[DRC] Add TIA-USD to the dYdX Chain

[Steven_Amber]

Hi dYdX community –

Steven from Amber here. We’re a large team engineers, quantitative researchers, traders, and crypto enthusiasts. Operating globally 24/7, we are an active market participant heavily involved in pricing, trading, and hedging cryptocurrency assets across all the various venues.

We have been active on dYdX from the start, being among the initial market makers on the platform and contributing to over a quarter of total trading volume at times. We are also an investor in dYdX and are excited to see the launch and success of dYdX V4.

Simple Summary

Add TIA-USD to the dYdX Chain.

Abstract

Since entering the Full Trading stage, the highest daily trading volume on the dYdX Chain has reached ~$416M (as of December 14, 2023).

We anticipate that the number of markets available on dYdX Chain will increase in 2024. So far, the dYdX community has not added any new markets to dYdX Chain. As such, we are proposing to add the TIA-USD trading pair to dYdX Chain.

Note we are only proposing to add one new asset in this proposal to test out the process for adding a new asset to dYdX Chain.

Specification

We will release the specification/implementation before the on-chain proposal is created. Information about adding new markets is available here in the dYdX Chain open-source software.

Motivation and Rationale

Since entering the Full Trading stage, the highest daily trading volume on the dYdX Chain has reached ~$416M (as of December 14, 2023).

We anticipate that the number of markets available on dYdX Chain will increase in 2024. So far, the dYdX community has not added any new markets to dYdX Chain. As such, we are proposing to add the TIA-USD trading pair to dYdX Chain.

Note we are only proposing to add one new asset in this proposal to test out the process for adding a new asset to dYdX Chain.

We are proposing to add TIA to dYdX Chain because it is one of the most in-demand tokens on the market right now. With a market capitalization of nearly $2B, it has 24h Perpetual swap volume of $816M on Binance and $41.8M on OKX (as of December 14, 2023). We believe by adding TIA it would help spur the growth of trading activity dYdX Chain.

Next Steps

We plan to create an on-chain vote early next week (~Dec 18, 2023).

[DefiPanda]

Hear. TIA will be big.

I also recommend later adding hot coins not available not Binance.

$ORDI is an obvious one. To win against Binance, the dYdX chain has to list coins not available on Binance.

[chaoslabs]

Thank you @Steven_Amber for this proposal to add the TIA-USD trading pair to the dYdX Chain. We are excited about this potential new offering and are eager to contribute to its successful implementation.

The Chaos team is examining the proposal in detail and we plan to share our analysis and recommendations with the community by tomorrow.

[iryna_everstake]

Thanks for the initiative! Adding new high-demand tokens should capture market interest and boost the trading activity of the dYdX Chain, which is important for its development and organic growth.

[chaoslabs]

Chaos Labs TIA-USD Initial Parameter Recommendations

Overview

From a risk perspective, Chaos Labs supports the addition of TIA-USD to the dYdX Chain.

TIA has grown rapidly from a $331m market capitalization at its launch on 31 October 2023 to over $2bn today. Adding a token growing this fast at a top 50 market capitalization, according to Coingecko, could drive meaningful growth for dYdX v4.

Our analysis recommends the initial parameters outlined below.

TIA Liquidity and Trading Volumes

TIA perpetual liquidity on centralized exchanges has stabilized at over $8m within 2% of mid. This level of deep, consistent liquidity should be sufficient for liquidity providers to manage their exposures externally, keeping market prices aligned.

Perpetual volumes on major centralized exchanges have been consistently over $1bn a day recently. This suggests strong demand for the trading pair, making it well-suited as the next asset to be added to the dYdX chain.

Most TIA perpetual trading activity mostly happens on centralized exchanges. Volumes are well distributed amongst the 3 largest exchanges, reducing dependencies on any single venue.

Hourly TIA price volatility has been similar to tokens of comparable market capitalization. There is no historical evidence that volatility poses any specific risks to dYdX.

Margin Risk Parameters

The margin risk parameters control the amount of leverage an account can access by position size. This helps ensure that dYdX is not exposed to bad debt should an overly large position not liquidate before its margin is fully consumed.

Considering the market capital and centralized exchange liquidity of TIA, our analysis recommends setting the base position notional to $250,000 and the maximum leverage to 10x. This means traders can take out up to 10x leverage up to a maximum position size of $250,000. Liquidation will happen once their leverage increases beyond 20x.

Similar markets with these parameters, such as LINK-USD, ATOM-USD, and OP-USD, have served dYdX v4 well thus far. These guided our initial recommendations.

Base Initial Margin Fraction: 0.1

Maintenance Margin Fraction: 0.05

Base Position Notional: $250,000

Maximum Leverage: 10x

Market Microstructure Parameters

The market microstructure parameters set rules around the lower bounds of trading actions. The tick size, in particular, is crucial for maintaining competition amongst liquidity providers.

A 1/10c tick size optimizes for sufficient competition amongst market makers at the touch while maintaining a simple user experience for traders. Given the current token price, orders in steps on 1 TIA are appropriate.

Tick Size: $0.001

Step Size: 1 TIA

Minimum Order Size: 1 TIA

[Steven_Amber]

Hi all -

The proposal has been submitted: Mintscan

The DIP doc link: DIP 5 - Add New Market: TIA - Google Docs

Note that we have added @chaoslabs initial parameter recommendations