From the ‘research report’:
‘…it leaves the ecosystem without a sustainable mechanism to fund essential operational expenses and growth initiatives. Relying solely on token dilution to cover these costs exerts continuous’, ‘The reliance on token dilution to cover ecosystem costs puts downward pressure on the token price’, ‘reducing the reliance on DYDX token emissions to cover ecosystem expenses will help stabilize the token’s value’
There is NO inflation on dYdX, the staking rewards come from USDC commission of trading volume on dYdX v4. Moreover, @kpk will manage the treasury which will generate additional around 4M USDC from staking rewards
Unlike most PoS networks, dYdX Chain doesn’t reward stakers via inflation, but with real USDC revenue from the dYdX v4 trading volume commissions.
To encourage staking DYDX the key is increasing the trading volume at dYdX v4 so that stakers receive a larger reward for staking DYDX. Moreover, the unstaking period of DYDX is very long compared to most networks, decreasing the unstaking period could also encourage more staking.
This is confusing, currently 100% of dYdX v4 revenues go to DYDX stakers and validators, are you suggesting changing 100% to 0%? Or are we missing something here?
The profitability depends, once more, on the trading VOLUME of dYdX v4. More volume means more revenue for DYDX stakers and validators. Most dYdX validators have not been profitable since the dYdX v4 genesis, because Tokyo is very expensive especially for bandwidth while the trading volume hasn’t been too high. In other words, most dYdX v4 validators have not been profitable yet but they still contribute a lot to the network in multiples ways, killing 30 validators will results in 30 entities stopping their contributions to dYdX v4, contributions we have been doing for around a year since genesis despite most of us not being profitable.
Furthermore, 60 is already a very small validator set compared to most other PoS networks, which is already more centralization, by cutting the number of validators by half you are exacerbating the centralization problem even further. Moreover, if validators are really not profitable and leaving the network you will see the minimum amount of DYDX to join the active set decreasing rapidly, however, the opposite has happened, the minimum amount of DYDX to join the active set (60th) has been increasing continuously meaning a high demand and competition to join the active set. This is empirical evidence proving the opposite of what you suggest: despite maybe revenues not being yet great for dYdX validators, these validators see a lot of potential and future so not only they have remained but still there is strong competition to join the active set with the minimum amount to join continuously increasing. Also, Regen network and Archway are really small Cosmos chains, you cannot compared them in your report with dYdX and suggest that dYdX copy what such small projects did. dYdX is a bluechip project and the leading Perps DEX, you can’t compare dYdX with Regen network or Archway.
Again, most dYdX validators have not been profitable since the launch, removing 30 of us what will it achieve? Just losing all our contributions and support, and decentralization. Don’t be scared that 30 validators will leave because of profitability issues, after 1 year we are still here.
Also, in your document, saying that reducing the validator set by half to 30 won’t impact decentralization much is incorrect. Injective, Sei and other networks maintain a low amount of validators to keep fast block times, 60 validators is already amongst the lowest. And the whole point to move from dYdX v3 to v4 was to decentralize all components of dYdX and the key of this decentralization with v4 is the number of validators, 'dYdX v4 open-source chain software’s fully decentralized and performant in-memory orderbook ’ and ‘In dYdX v4, each validator will run an in-memory orderbook that is never committed to consensus (i.e., off-chain)’, dYdX v4 decentralization is not just about the stake distribution but its decentralized order book and unless I miss something you are suggesting to cut by half the decentralization of this in-memory orderbook kept by each validator (the main point to move from v3 to v4, decentralizing also the orderbook and matching engine) (Announcing dYdX Chain)
Additionally, the dYdX Foundation, Stride and now @kpk are increasing the decentralization of stake and the Karpatkey program with 40M DYDX will likely have a very positive impact to increase decentralization and validator revenues. Also, with dYdX Unlimited and the new incentives program, the larger trading volume will also bring more revenue to validators and dYDX stakers
Could you elaborate more about the reasons for this?
I think it was already announced that dYdX v3 would be closed soon?
Also, this proposal is VERY dangerous. If it goes on-chain, unless stakers are voting very actively and getting informed, naturally the top validators will vote instantly in favour to eliminate 30 of their competitors, and the proposal will likely pass given the already centralized staked in the top validators