Hi @Callen_Wintermute, we have been examining data from the dYdX Epoch Review blog posts. To provide a comprehensive view, I’ve compared key metrics from four recent epochs - two before the rewards reduction (Epochs 19 and 20) and two following it (Epochs 21 and 22).
Before the rewards reduction, during epochs 19 and 20, the platform demonstrated robust activity:
- Trading Volume: $30.7B and $38.0B, respectively
- Average Daily Trading Volume: $1.1B and $1.4B, respectively
- Net deposits and withdrawals: $195.1M and $178.9M, respectively
- Unique depositors: 4357 and 4114, respectively
- Fees Paid: $7.5M and $8.6M, respectively
Following the rewards reduction, during epochs 21 and 22, we see a decline in these metrics:
- Trading Volume: Dropped to $31.5B and $30.2B, respectively
- Average Daily Trading Volume: Decreased to $1.2B and $1.1B, respectively
- Net deposits and withdrawals: Turned negative at -$47.5M and -$97.4, respectively
- Unique depositors: Dropped to 4334 and 2906, respectively
- Fees Paid: Fell to $7.7M and $7.1M, respectively
Following the rewards reduction, we observe a distinct downward trend across all key metrics. For instance, the trading volume decreased by approximately 20.5% from Epoch 20 to Epoch 22. There’s also a drop in unique depositors by around 29.3%.
This decline is reflected in the average daily trading volume (a fall of about 21.4%), and in net deposits and withdrawals, which shifted significantly from positive to negative. The fees paid to the platform also decreased by approximately 17.4%.
While we understand the importance of looking at these stats in the context of the broader crypto/DeFi’s trading volume, these changes indicate that reducing rewards has negatively influenced user behaviour on dYdX.
Judging by the first two weeks of the current epoch, these metrics are looking increasingly concerning. We’re observing an average daily trading volume of around $500 million, possibly even less. This represents an alarming further decrease of approximately 50%.
These changes lead to less liquidity, making the platform less appealing to traders. The increase in net withdrawals and decrease in unique depositors suggest a decline in user confidence, which impacts the platform’s growth and reputation. Lastly, the decrease in fees paid negatively affects revenue and profitability.
In light of these observations, we propose reconsidering the reward reduction. dYdX is in the early stages of product development and is vying for a significant share in a highly competitive market. Given this scenario, reinstating and redesigning the rewards system entirely will help mitigate these negative effects and improve user engagement.
I have initiated a discussion on the forum around redesigning the rewards system entirely. You can find the discussion here.
Our priority is to drive platform growth and increase trading volume. I believe revisiting the rewards strategy could be a significant step towards achieving this goal. I hope this analysis provides a valuable perspective on the post-reward reduction landscape, and I look forward to discussing this further.