Summary: This DRC proposes a three-month trial to send 100% of dYdX Chain’s net trading fees to DYDX buybacks. This boosts token value accrual, similar to Hyperliquid’s model. During the trial, validator and staker rewards come from the Community Treasury to keep network security strong without splitting fees. The goal is to test better P/E ratios and market cap efficiency amid current undervaluation. It reverts automatically after three months unless governance extends it. This builds on the previous DYDX Buyback Program DRC, which set the initial 25% allocation.
Background: dYdX Chain splits net trading fees like this: 25% to DYDX buybacks, 40% to staking rewards for validators and stakers, 25% to Megavault liquidity, and 10% to treasury. The buyback program, proposed in the March 2025 DRC by the Treasury SubDAO (reference: [DRC] dYdX Treasury SubDAO DYDX Buyback Program ) and implemented gradually, has bought over 5M DYDX tokens by October 2025 using about 25% of fees (reference: Buybacks Dashboards ). It involved reducing Megavault’s share in stages and using TWAP for purchases on exchanges like Binance, followed by staking. But with annualized fees at $20-40M from recent protocol revenue and a market cap of ~$320M at $0.333/DYDX, the token has a low P/E of ~8-16, showing undervaluation. Hyperliquid uses 99% of fees for buybacks through its Assistance Fund, leading to big token price gains. Recent X posts and community talks suggest trying full buybacks to give more value to DYDX holders, while paying validators from the large Community Treasury ($100M+ in assets) to avoid fee dilution. The prior buyback DRC highlighted benefits like aligning holders, enhancing security via staking, and generating extra USDC rewards, but community feedback noted concerns over Megavault competitiveness, limited price impact from buybacks, and the need for expense audits to reduce token sales. This trial runs for three months to check results and address those points experimentally.
Objective: Run a short experiment to improve DYDX tokenomics by maxing out fee accrual via buybacks from November 2025 to January 2026. This could buy back ~$5-10M worth of tokens (~15-30M DYDX at $0.333), building on the prior program’s ~1.55% max supply buyback potential at lower allocations. It keeps network security with treasury-funded rewards and gathers data on price effects, fee levels, and feedback before any permanent change.
Proposal Details:
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Parameter: Net protocol fee distribution ratios (temp change for trial).
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Current Value: 25% buybacks, 40% staking rewards, 25% Megavault liquidity, 10% treasury.
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Proposed Value (for Trial): 100% to buybacks for three months (November 1, 2025 - January 31, 2026); staking rewards for validators/stakers paid from Community Treasury at levels matching current 40% share (estimated ~$2-4M over three months based on annualized fees). Megavault liquidity program remains funded at current levels via treasury if needed to maintain competitiveness.
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Rationale: The current split weakens fee value accrual to DYDX. A three-month trial at 100% buybacks copies Hyperliquid’s 99% approach, testing how it drives token scarcity and price growth without locking in forever, as suggested in the prior DRC’s future considerations for scaling to 100%. With monthly fees at ~$1.67-3.33M, it could reduce supply meaningfully, fixing the low valuation (P/E 16 on $320M cap / $20M fees; 33 on $540M FDV / $40M fees adjusted). Treasury covers validators to maintain security without inflation or fee cuts, leveraging existing funds and addressing community concerns about overspending by avoiding new token sales. Post-trial, it auto-reverts; check success with metrics like price shifts, buyback amounts, staking APR impacts (previously estimated at 6%), and polls. Use similar operations as the prior program: TWAP purchases on Binance or Osmosis, then stake tokens to boost network security and generate extra USDC.
Impact Assessment:
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Technical Impact: Low risk; needs governance-ok’d updates to fee distributor module with a sunset clause to revert after 92 days. Perks include auto buybacks on open market and staking the tokens, similar to the prior program’s staking integration which raised projected annual USDC rewards.
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Economic Impact: Good for DYDX holders with short-term scarcity and real yield. Gives data on market cap lift via better P/E, potentially exceeding the prior DRC’s scenario of $7-13M annual buybacks at 25% allocation. Costs: Small treasury drawdown (~$2-4M for rewards), easy to handle; track with end-trial report including expense audit to address feedback. Risks: Lower fees mean slower buybacks, but short time limits harm; treasury cushion avoids validator shortfalls and maintains Megavault APR.
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Social Impact: Builds community trust with experimental testing; validators keep pay steady. Helps traders (fees unchanged) and holders (gains).
Next Steps:
I’m looking for all possible options as a feedback from the community which can then be incorporated into the submission of a formal governance proposal.
Updated version based on all discussions
3 months trial with the following fees distribution:
Buybacks - 80%
Staking - 15%
Community Treasury - 5%
Megavault - 0%
Also for the trial period:
All remaining unlocks must be postponed, Surge and similar rewards programmes which are based on DYDX token must be stopped so that circular supply is not increasing.
