It’s excellent news that we have such a high level of conversation within the forum around the protocol. I believe this is necessary in order to make the best decisions and to better understand the likelihood of the various scenarios we might face. One exercise that I think is essential is grounding these statements in data that we can later use to evaluate the outcomes against expectations.
Staking Rewards Reduction
It’s an excellent reflection that the project must prioritize growth at this stage, which I believe is something we all share. This growth needs to be financed, and this financing can fundamentally come from two main avenues. The first is through token sales that are part of the project, which can be understood as a kind of capital increase. The second is reinvesting the revenues that the project begins to generate from its activities.
The most important factor at these stages is the first, as long as the market recognizes the value creation within the project, leading to an increase in token price. This is why it’s so crucial to develop strategies that demonstrate growth to the market or that allow the token to capture more value.
In this sense, the rewards that have been offered to token holders surely helped to limit the drop, which can only be explained by the negative inertia in recent months,in terms of metrics. For this reason, I believe it’s important to conduct an analysis of the impact that the project’s spending has had on growth so far before increasing it, as failing to do so would overlook an essential evaluation. Increasing spending on ineffective measures would not achieve the impact we are hoping for.
In this sense, we support this measure, but we believe that without an analysis of the impact of the measures taken so far, it is less effective. A significant part of the pressure on the DYDX token comes from the token sales made by market makers who have directly received the incentives from these initiatives without creating long-term value.
Megavault 50% Revenue Share
The general dynamic in any derivatives exchange is that traders typically lose money due to leveraged trading. It requires a lot of experience and excellent risk management to be sustainable in the long term. For this reason, it is common for these statistics to be a consistent pattern across all exchanges. In Hyperliquid, as expected, this also happens. In fact, their Vault develops a strategy that closely correlates with this PNL
This implies that the VAULT’s profit is explained by the losses of many small investors. It is certainly an opportunity for the protocol, which should act as a counterparty to this activity, even attempting to return some of the profits to these investors until they start to become profitable. However, the statistics of our VAULT are different. We are actually providing a counterparty to professional market makers, to whom we direct part of the project’s revenues, and they will only remain active as long as they are profitable. This will certainly increase the project’s volumes, but it does not create long-term value, and it shifts all the profitability to these agents.
I am convinced that the VAULT strategies will improve to achieve profitability that the project could even share with investors who also provide liquidity. However, it seems imprudent to start directing capital to these VAULTs at this moment without these statistics. The most likely outcome will be directing capital for project growth to these market makers, which won’t compensate for the fees generated. While it may make the project’s statistics look better, it would be a highly inefficient way to generate volume, as it will be closely tied to this subsidy.
Strategies that I believe would be much easier to scale and that we know have high demand are cash & carry strategies. These strategies, in projects like Ethena, have managed to attract 3 billion in capital, and apart from being profitable, they provide liquidity to short positions, which are precisely what a derivatives exchange needs.
Validator Set Reduction
As we mentioned in the analysis, we found the reasoning behind the profitability to be very weak, and the only reason we could identify was improving the user experience. If the project deems it necessary to enhance the user experience, then this is certainly a very appropriate measure. However, the downside is the increased centralization, which we agree may not be significant, as well as the impact on governance, since it will also reduce participation in forums like this by half, along with contributions from these token holders. Another additional impact is the loss of these stakeholders, as it is very likely that they will sell the tokens they had purchased to engage in the activity
Treasury Diversification
I fully agree with this measure and also with the creation of a team to manage the treasury. I believe this is a sign of the project’s maturation.Our vote was in favor of this matter, and it seems like an important goal to generate revenue that can sustain the operational costs of the project
Conclusion
It is truly important to get the project back into a growth momentum. This certainly implies allocating more resources towards growth. However, it’s crucial to conduct an analysis of the measures that have not been efficient in achieving these objectives over the past year, so that part of the resources previously used and any new resources can be redirected to more efficient measures