Simple Summary
This proposal seeks community approval to compensate users who incurred losses during the chain halt incident on October 10, 2025, using funds from the Insurance Fund (dydx1c7ptc87hkd54e3r7zjy92q29xkq7t79w64slrq).
Following a thorough review by the dYdX Support team, 27 valid claims were identified, totaling $462,097.79 in compensation. This proposal seeks the disbursement of these funds to affected users in proportion to their validated losses.
Abstract
As outlined in the Incident Review blog post by dYdX Labs, at approximately 5:35 PM ET on Friday, October 10, 2025, the dYdX Chain experienced temporary instability and downtime during a period of extreme market volatility. The volatility triggered a rare protocol edge case related to isolated markets, resulting in a chain halt to preserve state integrity.
Under certain configurations, markets on dYdX can be set as cross (sharing collateral and insurance pools) or isolated (with dedicated pools to contain risk). During this event, the full open interest of an isolated market was liquidated in a single transaction. An incorrect order of operations during this process resulted in the system registering a negative balance, despite the isolated insurance fund having sufficient capital to cover the shortfall. This discrepancy triggered the protocol’s failsafe mechanism, halting the chain to ensure that no additional funds can be minted within the system where there is a net deficit in the collateral pool..A short delay followed as some validators restarted their oracle services, temporarily resulting in stale oracle prices until network consensus was re-established.
Although the protocol and user funds remained secure, a subset of users experienced losses during the halt and oracle desynchronization period. The dYdX Support team conducted a comprehensive review of the submitted claims and verified 27 valid cases, representing a total of $462,097.79 in compensation. The Insurance Fund currently has a balance of ~$16.2 million, more than enough to cover the compensation.
Motivation & Rationale
The Insurance Fund exists to safeguard users and the protocol against exceptional risks, including protocol-level anomalies. Compensating affected users:
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Ensure no user bears losses from systemic issues.
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Reinforce confidence in the protocol’s reliability and governance.
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Uphold dYdX’s commitment to transparency and accountability.
Specification
We propose to transfer 462,097.79 USDC from the Insurance Fund (dydx1c7ptc87hkd54e3r7zjy92q29xkq7t79w64slrq) to the addresses and in the amount specified here.
Next Steps
We invite the community to provide feedback on this proposal. In the interest of timely resolution for affected users, we intend to submit the on-chain proposal in the near future.