Hello, I am an admirer of this project as it has always managed to be ahead of its time (at least in the past).
I also want to declare that I am a staker in the project and I assume that my intervention in this forum is solely and exclusively as a staker.
As a staker, my interests are aligned with the preservation and profitability of my capital invested in this project. I understand that my interests outlined above are completely interconnected in the sustainability and development of the project. My goal is not to realize all the capital now, but in the future. To achieve this, the value of the $DYDX token must be defended and the expansion of the project must be ensured with a long-term vision.
As we know, the competition established in the recent past was able to learn (and very well) the lessons from the ground initially explored by DYDX and implement a level of competitiveness much higher than what DYDX was used to. Today DYDX has extremely high competition and, we have to admit, has lost its competitive advantage.
When this happens, as in any other company, decisions need to be made and action taken.
The report and proposal made by @nethermind , although painful, is a pragmatic proposal that defends, above all, the sustainability of financing and business expansion of the DYDX project and promotes the reduction of dumping of $DYDX tokens (which I believe to be beneficial for everyone involved with this project) which is common in the most varied crypto projects due to poor engineering in the development of their tokenomics.
That said, we need to act and regain DYDX’s competitive advantage, fight where we fall short of the competition (improve the product):
- Latency: it is necessary to analyze how it is possible to reduce latency and prove with technical data the number of validators, location and quality, as well as what (if any) technical alternatives are necessary to achieve this objective; It is equally important, for the sake of transparency, to prove to the community what the effective arguments are for reducing the number of validators. While reducing latency of the DYDX chain and higher profitability (per validator) corresponding to a smaller group of validators are justifiable objectives (always keeping latency reduction as the main objective). On the other hand, a possible reduction in the group of validators with the sole objective of increasing the profitability of DYDX’s largest current valuers to the detriment of the rest is a purely and simply predatory positioning of large validators in relation to smaller ones. I insist that this issue must be clarified without any doubt within the community.
- Liquidity: forwarding fees to Megavault increases the liquidity available for trading and forwarding fees to Tresury DAO future staking increases the liquidity necessary for the sustainability of project management without the need for financing to be carried out through the sale of $DYDX token (imagine Apple financing its current cash needs by selling its shares). Since this is a normal system at the beginning of a project, it is not acceptable to maintain it in the future;
- Benchmarking: the competition developed its products with innovations resulting from lessons learned from DYDX’s trajectory. It’s time for DYDX to also learn from its competition and innovate;
- Structural costs: a cut in the profitability of stakers and validators is not enough without there also being an internal analysis on the adequacy of the size of internal costs to DYDX’s liquidity needs;
- Differentiation: although this discussion is focused on the sustainability and tokenomics of DYDX, we must not forget that it is necessary to appeal to creativity in the development and expansion of the product, whether through new services, new collateral, passive income strategies, a delta-neutral stablecoin , better UX, abstraction, new liquidity bridges, etc.
- Tackle the last big elephant in the room (incentivizing users with $DYDX tokens) in an innovative way. Something that I would like to see present in the report presented would be an alternative solution for incentivizing users other than the distribution of $DYDX tokens, which we found that, although common practice in defi, is not at all an effective way to retain users the distribution of tokens from a protocol, be it DYDX or any other. I propose that the possibility of denominating the incentives in USDC be analyzed, which would be directed to the Megavault and the user would be given a token representing their percentage in the vault that would increase in value (as for example what happens with Jupiter’s JLP. In addition to eliminate dumping of the $DYDX token, the user would be encouraged to conserve liquidity in the protocol.
Conclusion: the plan proposed by Netherming is extremely pragmatic, although painful in the short term, and I consider that its correct implementation (after the necessary clarifications I mentioned) constitutes an unparalleled innovation for the sustainability and expansion of the DYDX protocol, which will allow placing the DYDX once again at the forefront of the DeFi market. At the same time, it lays the foundations for greater future profitability for the protocol, stakers and validators.
As this report is clearly the result of a consultation carried out by DYDX I would like to see a post on this forum about the current position of @dYdXFoundation and @antonio regarding this proposal.
Thank you for your attention.