Hey everyone, Montagu from Citadel One, a DYDX validator.
We share many of the concerns voiced out by community members regarding this proposal. I wanted to share a few inputs regarding some of proposed changes, separately.
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Revenue Distribution
This part is suggesting a 50-40-10 revenue split between MegaVault, Stakers and Treasury subDAO, respectively:
→ Allocating a part of revenue to the Treasury subDAO is logical as it reduces relying on DYDX tokens to fund future development.
→ Allocating half of the protocol’s revenue to MegaVault seems excessive at this point. The feature isn’t battle-tested and seems to be unprofitable at the moment. There is, without a doubt, benefits to having deeper liquidity but I find it hard to justify allocating 50% of the protocol’s revenue to it from the get-go. This should start at a much lower percentage and increase it accordingly, not the other way around.
→ A quote from the report: ‘The dYdX ecosystem currently lacks a “buy and stake” mechanism’
Unless I’m mistaken, that is inaccurate. The community staking deal with Stride does specifically that. That being said, I’m not opposed but perhaps better ideas could be explored such as deepening DYDX liquidity given that this will be actively managed by the subDAO. -
Halvening the Validator Set
This part is suggesting the reduction of the Validator set from 60 to 30. The proposal’s motivation is the profitability of Validators. Based on my understanding, this rationale here is to make up for the losses incurred by Validators following a 60% decrease in revenue.
Disclaimer: Citadel One would be directly affected by this change so take this with a grain of salt.
There are many inconsistencies here that I’d like to point out:
→ I’d be curious to know more about the figures used to benchmark profitability and how were they sourced. I doubt they represent a majority of the Val Set.
→ This will only work if stake from decommissioned validators is distributed pro-rata amongst the Top 30, which is the best-case scenario and unlikely. What’s more likely is more concentration of VP which will further hurt the profitability of the remaining Validator, ending up with the same problem the proposer’s trying to solve.
→ Validating is permissionless, meaning that validators are free to opt out whenever they want ( example, when they’re not profitable). Imo, there is no need for a third party, with inaccurate data, to make that decision for them.
→ That being said, there are valid reasons to adopt a smaller validator set and they should be considered in their own merit. This is why I think the community should start a separate discussion about increasing the chain’s performance as there are alternative solutions worth exploring (mentioned above) before halving the Set.
Better performance and low latency should be a priority but it’s important to remember that we’ll always lag behind CEXs and ‘semi-decentralized’ DEXs as decentralization ( dYdX’s competitive advantage) comes with its trade-offs.TL;DR The proposer’s rationale is flawed and backed with inaccurate analysis.
Barring the 10% of revenue routed to the Treasury subDAO and halting the bridge, all proposed changes here needs to be further discussed, SEPARATELY. This isn’t to say that some of changes could prove beneficial to the chain but an approach of ‘if it didn’t work we’ll reassess’ isn’t the way to go here.