[DRC]: dYdX Foundation Fundraising Proposal

[dYdXFoundation]

DRC: dYdX Foundation Fundraising Proposal

1. TLDR

We are requesting $30M in DYDX (10,581,228 DYDX tokens at 30-day TWAP of $2.86 as of 23/1/2024) of funding from the dYdX Chain community treasury to be transferred to the dYdX Foundation’s cold storage wallet to fund the Foundation’s operations for an additional 36-month term. Note, the number of tokens and 30-day TWAP will be updated before the on-chain vote is created. This funding will provide 3 more years of runway for the dYdX Foundation to execute its roadmap, which - in line with the dYdX Foundation’s statutory purpose - includes:

• Enhancing dYdX Chain’s governance velocity and impact
• Fostering DAO enablement
• Supporting appropriate technical and strategic integrations for the dYdX Chain infrastructure and its applications
• Helping to scale the adoption of the dYdX Chain
• Enhancing global marketing and communications around the dYdX brand
• Hiring and retaining an A-player dYdX Foundation team
• Supporting operational excellence across the entire dYdX ecosystem

The dYdX Foundation does not charge fees or have a profit-making purpose, and does not seek any profits in general. The funds will be used to hire and retain the best talent, to help scale the adoption of the dYdX Chain, and to continue further decentralizing the dYdX ecosystem such that it can propel itself forward.

Next Steps:

1. An AMA will be held on Friday, January 26, 2024 at 12:00 UTC. Register using this link.
2. Depending on dYdX community feedback, the dYdX Foundation is targeting an on-chain proposal on Jan 29, 2024.

2. The Story of dYdX: A Journey Towards Decentralization

The launch of the dYdX Chain marked a pivotal moment for both dYdX and the broader DeFi ecosystem. The dYdX Chain introduces a software infrastructure for a permissionless exchange governed entirely by code and controlled by its stakeholders, enhancing transparency and security in non-custodial derivatives trading.

Central to dYdX’s ethos is the belief that decentralization and disintermediation are fundamental to democratizing access to financial opportunity and essential for the health of the crypto ecosystem.

The dYdX Foundation’s journey commenced with the launch of the dYdX v3 protocol, a non-custodial trading platform for perpetual smart contracts operating on the Ethereum blockchain and StarkWare’s Layer-2 infrastructure. The dYdX Foundation was established as an independent non-profit organization based in Zug, Switzerland, and launched the governance token of the dYdX v3 protocol (ethDYDX token) on August 3, 2021. The ethDYDX token aligned traders, liquidity providers, and partners of dYdX to work collectively towards enhancing and governing the dYdX v3 protocol.

The dYdX Foundation is governed by its council members, who include Arthur Cheong, Rebecca Rettig Waldman, and Markus Spillmann.

The most recent step in dYdX’s decentralization journey was the launch of the dYdX Chain, an open-source perpetuals exchange built as a proof-of-stake app-chain leveraging the Cosmos SDK and CometBFT. The dYdX Chain is customized for high-performance trading, achieving full decentralization and greater alignment between different stakeholders. The standalone, fully sovereign app-chain enables complete customization of the technology stack, enhancing the network’s functionality and allowing independent third-party validators to play a significant role in the dYdX ecosystem.

Today, the dYdX DAO is thriving but nascent, supported by independent entities and other participants that contribute to the ecosystem in different forms. These include:

1. dYdX Trading, the core development team behind the open-source software of the dYdX Chain;
2. dYdX Foundation, a Swiss foundation whose main purpose is to support and grow the dYdX protocol ecosystem by enabling communities, developers, and decentralized governance;
3. dYdX Grants subDAO, a grant-making body that is responsible for the administration of grants to dYdX contributors; and
4. dYdX Operations subDAO, an operational arm of the dYdX DAO that the community voted to fund to provide key infrastructure and to build operational capabilities for the dYdX DAO at large.

In a broader context, beyond the more formal group and players mentioned, the dYdX ecosystem includes but is not limited to validators, stakers, community members, grantees, token holders, infrastructure providers, investors, market makers and, most importantly, traders.

The dYdX community’s decision to adopt DYDX as the Layer 1 token of the dYdX Chain has expanded the token’s utility functionalities. Once migrated to the dYdX Chain and staked to dYdX Chain validators, DYDX secures the network and allows its holders to take part in the governance system.

The dYdX v3 protocol achieved significant milestones, including processing over $1 trillion in total trading volume, distributing ethDYDX tokens to approximately 70,000 distinct addresses, and maintaining an average daily volume of around $1 billion. However, it is important to note that the protocol still represents only 1-2% of the global crypto perpetual market. This suggests that, despite the successes of dYdX v3, the dYdX Chain has substantial room for growth.

We view the successful launch of the dYdX Chain as just the beginning. The dYdX Chain’s capacity to handle around 2,000 transactions per second while maintaining full decentralization is a groundbreaking development in DeFi. With this infrastructure in place, we as a community can now turn our focus toward the future growth of the dYdX Chain.

The dYdX Foundation can help support and accelerate the growth of a robust dYdX ecosystem. The Foundation’s vision is that the dYdX Chain will become the underlying infrastructure of the largest DeFi protocol in the world, where any asset with a price feed can be traded. Thus, the dYdX Chain shall become the exchange layer of the Internet, governed entirely by code and controlled by its stakeholders.

We’re excited to work together with the dYdX community to help make that happen.

Our Mission

Our mission is to support and grow the dYdX protocol ecosystem by enabling communities, developers, and decentralized governance.

Our North Stars

1. Market Share: Support the growth and consolidation of dYdX’s global market share of perpetual volume.
2. Active Traders: Provide resources to increase weekly active user metrics and improve cohort retention.
3. Protocol Revenue: Promote and encourage reflection about diversifying the protocol revenue streams via strategic integrations, enhanced protocol functionalities, new market listings, and front-end integrations.

Why is the dYdX Foundation important?

Since its inception on June 22, 2021, the dYdX Foundation has established itself as one of the many important contributors and participants in the dYdX ecosystem and as an independent and autonomous legal entity. True to the Foundation’s mission to support and grow the dYdX protocol ecosystem by enabling communities, developers, and decentralized governance, it has scaled its activities according to its founding purpose with visible success.

The dYdX Foundation’s purpose is to support and grow every aspect, technical or otherwise, of the current implementation and all future implementations of the dYdX protocol, including but not limited to the ecosystem related to the dYdX protocol (the “dYdX Ecosystem”), and to foster participation from others who seek to support and grow any aspect, technical or otherwise, of the dYdX ecosystem or the current implementation and all future implementations of the dYdX protocol. Specifically, the dYdX Foundation’s mandate empowers it to, among other things:

• Support and finance appropriate research and development activities and projects;
• Promote and educate the public on the dYdX ecosystem and/or dYdX protocol;
• Issue, receive, spend, and hold digital assets;
• Engage with various businesses, partners, banks, regulators, authorities, and other third parties to the benefit of the dYdX ecosystem;
• Acquire, hold, or grant trademarks, copyrights, and other intellectual property rights or licenses;
• Organize conferences and other events that support and promote the dYdX ecosystem and/or the dYdX protocol; and
• Conduct and promote all business and/or enter into all transactions, and generally perform all acts as may be necessary, appropriate, incidental to or desirable to assist in achieving or promoting the objects described herein.

The Foundation’s statutory purpose, structure, and overall legal mandate ensures that any funds and resources held or controlled by the Foundation must be used in furtherance of the Foundation’s mission and purpose and, therefore, for the ultimate benefit of the broader dYdX ecosystem.

In its 2.5 years of operations, the dYdX Foundation has experienced significant growth, expanding its team and stakeholder base. The dYdX Foundation team has focused on the following areas of the dYdX ecosystem: DAO development, protocol governance, user support, dYdX Chain business development, brand building, dYdX community enablement, education, user research, and go-to-market.

Past Impact

Governance

On August 3, 2021, the dYdX Foundation introduced ethDYDX, a governance token that allows the dYdX v3 protocol’s community to govern certain aspects of the dYdX v3 Layer 2 protocol. The ethDYDX token was issued as a utility token in line with Swiss law. ethDYDX aligned incentives between traders, liquidity providers, and other users of the dYdX v3 protocol. ethDYDX enabled a robust ecosystem around governance and rewards – each designed to drive growth and decentralization of the dYdX v3 protocol. Since then, the dYdX Foundation has supported the ecosystem by guiding proposers, voters, and other governance participants through drafting technical documentation, contributing to the visibility of dYdX governance processes, and promoting active governance participation.

Go-To-Market, Growth, & International Business Development

We’ve spearheaded go-to-market, growth, and business development efforts in numerous jurisdictions. Between 2022 and early 2023, our team focused on user research and partnerships, gathering and analyzing feedback for dYdX v3. Based on this experience, we’ve established long-standing high-impact relationships with key regional partners, giving us an in-depth understanding of the market and strengthening our ability to enable the growth of the dYdX Chain. In early 2023, all internal resources were strategically realigned to support the international development, growth, and adoption of the dYdX Chain open-source software.

dYdX DAO Acceleration

The dYdX Foundation has been at the forefront of thought leadership on DAO development. We introduced a framework for the creation of a Guernsey purpose trust that solves several issues for DAOs. This structure was ultimately implemented by the dYdX Grants Trust and the dYdX Operations Trust and approved by the dYdX Community via governance. Further, we have supported community discussions around the development of various subDAOs. We’ve also been a close partner for both of the existing dYdX subDAOs, the dYdX Grants subDAO and the dYdX Operations subDAO, supporting them in their evolution towards becoming fully autonomous, community-controlled subDAOs.

dYdX Chain Enablement

A major focus for the dYdX Foundation has been supporting the enablement of the dYdX Chain. In our blog post, “Exploring the Future of DYDX”, we detailed our commissioning of:

• The development and open sourcing of an Ethereum smart contract (the “wethDYDX Smart Contract”) that the dYdX Community voted (Snapshot and on-chain) in support of adopting and then deployed to enable a permissionless and autonomous one-way bridge for the ethDYDX token to be migrated from Ethereum to the dYdX Chain.
• The development and open sourcing of source code for a “User Interface” to interact with the wethDYDX Smart Contract (the “User Interface Code”). On October 30, 2023, the dYdX Operations subDAO deployed an instance of the User Interface Code to provide a front-end for ethDYDX holders to interact with the wethDYDX Smart Contract and migrate their ethDYDX tokens from Ethereum to the dYdX Chain.
• The development and open sourcing of a GovernanceStrategyV2 smart contract (the “GovernanceStrategyV2 Smart Contract”) that the dYdX Community voted in support of and deployed to upgrade the existing dYdX v3 GovernanceStrategy Smart Contract to enable the wrapped version of the Ethereum-based DYDX token (“wethDYDX”) to have the same governance and utility function as ethDYDX in dYdX v3.
• The development and open sourcing of a TreasuryBridge smart contract (the “TreasuryBridge Smart Contract”) that the dYdX Community voted to adopt and deployed to enable the migration of ethDYDX in the dYdX v3 Community Treasury, the Rewards Treasury, and each respective vester smart contract to the dYdX Chain.

Education & Documentation

The dYdX Foundation has been pivotal in enhancing education and documentation for the broader dYdX ecosystem. The dYdX Foundation’s commitment is exemplified through initiatives like the dYdX v3 epoch reviews, annual and semi-annual ecosystem reports, monthly town halls, and the creation and development of governance documentation. These initiatives help to foster a transparent ecosystem, an informed community, and decentralized governance.

User Support

On March 20th, 2023, the dYdX Foundation published Improving User Support in the dYdX Ecosystem. Over the past year, we have consistently delivered exceptional User Support services in collaboration with ACX, a prominent User Support service provider. Since the introduction of the dYdX User Support program, the dYdX Foundation has been dedicated to refining documentation, bolstering capabilities, and applying insights gained from direct interactions with users. For example, the dYdX Operations subDAO, the entity responsible for hosting one of the dYdX Chain’s Front-Ends, dydx.trade, established a partnership with the dYdX Foundation to offer User Support to users of their front-end application.

Marketing & Events

The dYdX Foundation has been instrumental in enhancing brand recognition for dYdX, engaging communities, and educating users about the dYdX Protocol.

In 2023 alone, our team attended over 70+ in-person events and 10 major events across Asia, Europe, and South America including but not limited to Paris Blockchain Week, DAO Tokyo, B-Dash Camp, IVS Kyoto, WebX, Eth CC, Nebular Summit, Atom Istanbul, Web3 GOA and Korea Blockchain Week, Cosmoverse, or India Blockchain Week. Collectively, these events attracted over 40k attendees. Additionally, the team hosted 195+ AMAs, podcasts, webinars, weekly trading floors, and Hedgie huddles, among other activities. The Foundation launched a series of developer and educational content initiatives, available on multiple platforms and Youtube. Further, our collaboration with a PR firm has significantly boosted our brand visibility achieving over 14 million media impressions in 7 months of activity and enhancing media relations with Tier 1 Publications (e.g., Blockworks, Bankless, Wall Street Journal).

The dYdX Foundation planned and funded dYdX Connect, which proved to be a significant development within the dYdX Ecosystem to support and promote growth by enabling dYdX Chain ecosystem partners, collaborators, and developers to meet IRL to facilitate relationship building and celebrate collective achievements. dYdX Connect events were a hit in Paris, Tokyo, and Istanbul in 2023. We look forward to continuing and expanding dYdX Connect in 2024.

IP Protection

Moreover, the dYdX Foundation has proactively taken steps to protect intellectual property by registering or filing for registration of the DYDX trademark in dozens of key markets. We’ve also granted licenses over the DYDX mark to select ecosystem participants to enable a consistent, robust and compliant utilization of the mark across the ecosystem. We continuously monitor our trademark filings, applications, and licensing agreements while regularly reassessing our approach to intellectual property, including trademarks and domain names.

Legal

Lastly, the dYdX Foundation has spent considerable time and resources on ensuring that a robust, resilient, and compliant collaboration set-up with other key ecosystem partners is in place to enable smooth cooperation and interactions. We’ve also worked with numerous legal firms in multiple jurisdictions to optimize the Foundation’s legal and regulatory compliance status, keeping the broader dYdX ecosystem in mind and striving to address risks appropriately.

In summary, the dYdX Foundation has evolved significantly, cementing its role as one of the pivotal players in the dYdX ecosystem. Moving forward, we remain dedicated to our mission to support and grow the dYdX protocol ecosystem by enabling communities, developers, and decentralized governance.

Why are we raising capital?

The dYdX Foundation is requesting funding to continue to fulfill its statutory purpose and focus on the following initiatives:

• Enhancing dYdX Chain’s governance velocity and impact
• Fostering DAO enablement
• Supporting appropriate technical and strategic integrations for chain infrastructure and applications
• Help scale the adoption of the dYdX Chain
• Enhancing global marketing and communications around the dYdX brand
• Hiring and retaining an A-player dYdX Foundation team
• Supporting operational excellence across the entire dYdX ecosystem

dYdX Foundation Team

Foundation Council Members

The Foundation Council is comprised of the following members:

1. Arthur Cheong, Founder, CEO & CIO @ DeFiance Capital
2. Rebecca Rettig, Chief Legal & Policy Officer @ Polygon Labs
3. Markus Spillmann, Chief Executive Officer @ Sielva Management SA

Operating Team

The Foundation’s core team is currently comprised of:

• Charles d’Haussy - CEO: before joining the dYdX Foundation, Charles was the Global Head of Business Development at ConsenSys, a leading blockchain engineering company. He also has experience as an entrepreneur and as the Head of Fintech with the Hong Kong government. In 2018, Charles was elected as a Top-50 fintech influencer in Asia, and in 2023, he was named by Cryptoast as one of the 21 French people who positively influenced the crypto space.
• David Gogel - VP Strategy & Operations: David, a startup operator, entrepreneur, and investor, joined the dYdX Foundation team in 2021 as the first team member, bootstrapping and scaling the organization. He formerly founded a consultancy advising crypto and fintech founders and worked in Corporate Development and M&A at Fortune 500 financial and tech companies. He holds an MBA & BSc from Wharton and is a Senior Fellow for the Wharton Blockchain & Digital Asset Project.
• Javier Sanchez Valiente - Legal Counsel: Javier joined the dYdX Foundation in July 2022 taking over the most complex and challenging legal matters in the industry after 4 years at global law firm Freshfields Bruckhaus Deringer as a Corporate and M&A lawyer.
• Gregor Mocnik - Head of Finance: joining from Meta, Greg brings a depth of knowledge and experience from his career in M&A and finance and accounting roles at Roche. He is a CFA and ACCA charterholder and advisor to Acctual. Since joining in June 2022, he has built financial infrastructure and processes supporting the Foundation’s organizational pillars.
• Joshua Watts - Head of Governance & Strategic Initiatives: before joining the dYdX Foundation in November 2021, Josh worked as a corporate lawyer and a venture capital associate. As one of the dYdX Foundation’s first employees, he played a pivotal role in expanding and fortifying the team. Since joining as a cross-functional operations associate, he has assumed responsibility for governance and strategic initiatives at the dYdX Foundation. He holds a JD and an MBA from the University of Toronto.
• James Hallam - Head of Business Development: As one of the first team members at the Foundation, James led the growth of the dYdX ecosystem, developing different markets and partnerships over the years. He is currently responsible for the global BD & growth teams internationally, focusing on key current and emerging markets in 2024.
• Karan Ambwani - Head of Solutions: Karan joined the Foundation team in 2022 as GTM Lead for the India market and rapidly took over engineering and solutions activities to support user engagement and technical integrations. With a heavy engineering and product background, he provided solutions to clients around the world including ConsenSys and Conflux Network.
• Tristan Dickinson - Marketing & Communications Lead: dynamic and experienced Marketing leader with a background in banking, financial services, and technology, Tristan joined in 2023 and has built and executed the Marketing and Communication strategy for the dYdX Foundation, growing community and governance participation, and onboarding and maintaining key media and partner relationships.
• Hisashi Oki - Asia Business Development Lead: previously the Brand Marketing and Communications Lead at Kraken and the Editor-in-Chief at Cointelegraph, both in Japan, Hisashi joined the Foundation team in 2022 to drive BD efforts in Japan and has now expanded the scope to the entire Asian market. He also helps Ledger reach the Japanese market.
• Hernan Ronchetti - Finance & People Ops. Manager: after 12 years in the oil & gas industry with different Finance and Human Resources roles at ExxonMobil, Hernan joined the dYdX Foundation in 2023 taking care of different operational processes and activities to support the growth of the company and the ecosystem.
• Artem Shipkov - Europe Business Development Lead: with a strong focus on growth marketing for French-speaking countries, Artem became France GTM Lead in 2023 and has, since then, succeeded in developing the biggest European crypto markets. Formerly a Binance and Bybit professional, Artem also devotes his time as an investor for tech startups.
• Mega Septiandara - Governance & Strategic Initiatives Manager: passionate about encouraging the adoption of cryptocurrency and blockchain to the masses, Mega joined the Foundation team in 2023 coming from the Nansen Research team. Her background also includes business intelligence, blockchain data analytics, and corporate law experience.

We’re also grateful to work with a number of contributors who are making an outsized impact:

• Pratik (Vivan) Shigli - Community Manager
• Christopher Ximenez - User Support & Retention
• Lawrence Chiu - User Technical Support
• ACX International - Compliance, User Support, Community Management Solutions

3. Team Structure & Key Activities:

We have listed our current team structure and key activities below. These activities will be carried out to fulfill the Foundation’s corporate purpose and they may be changed or modified in the future in order for the Foundation to continue to fulfill its corporate purpose.

3.1 Governance & Strategic Initiatives (GSI)

Why It’s Important: A robust and engaged governance community, comprising both stakers and validators, is essential for fostering a sustainable and thriving ecosystem. Active participation ensures that decisions reflect the community’s diverse perspectives, leading to better outcomes.

3.2 Business Development & Growth (BDG)

Why It’s Important: Ecosystem growth and strategic partnerships are essential for scaling the reach and impact of dYdX. By expanding into new regions, supporting effective growth strategies, and leveraging a robust CRM for ecosystem management, dYdX can enhance its global presence and operational efficiency, driving user adoption and overall growth.

3.3 Solutions & User Success (S)

Why It’s Important: Seamless technical integrations with the dYdX Chain are critical for fostering a robust and interconnected ecosystem. By providing rapid and effective technical support across a spectrum of users and third-party developers and improving documentation, the Solutions team can enhance user retention and growth.

3.4 Marketing & Communications (MC)

Why It’s Important: Robust marketing and communications are essential for building dYdX’s brand and enhancing user engagement. Through focused strategies in SEO, thought leadership, brand partnerships, and event management, dYdX can elevate its market presence, attract a broader audience, and solidify its reputation as a leader in the DeFi and trading space.

3.5 Core Operations (CO)

The Core Operations team is comprised of Legal, Finance, and Talent.

Legal

Why It’s Important: The Legal team’s role is critical in navigating the complex regulatory landscape of the DeFi world. By focusing on policy efforts, thought leadership, DAO legal support, IP protection, and legal strategy, the Legal team seeks to ensure that the dYdX Foundation operates within legal boundaries and continues to advance its strategic objectives effectively, keeping the broader dYdX ecosystem in mind.

Finance

Why It’s Important: The Finance team’s role is pivotal in ensuring the financial health and sustainability of the dYdX Foundation. Effective fundraising, asset management, financial planning, and control are crucial for meeting the Foundation’s strategic goals and maintaining its position as a leader in the DeFi space.

Talent

Why It’s Important: The Talent team is essential to dYdX’s success, focusing on building a skilled and cohesive workforce that’s deeply integrated with the ecosystem. They concentrate on technical training, upskilling, embedding dYdX culture, and strategic hiring, leveraging the unique strengths of our team members and partners. This approach not only fosters organizational and ecosystem growth but also cultivates a positive, productive work culture, crucial for long-term engagement, retention, and the continuous success of the dYdX Foundation and its broader ecosystem.

3.6 Historical Financials

In terms of total assets, the dYdX Foundation currently holds $4.8M in cash and short-term treasury bills and 2.6M DYDX tokens (2.3M of which are currently staked to dYdX Chain validators). Under the current monthly average burn of $0.8M, this extends our cash runway for another 6 months (i.e., until June 2024).

Between 2H2021 and 2023, the dYdX Foundation spent $11.7M to deliver on its purpose. In 2023, the dYdX Foundation incurred $6.0M in total operating expenses. This reflects a moderate increase in activity that aligned with our internal budget for the year. Notably, we undertook a strategic budget reassessment, resulting in reduced spending, particularly in marketing, in anticipation of the dYdX Chain launch and as a response to challenging macroeconomic conditions. This enabled us to reallocate resources more effectively towards high-impact initiatives.

Despite these adjustments, we expanded our footprint by adding three new team members, bringing our total team count to 12 by year’s end. The bulk of our operating expenses were directed towards compensating our global talent, followed by marketing, and professional services, which included legal, accounting, and tax. Marketing spending was strategically decreased and concentrated in Q4, coinciding with the dYdX Chain launch. Nevertheless, the dYdX Foundation successfully enhanced its brand presence by sponsoring a number of events including DAO Tokyo, Japan in April, Nebular Summit in Paris, France in July, and Cosmoverse in Istanbul, Turkey in October 2023, and numerous dYdX Connect local events. Other administrative costs encompassed corporate, payroll, recruitment, Foundation Council expenses, and other operational costs, primarily consisting of liability insurance and banking fees. Overall, we concluded the 2023 fiscal year on target, achieving notable progress in a challenging environment and eagerly anticipating future developments.

The dYdX Foundation is registered as a private, not-for-profit foundation and is regulated by the Federal Supervisory Authority for Foundations (FSAF) in Switzerland. Since its inception, the dYdX Foundation has prepared its financial statements and been subject to statutory audit complying with Swiss local GAAP.

[dYdXFoundation]

3.7 Fundraise Operating Budget

The dYdX Foundation is requesting $30M in DYDX from the dYdX Chain Community Treasury for 3 more years of runway to execute on our roadmap.

The dYdX Foundation does not have a profit-making purpose and does not seek any profits in general. The funds will be used to hire and retain the best talent, to help scale the adoption of the dYdX Chain, and to continue further decentralizing the dYdX ecosystem such that it can propel itself forward.

The community treasury currently holds approximately 90M DYDX tokens (worth approximately $257M using 30-day TWAP of $2.86) and is expected to vest an additional 163M DYDX tokens (worth approx. $466M) through August 2026, which add up to a total of 253M DYDX tokens (worth approx. $723M). The Foundation’s funding request represents 1% of the total supply and 4.1% of the current total community treasury.

Below is our projected operating budget for the relevant three-year period (2024-2026). This budget represents our most informed forecasts, utilizing the latest available data and market insights.

OPERATING BUDGET

• Forecast for FY2023 is based on actual results for YTD October 2023 and estimates for November and December.

Notes:

1. Personnel includes total employer cost, including salary, bonus, withholdings, and benefits. FTE projections include 4 new hires in the first year to support future growth. Additionally, this expense includes the vesting of DYDX tokens with a standard one-year cliff policy. Hence the increase in personnel costs can be seen starting from 2025.
2. Marketing, BD & Growth includes the cost of marketing and growth initiatives including partnerships, affiliate marketing, event sponsorships, design, translations, dYdX merchandise, SEO, enhancements to the Foundation website, as well as other costs associated with business development.
3. Professional services are primarily represented by legal costs, which are further divided into services and provisions. Provisions represent a reserve to cover legal fees and claims arising from any unexpected potential future litigations or regulatory proceedings.
4. Contractors are costs of part-time additional resources used in supporting local marketing initiatives (8) and the user support function (4).
5. Administration represents corporate and other overhead functions, namely compensation for Foundation Council Members, recruiting, and payroll administration.
6. Other operating costs include primarily D&O liability insurance and banking and transaction charges.

In order to provide stability to our team members and sustain the Foundation, we may make a request to the community for additional funding in the future (which will be subject to a separate governance proposal and decision).

3.8 Treasury Management

Treasury management and asset protection have always been at the center of our Finance team’s attention. Our investment policy is designed first to ensure capital preservation, followed by maintaining liquidity and, lastly, generating additional yield. In 2023, we implemented several new approaches and policies. Notably, our $6M investment bond ladder strategy deployed in US Treasuries reduced our USDC exposure by >90%, 3x’d our previous APY, and significantly reduced counterparty risk. This move was partly a strategic response to the tumultuous events in the US crypto banking crisis with the collapse of SVB, Silvergate, and Signature banks, as well as the subsequent USDC de-pegging and freezing of redemptions. In a macroeconomic landscape characterized by high global interest rates, these strategies have enabled us to secure attractive, risk-adjusted returns on our fiat holdings. Despite these challenges predominantly impacting US entities, we have proactively fortified our asset protection measures and reinforced our safeguards, resulting in no loss of funds and a continued commitment to a conservative fiscal approach.

In alignment with our commitment to bolstering the network’s security, we have initiated a stake delegation program. Over 2.3 million DYDX tokens, constituting 88% of our current DYDX holdings, are now delegated across ten different dYdX Chain validators, adhering to our staking principles and best practices, as outlined in our blog.

Looking ahead, should the Foundation successfully raise additional funds through this proposal, our core objectives remain unchanged. Our strategy involves diversifying a portion of the newly acquired funds to ensure operational stability irrespective of market fluctuations. Concurrently, we aim to expand our stake in the delegation program using our DYDX tokens, thus earning rewards and contributing to further fortifying the security of the dYdX Chain network. Additionally, a segment of our DYDX holdings will be reserved for our compensation strategy, enabling us to attract, incentivize, and retain top-tier talent.

3.9 Fund Disbursement

We are requesting $30M in DYDX (10,581,228 DYDX tokens at 30-day TWAP of $2.86) of funding from the dYdX Chain community treasury to be transferred to the dYdX Foundation’s cold storage wallet to fund the Foundation’s operations for an additional 36-month term. We are proposing a one-time disbursement of the funds. Details on fund disbursement are included below.

*To calculate our final DYDX request we will use the 30-day TWAP on the day we put forth our Governance Proposal. $2.86 is approximately the 30-day TWAP as of 1/23/2024.

To enhance our financial resilience, we aim to diversify some of the DYDX into fiat and stablecoins to extend our current operational runway to 18 months, focusing on minimizing any potential market impact. In pursuit of this goal, we will actively seek out diversified funding avenues, converting relevant funds into fiat and stablecoins through various channels such as centralized exchanges, OTC desks, and/or brokerages. Our target audience for these transactions includes strategic buyers and investors who are aligned with a long-term perspective.

This strategy is crucial for the dYdX Foundation to ensure a stable fiat reserve, allowing us to maintain seamless operations regardless of market fluctuations or the DYDX token’s price volatility. It’s important to acknowledge that the DYDX token currently exhibits limited liquidity, making it susceptible to short-term volatility. Consequently, our remaining DYDX holdings will inevitably bear some degree of market risk.

We are committed to adopting an opportunistic approach, leveraging market conditions to diversify our funds further when favorable market opportunities arise.

The dYdX Foundation commits to, upon request, informing the dYdX Community of any additional sales of DYDX tokens ex-post and disclosing the sold amount and execution price. Finally, we plan to use our fiat and DYDX holdings to earn additional yield in line with our conservative investment principles and policies, as outlined above.

3.10 Benchmarking

Assuming a DYDX token price of $2.86, a $30M in DYDX budget would represent 1% of the total DYDX supply and 4.1% of the current total Community Treasury. Despite a significant increase in the size of the treasury as a result of governance proposals to optimize DYDX emissions, the dYdX Community has been conservative in approving new treasury spending, with only ~6% of total treasury spent or earmarked. We are confident that the proposed budget is both reasonable and comparable in scale to similar initiatives within the industry.

*Note this assumes a DYDX token price of $2.86.

4. Next Steps

We are excited to discuss this proposal with the broader community as it passes through the DRC phase. Should sentiment be positive, an on-chain proposal will be submitted on January 29, 2024.

5. FAQ

Funding Request Proposal

5.1 How will the final DYDX price be determined?

To calculate our final DYDX request we will use the 30-day TWAP on the day we put forward our Governance Proposal. $2.86 per DYDX is approximately the 30-day TWAP as of 23/1/2024. We plan to communicate an updated TWAP before the on-chain proposal is created.

5.2 What will happen to the DYDX tokens after they are sent to the dYdX Foundation?

If the proposal passes, the full $30M in DYDX funds will be sent to the dYdX Foundation’s cold storage, which is custodied by a large reputable custodian. The designated deposit dYdX chain address is disclosed under FAQ 5.5.

5.3 What is the strategy to convert DYDX into FIAT initially and over time?

To hedge our FIAT expenses for the next 18 months, we plan to convert progressively an equivalent of 12 months of runway in DYDX to FIAT. This, at the current DYDX price, represents approximately 30% of the total amount. We plan to diversify the initial portion shortly after the receipt of the funds and the remainder gradually over time to ensure and continue to maintain an 18-month operating runway. We aim to minimize any potential market impact through various channels such as centralized exchanges, OTC desks, and/or brokerages.

5.4 How does the dYdX Foundation plan on being sustainable over time?

This proposal would fund dYdX Foundation operations for at least 3 more years. In the future, and unless other more viable and efficient sources of funding become available, we plan to return to the community to increase our operating budget when we approach 18 months of runway.

5.5 What is dYdX Foundation’s cold storage wallet address?

dYdX Foundation’s cold storage address is dydx1he0e9veu60gmcry2d9yqhafm0t0cpmnq5hdytu.

5.6 Will the dYdX Foundation report on performance and use of the Budget funds?

As part of our commitment to transparency, we aim to issue an annual report and a semi-annual report that will summarize our progress and how the DYDX obtained from the community treasury in this proposal are used.

5.7 Will the dYdX Foundation participate in this governance vote? Who can participate?

The dYdX Foundation will not vote in the governance proposal and will not seek to condition behavior or contribute to any particular outcome for the proposal, and will limit its involvement to (a) acting as the sponsor and proposer, (b) promoting transparency and visibility, and (c) encouraging participation from a neutral standpoint.

Validators and DYDX Stakers are free to participate at their discretion.

5.8 Why is the dYdX Foundation asking for $30M in DYDX in one transaction? Why not divide the payment?

Our organization is fundamentally aligned with the success of the dYdX ecosystem. Unlike other entities requesting funding from the community treasury, our mission is to support and grow the dYdX protocol ecosystem by enabling communities, developers, and decentralized governance.

A single transaction is straightforward and clear, both for the dYdX Foundation and for dYdX ecosystem stakeholders. It avoids the potential confusion, administrative burden, costs, and time that multiple transactions might entail.

Receiving the total amount at once allows for more effective long-term visibility and planning.

5.9 Will the dYdX Foundation use any of the DYDX for delegation?

The dYdX Foundation may consider delegating all or part of its DYDX token holdings to dYdX Chain validators. If the dYdX Foundation decides to delegate DYDX tokens to dYdX Chain validators, it will seek to do so based on the Stake Delegation Principles.

Transparency

5.10 Where can I get more information on the dYdX Foundation and its past activities?

The dYdX Foundation’s past activities and thought leadership publications are publicly available on our website and blog.

5.11 What would happen with leftover funds if the dYdX Foundation has not used all the funds by the end of the 2024-26 period?

The dYdX Foundation does not have a profit-making purpose, and does not seek any profits in general. Upon a successful governance vote, any funds transferred to the dYdX Foundation shall become the property of the Foundation and may be used by the Foundation in its sole discretion, subject to the Foundation’s statutory purpose and duties.

5.12 How will dYdX Foundation provide transparency on the use of funds?

Moving forward, as part of our commitment to transparency, we aim to issue an annual report and a semi-annual report that will summarize our progress and how the DYDX obtained from the community treasury in this proposal is used.

Legal Disclaimer

The dYdX Foundation’s purpose is to support the current implementation and any future implementations of the dYdX protocol and to foster community-driven growth in the dYdX ecosystem.

Nothing in this document shall be construed by anyone and, in particular, by dYdX ecosystem participants (including but not limited to DYDX token holders and dYdX Chain validators) as a representation, promise, commitment or undertaking by the dYdX Foundation to perform any action or provide any services, and no person should derive any actual or potential expectations whatsoever or be entitled to any type of legal action or claim of any type against the dYdX Foundation as a result of this document or the funding mentioned in this document.

The dYdX Chain software is open-source software to be used or implemented by any party in accordance with the applicable license. At no time should the dYdX Chain or its software be deemed to be a product or service provided or made available in any way by the dYdX Foundation. Interactions with the dYdX Chain software or any implementation thereof are permissionless and disintermediated, subject to the terms of the applicable licenses and code. Users who interact with the dYdX Chain software (or any implementations thereof) will not be interacting with the dYdX Foundation in any way whatsoever. The dYdX Foundation does not make any representations, warranties or covenants in connection with the dYdX Chain software (or any implementations and/or components thereof), including (without limitation) with regard to their technical properties or performance, as well as their actual or potential usefulness or suitability for any particular purpose.

Any third parties mentioned in this document are independent from and unaffiliated with the dYdX Foundation, and the dYdX Foundation is not responsible for any action taken by them or any other third parties, including content set forth on any third-party websites, such as any links to such content in this document. The dYdX Foundation is not responsible for any actions taken by any third parties who use dYdX Chain software or any implementations thereof.

Nothing in this document should be used or considered as legal, financial, tax, or any other advice, nor as an instruction or invitation to act by anyone. The dYdX Foundation makes no recommendation as to how to vote on any proposal in dYdX governance, or to take any action whatsoever. The dYdX community is sovereign to make decisions freely and at its sole discretion, in accordance with the governance rules, principles, and mechanisms adopted by the dYdX DAO. The dYdX Foundation does not participate in governance decisions to be made by the dYdX community, including, without limitation, by voting on governance proposals. The dYdX Foundation may alter or update any information in this document in the future and assumes no obligation to publicly disclose any such change. This document is solely based on the information available to the dYdX Foundation at the time it is made and should only be read and taken into consideration at the time it is made and on the basis of the circumstances that surround it. Some information contained in this document has been obtained from public sources and not independently verified by the dYdX Foundation; therefore, the dYdX Foundation does not make any representations or warranties as to the accuracy or correctness of any public information mentioned or used in this document. The dYdX Foundation makes no guarantees and is under no obligation to undertake any of the activities contemplated herein.

[Kam]

Hi, I’m Kam and I work at Chorus One. We are a validator on the dYdX chain.

First of all, thank you very much for the detailed draft, which has already answered most of my questions.

We are in support of this proposal. Since the announcement of dYdX v4, the foundation has played a very key role in managing relationships and communication with all DYDX stakeholders.

As a validator, we really appreciate the constant communication from the foundation and help during the testnets, mainnet launch, and now.

We believe that the dYdX Foundation is underfunded compared to other foundations we see in the space for large protocols. If this proposal passes, we are very confident that the team will do good work.

The dYdX Chain has a very bright future and has already shown its success by having more trading volume than Uniswap only a few months after launch. The protocol needs to be supported by a foundation, and this proposal will help the foundation continue providing value.

[Imperator.co]

As an active contributor of the ecosystem (validator & indexer v4 maintainer) we fully support this proposal!

Our experience with the foundation has been incredibly positive and inspiring where we have witnessed the positive impact of their initiatives, from the significant growth in active traders to the expansion of the dYdX protocol’s global market share. These efforts have not only enhanced user experience but have also played a crucial role in attracting and retaining a diverse range of meaningful participants within the ecosystem

In addition, the transparency and accountability demonstrated by the dYdX Foundation in its operations and financial management are commendable. Their detailed reporting and strategic planning give confidence in the Foundation’s ability to use funds effectively to continue the growth and decentralisation of the dYdX ecosystem

Our positive experience in collaborating with the dYdX Foundation and witnessing their impactful work leaves no doubt in our mind about the value of supporting this fundraising proposal. We look forward to the continued significant contributions of the dYdX Foundation and are excited to see the dYdX ecosystem reach new heights with the support of this funding!

[Crosnest]

Crosnest is a validator and relayer on the dYdX chain and our team fully supports this very extensive Fundraising Proposal.

As mentioned by Kam, dYdX v4 has surpassed Uniswap in terms of trading volume, an achievement that is in large part due to the work of the dYdX Foundation.

The next logical step is to get the trading volume to a level that’s comparable to centralized exchanges. Regulations have been coming to several jurisdictions and have caused the closure of several CEXs which will definitely help the dYdX Chain, but getting to the trading volume of CEXs will be difficult and will require a lot of work and investments.

This proposal is a first step in the right direction.

[Callen_Wintermute]

Thanks for the detailed outline and specifics of the funding request, you’ve provided a super clear picture of the Foundation’s vision; a vision we are very supportive of!

The dYdX Foundation continues to play an instrumental role in the adoption and advancement of dYdX and the dYdX Chain. dYdX remains in a dominant position as the leading DEX however, there is still so much more to achieve on the governance, community, and growth side and the dYdX Foundation is the perfect steward.

[Huzmond]

Huzmond from Enigma here. We are a validator on dYdX Chain.

As both validators and dYdX stakeholders, we support the foundation’s fundraising proposal.
Since the initial testnet we joined, the foundation has demonstrated unwavering commitment to building dYdX Chain.

While acknowledging that there are areas where dYdX can enhance its adoption, infrastructure, and other aspects, we firmly believe that supporting the dYdX Foundation is essential for the advancement of its mission.

We support this funding, confident that it will be a net positive for dYdX.

[CipherLabs]

As Cipher Labs, we’ve had the opportunity to collaborate with the dYdX Foundation team over the past two years. Our experience with them has been extremely positive, marked by their professionalism and effectiveness. They have played a crucial role in the growth of the dYdX platform.

We fully support the dYdX Foundation’s fundraising proposal. Their efforts in governance, DAO enablement, and technical integrations are vital for the platform’s continued development. The Foundation’s commitment to operational excellence and strategic planning, particularly in hiring and retaining top talent, aligns perfectly with the needs of the dYdX ecosystem.

Given their past success and the clear vision presented in their proposal, we believe the Foundation is well-equipped to use the funds effectively and drive further growth. Cipher Labs is confident in the dYdX Foundation’s ability to continue being a key contributor to the platform’s innovation and development.

[coinhall_xian]

Hi! I’m Xian representing Coinhall, an active validator on the dYdX chain. Thank you for the transparent and detailed proposal (kudos to the Governance team) and FAQs.

We support this dYdX Foundation’s fundraising proposal as we believe that the Foundation team is the right team to take dYdX to the next level. We’re excited for the AMA session to hear from the community. Looking forward to contributing to the growth of the dYdX ecosystem!

[ARIA]

Glad to see a great explanation about proposal.
I’ve been and working as a delegate since 2022 winter, and great experience so far.

I have seen many times where discussions and proposals supported by high ethical standards and professional knowledge, have moved protocols forward.

This would not have been possible without the Foundation’s support.

I also respect their open-minded. Their attitude continue to attract people who want to contribute to the protocol but have limited time(like me).

Currently, I am focused on expanding awareness of the dYdX ecosystem and look forward to continuing to collaborate and discuss with dYdXers.

[Denys_Validatrium]

Hi, I’m Denys from Validatrium. We are validators at Dydx. Unfortunately for now not in active set but have a strong intention to get back into active.

Thank you for the comprehensive outline and specific details in the funding request. It has given us a clear understanding of the Foundation’s vision, which we wholeheartedly support!

Looking forward for tight cooperation

[psmith]

Great to see the detailed analysis on funding, KPIs, and ecosystem growth moving ahead! The dYdX Foundation has been one among many of the strong ecosystem contributors from Day 1. I’m excited to see their continued momentum as the network decentralizes further.

There’s much work to be done and the dYdX Foundation is in a position to help the decentralization efforts. Looking forward to seeing how this progresses.

[Govmos]

On behalf of the entire PRO Delegators’ validator team, I am pleased to announce our support for this funding proposal.

To provide some context, foundations in the blockchain industry have faced their fair share of controversies over the years. Originating from the traditional finance industry, where regulations and compliance establish a fundamental standard for transparency and accounting, in the realm of crypto, these standards are not yet universally enforced. This is the primary reason why Govmos has consistently supported those who voluntarily disclose information, adhering to the highest standards even when not strictly required.

Having reviewed thousands of company statements throughout my career, I must acknowledge that the details provided in this forum post are nearly on par with these standards. Therefore, we wish to commend these actions with a warm and genuine thank you.

On a complementary note, we scrutinized all the financial details in this proposal, searching for potential adjustments or positive feedback, but found none. Ratios are balanced, projections are realistic, and the requested amounts are not excessive. To us, these metrics bear witness to the professionalism of the Foundation, and as such, we are more than happy to offer our support to extend their runway for a few more years.

Thank you for reading!

[tane]

Hi @dYdXFoundation,

First of all, we truly appreciate the Foundation’s continuous effort and dedication for the success of the dYdX protocols. The smooth transition to the dYdX Chain was only possible with the team’s contributions and supportive behaviors along with various stakeholders. Recently, dYdX v4 has passed Uniswap in terms of the volume, which is a true feat that every contributor of the protocol should be proud of. All the achievements that the team has described in the proposal are something great that we should not take for granted.

We also appreciate the team’s effort of putting all the details together into the comprehensive and articulated funding proposal, and clearly presenting them to the stakeholders via the AMA. It’s amazing to see the clear planning on the budgets, team structures and their goals, the management of the fund, benchmarking of the allocation against the treasury described transparently in the document. We are particularly impressed by the said vision: The Foundation’s vision is that the dYdX Chain will become the underlying infrastructure of the largest DeFi protocol in the world, where any asset with a price feed can be traded. Thus, the dYdX Chain shall become the exchange layer of the Internet, governed entirely by code and controlled by its stakeholders.

At Tané, we are in full support of the proposal and very happy to continue our collaboration with the Foundation and other contributors.

[dYdX_Ops_subDAO]

The dYdX Operations SubDAO would like to express its support for dYdX Foundation’s Fundraising Proposal. This proposal seems well-thought-out and aligns with the long-term goals of the dYdX ecosystem. Our reasons for supporting this proposal can be found hereunder:

1. Purpose-driven: Most importantly, the Foundation’s proposal details the clear purposes of the funds should the proposal pass through dYdX’s governance framework. In light of dYdX’s current industry position, we deem that the funding requested is justified and also needed so as to hire and retain top talent, continue in scaling the adoption (and thus user and contributor growth) of the dYdX Ecosystem at large, and correspondingly contributing to the progressive decentralisation of the dYdX Chain and the wider ecosystem.
2. Financial Transparency: Building on [1] above, this proposal also sets a standard for financial transparency, an element that has been pivotal to the dYdX Operations SubDAO’s current success. This level of transparency is commendable.
3. Treasury Management: The backbone of the Ecosystem’s current and future endeavours lies within the dYdX Treasury. This is the source of our runway that will enable current and future endeavours to flourish. In this regard, the dYdX Foundation’s strategy in relation to capital preservation liquidity, and yield generation, is pivotal so as to ensure longer-term success and longevity of the Ecosystem. It shows that dYdX is here for the long-term and that the Foundation is forward-thinking in its approach. This, again, from our perspective, is commendable.
4. Gradual Token Conversion: A concern that normally arises in proposals such as these is Token Conversion. We are aligned and agree with the Foundation’s strategy for gradual token conversion as opposed to a one-time swap for tokens which are allocated should the proposal pass. This prudent and diligent approach will naturally aid in mitigating any undesired market impact.

To sum up, we’d like to thank the dYdX Foundation for the work effected thus far throughout the years to get us to this stage and we are in full support of the foundations proposal. We alsp look forward to contributing cumulatively to the Ecosystem’s continued success!

Regards,
Members of the dYdX Operations SubDAO

[rspa]

Thanks for the community AMA and the very detailed proposal. Seems you had to break it up into two blocks, to circumvent Discourse limitations.

This sets a great standard for transparency and diligence.

The dYdX foundation is important for this protocol’s continuing growth, and we appreciate the willingness to continue to step up.

In our dealings with the Foundation we have received all the support we needed and more. Great work.

[dYdXFoundation]

Hello dYdX community,

We sincerely value and appreciate all the feedback we’ve received. We’re excited to announce that we will be initiating the on-chain proposal in the coming hours. To keep everyone informed, we are sharing the DIP along with the number of DYDX requested and the TWAP price:

• Number of tokens requested from dYdX Chain Community Treasury: 10,915,674 DYDX
• 30-day TWAP: $2.77/DYDX

Thank you for your continued support and engagement.

[dYdXFoundation]

Hello dYdX community,

The vote is now live > Mintscan

Thanks!

[charles]

As we celebrate the successful completion of our recent foundation fundraise, I wanted to take a moment to express our heartfelt gratitude to each and every one of you who contribute to our shared vision of shaping the future of DeFi and the dYdX Chain.

I’m talking about you, the “Builders for the traders”

You:
the engineers,
the coders,
analysts,
hedgies,
researchers,
dashboard-ers,
degens,
products wizards,
leaders,
investors,
designers,
bridgers,
validators,
relayers,
custodians,
indexers,
DAOs members,
stakers,
grantors,
grantees,
auditors,
proposers,
voters,
problem solvers,
thread-ers,
journalists,
educators,
legal experts,
memerizers,
trustees,
translators,
merchandise fashionistas
and more…
…in so many countries.

We’re excited to continue working with the community to execute our strategy while co-building and expanding the dYdX ecosystem.

Our DF team has worked tirelessly over the past years to ensure that our foundation was built upon solid principles, transparent communication, and a deep understanding of the challenges & opportunities of our space.

Once again, thank you for your unwavering support and dedication.
We could not have achieved this milestone without you.
Here’s to many more exciting developments ahead!

Blockchainly yours,

Charles & the dYdX Foundation team

[harpr]

There’s no dedicated post for this, so I’m leaving my comment here to get the conversation started.

It’s somewhat disappointing to observe the foundation allocating another round of delegations exclusively to active validators, neglecting inactive validators who are facing challenges getting into the active set. The aim of these allocations should prioritize decentralization and support for high-performing validators who would enhance the network’s health and security.