DRC - Remove DYDX/stkDYDX Trading Fee Discounts

Proposed Changes:

  • Remove DYDX/stkDYDX Trading Fee Discounts

Note: the community has no power over Trading Fee Discounts, this is simply a signal to dYdX Trading on behalf of the community.


Trading fee discounts based on the balance of a user’s DYDX/stkDYDX balance fail to promote a credibly-neutral exchange that optimises for volume and revenue. Therefore, we propose to remove the Trading Fee Discount program so that users receive discounts purely based on their 30d Volume.


We believe that a credibly-neutral dYdX is the best dYdX. A decentralized trading venue that is open and inclusive to all new and existing participants arguably has the highest potential long-term.

What does this look like for dYdX?

It involves eliminating cosmetic entry barriers for traders and liquidity providers e.g. “holding DYDX/stkDYDX earns you X”, and instead reward any trader (LP) based solely on their trading volume ( + depth, spread, uptime). The first step to achieving this was successfully proposed by Xenophon Labs by eliminating stkDYDX from the Liquidity Provider Rewards Formula, however, there is still one token barrier that exists i.e, Trading Fee Discounts.

Trading Fee Discounts allow holders of DYDX to reduce their cost of trading on dYdX. I’d argue that given 1) dYdX is already one of the cheapest exchanges to trade on, and 2) the volume required to achieve discounted fees isn’t particularly high. Therefore, the trading fee discount program isn’t necessary and removing it will eliminate the cosmetic barrier for traders and simplify user experience. Specifically, it levels the playing field for traders and LPs irrespective of their DYDX holdings.

Furthermore, trading rewards already act as a rebate based on the fees a user pays, and in a recent DYDX Holder Questionnaire conducted by the Foundation. They found that only 19% of monthly active users on dYdX hold or stkDYDX and 94% of DYDX/stkDYDX holders are not active traders on the protocol.

To summarise, this change in conjunction with the removal of stkDYDX from LP rewards attempt to maximize protocol revenue via improved liquidity and volume-based metrics. It no longer rewards inefficiencies (stkDYDX/DYDX) and any participant whether that be a trader, LP, or both, is rewarded according to the value they bring to the platform as described above.

Lastly, one major criticism commonly expressed with eliminating stkDYDX/DYDX utility is that it kills protocol alignment and the value of DYDX. I do agree with this, but it’s largely justified by the lack of sustainable DYDX value-capture. Hopefully this will change with V4, but it shouldn’t be the reason why we keep inefficient mechanisms and based on the survey mentioned above, the argument holds little merit.

Next Steps:

We’d like to request feedback from the community surrounding this change. Pending community discussion, we will look to initiate a Snapshot Vote.

There will be a binary vote that signals to dYdX Trading the wishes of the community, with:

  • Yes - Remove DYDX/stkDYDX Trading Fee Discounts
  • No - Do nothing.

Thanks @Callen_Wintermute for the suggestion. Once again, super late to this with the proposal passed on snapshot… However, I would like to share that I strongly disagreed with this proposal in its current form.

  1. The dydx token has no utility apart from governance and trading fee discounts. By removing the discounts, the dydx token is just a governance token and likely only large holders have an incentive to hold them. Until v4 is implemented with tangible utility that the community can enjoy (Eg. Staking etc), removing this only other utility of dydx is uncalled for. The protocol has been reducing reward emissions, which is understandable given the mature stage dydx is in. But there have been no subsequent actions taken to drive user growth or incentive programmes.

  2. If we were to only assume 6% of these holders use the fee discounts for their trading. This is indeed a relatively small number. Hence if it exerts a minimal impact , I don’t see any need to remove it. do these accounts significantly distort volumes? Perhaps not as there isn’t any relationship determined at the moment. Besides, it’s an additional utility for these traders and potentially new entrants too.

  3. The introduction of a Maker Rebate programme in the other proposal will also likely entail an encroachment into taker fees. It appears rather ironic, that makers receive discounts but yet takers don’t.

Therefore, I’d opine to keep to status quo at the present state with dydx tokens enabling users to have fee discounts

Thanks @0xcchan for the thoughts.

Given the community’s opposing response to this change, we have decided to hold back on this and will revisit it with the launch of V4 where based on public info there are expectations for greater token utility.

Regarding 3, I don’t think it’s ironic. Makers facilitate passive liquidity on the platform which in turn helps facilitate larger trading volumes. As noted in V4 Vanguard, dYdX is already a cheap exchange to trade on given volume fee discounts that aren’t particularly hard to achieve. There is also the rebate of DYDX rewards. This proposal focuses on highlighting the inefficiency of token gates and why it isn’t credibly neutral, not necessarily the fees the exchange should be charging.

1 Like