On behalf of the PRO Delegators’ team, we have carefully reviewed both the original proposition from Reverie and all the replies.
Context:
Firstly, we would like to summarize all the impending modifications that would occur if this proposition passed:
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On-chain stake will increase overall security by 20m dYdX from the current 245.57m tokens staked (roughly an 8% increase).
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The community pool’s balance will spend 20m tokens, which represents 8.54% of its current 234m supply.
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Existing depositors’ APR will decrease from 21.32% to roughly 18% (a 15.6% drop in revenue for existing stakers).
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90% of rewards used to auto-compound DYDX, 2.5% flow directly to the dYdX community treasury as USDC, with the remainder 7.5% going to the Stride protocol’s fee.
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Voting Power in the active set will add 20m dYdX to 14 validators based on the current delegation policy weights agreed upon by both Stride and the dYdX community (sources: here and there).
Analysis:
By compiling all these elements, here is our general interpretation: this modification is expected to have a minimal impact on security (+8%). Still, we think this cautious approach is essential to avoid creating unwanted distortions in the reward distribution mechanism of the protocol. Calculations provided in the original post foresee a reduction of 15% in revenues for existing delegators. This revenue reduction is expected to be compensated by an increase in the token’s price as 90% of the generated revenue by this new stake will be compounded into buying dYdX from the open market. Moreover, a slight portion of the remainder (2.5%) has been conceded by the Stride protocol to be directed into the community treasury and will be kept in USDC. This will help fund future initiatives for the community.
Legitimate concerns have been raised in comments regarding the distribution among the set in regards to the VP distribution. Our calculations show that the impact will be minimal on this front. Moreover, the Stride delegation program is expected to include new validators over time, which will further dilute this potentially negligible effect.
There are also voices complaining about the LST provider choice, which seems to favor Stride against other competitors, also raising potential conflicts of interest. Even though this falls into the realm of speculation, it is also evident that Stride currently has a significant leadership position in the space, and therefore it is hard to consider that self-interest is the only motivation here. To address this particular point, we would like to remind readers that PRO Delegators has a neutral political stance and will always cast abstain in regards to every proposition that may have significant ties to politically dividing votes.
Conclusions:
Overall, we think this is a good proposition that offers a balanced solution to kick-start an improvement to the chain’s security while not moving too radically to disturb natural market economics. We currently expect to cast a YES vote as long as the LST provider choice doesn’t become too much of a political divide. Beyond a certain threshold of public contest, we would be forced to abide by our obligation to abstain and invite our delegators to cast their own independent votes.
Thanks for reading,
Govmos
