in what many would call a bearish run for the crypto market as Bitcoin took a nosedive earlier this week, as El Salvador announced it as its new legal tender. As it always happens, with the price fall of Bitcoin, the whole crypto market suffered. However, the DYDX token held its ground as its price remained stable between $10-12, which is a good sign for DYDX holders as when the market recovers, the token may skyrocket to the moon. 
Even now, the DYDX token is showing bullish signs and if it continues to follow the same pattern, the all-time high of $15.81 can be overturned in the upcoming days.
The staking mechanism offered by the dYdX exchange can become a major reason of interest for both small and large investors who are always on the lookout for making a profit all the time. Since the DYDX token has relatively shown stable signs in this bearish market, major investors may buy and lock their tokens on the platform to earn rewards. If this happens, then hodl-ing it will be quite beneficial in the upcoming months. 
DYDX token looks good right now, however, the crypto market is volatile as always, and it is advisable to keep an eye on market indicators and take opinions from cryptocurrency experts before investing in this token.
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