The dYdX Operations subDAO published a blog post shortly after the genesis of the dYdX Chain and outlined two post-genesis stages: Alpha and Beta. On November 7, 2023, the dYdX Operations subDAO published a deep dive on the Beta stage.
We propose ending the Alpha Stage and starting the Beta Stage outlined by the dYdX Operations by transitioning markets from post-only to active.
Motivation & Rationale
The Alpha stage focused on ensuring the dYdX chain network is stable and secure. Since Genesis and as of the 8th of November 2023, 136M ethDYDX has been sent to the wethDYDX Smart Contract and 3.7M DYDX on dYdX Chain has been staked to dYdX Chain validators. The number of staked tokens could always be higher but we feel that it is important to enable trading to allow for further testing on the dYdX Chain.
Trading and trading fees are a step towards full trading (enabling trading rewards on dYdX chain) and could encourage more dYdX chain DYDX holders to stake their tokens to dYdX chain validators. Note, this proposal is not proposing to enable trading rewards on dYdX Chain - that will require a separate dYdX Chain governance proposal.
The dYdX Operations subDAO indicated that the Beta Stage would involve the deployment of a front-end and an indexer. We think it would be advantageous to allow for the front-end and indexer to be deployed to ensure that both are running smoothly on dYdX Chain mainnet.
Specification
We will leverage this open-source script to enable trading on all CLOB (Central Limit Order Book) pairs by transitioning such pairs from INITIALIZING/Post-only to an active state.
Next Steps
We are planning to submit a dYdX Chain on-chain proposal on Thursday (November 9, 2023).
Without opening Beta, most token holders won’t even bother to stake because there is virtually no rewards for staking.
I think initially the deposited trading money will be small, so even with limited staked DYDX tokens and relatively centralized validators set we are still fine.
We need to enable trading to incentivize people stake more. Meanwhile, foundation can use social media to amplify the importance of validator diversification/decentralization.
Cipher Labs supports the proposal to end the Alpha Stage and initiate the Beta Stage on the dYdX Chain. We look forward to the development this will bring to the network.
Hey, @Callen_Wintermute
I support that Beta stage should start as fast as possible. The problem is the big holders of the token are not staking.
Antonio said trading won’t stake so we literally can dismiss ~23% of the supply.
I have a question about Wintermute if it’s not a secret. How many tokens have you bridged and staked.
I am asking because Wintermute maybe has the biggest exposure to dydx token both as VC and probably the biggest market maker.
For governance or decentralisation to be efficient there has to be a threshold of participants.
But with less than 0.3% of total tokens staked and one validator having 25% of stake and there by block production the whole idea of making dydx completely decentralised will not be achieved at this stage.
CONTEXT:
In representation of the PRO Delegators’ Validator, we find the current move a bit premature, given that one validator currently holds nearly 33% of the overall stake in the chain.
ANALYSIS:
The significant concentration of stake presents a potential risk that could impede the chain’s operation if the mentioned validator were to default on its uptime. While Figment boasts a robust track record, at Govmos, drawing from over 10 years of experience in risk management, we view this decision as premature until the associated risk is adequately mitigated.
SOLUTIONS:
There are several potential solutions to address this situation. One viable approach is to kindly encourage Figment’s and Chorus’ delegators to enhance the decentralization of the validator set by redistributing their stakes to smaller validators. We recommend a minimum of three validators constituting the top 33% stake to ensure a fundamental level of liveness for the chain. It’s crucial to acknowledge that activating trading pairs will impose additional strain on validators. We are prepared to support the proposal once this decentralization issue is resolved. On the security front, we emphasize that no compromises should be tolerated.
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On the security front, while slightly unrelated to this post, we are pleased to announce the completion of our own safety tests and anticipate joining the active set in the coming days.
Without APY, normal users won’t stake thats true. But VCs might have staked and show the support. Thats a little concerning but I know thats its not that easy for US entities
Up for starting Beta stage as this will attract $dYdX holders to stake. It is also a way to prove if the tokenomics work. Incentives actually encourage decentralization as more people would start to consider acquiring $dYdX become a staker and this is the way to attract token holders to stake to increase security.
Enigma support this proposal and have already cast our affirmative votes in its favor.
It is with a discerning understanding that we recognize the current risk within the dYdX chain staking framework, characterized by a lack of decentralization and an absence of incentives for token staking.
The introduction of the “Beta Stage” make it real for users to transition onto the V4 platform – acknowledging the gradual volume shift from V3 and its associated risks
We also believe that the distribution of trading fees to stakers in a future a separate proposal, will improve the stake distribution with real incentive.
In conclusion we’re looking forward for a positive impact this will have on the network and development of dYdX Chain
We are fully aware of the situation where the top 2 validators have more than 33% VPs and not sufficient number of tokens are staked to the validators yet. We simply value the importance of introducing the flywheel of the trading and the real staking rewards to stakers sooner rather than later over multiple risks we have at the moment.
Regarding the risks, we consider it important to evaluate them not just based on the technical feasibility but financially justifiable. At this stage, the players who may be able to halt or control the network don’t have clear financial justifications, but rather serious reputation risks.
In an ideal world, we would have been prepared more for this more or less predictable situation but we don’t believe the solution provided by @validator_net at another post should be a short term solution to work on but more for a mid-long term solution to be considered along with other solutions to diversify the staking distributions.
We hope all the bridged tokens that can be staked will be reasonably distributed into a set of validators that will have great impact on the protocol going forward.
@validator_net has decided to vote “ABSTAIN” on the proposal at this point:
VP distribution is evolving and has improved slightly: Top 2 can halt the chain and top 5 controls consensus.
Our main concern is a chain halt, which would trigger significant financial & reputation problems with trading enabled.
Even though sub-optimal, it seems unlikely that the current top 2 (Chorus One and Figment) will experience simultaneous disruptions leading to a chain halt.
To move the migration forward, we recognise that some risk is acceptable.
Should 33% VP sit with 4-5 validators, our vote would be a clear “YES”.
The 1st dYdX governance proposal to enable trading on all markets on the new dYdX Chain will likely be approved on November 13th
So, following the initial Alpha phase to bootstrap the security of the new dYdX Chain, which validators currently are the TOP 10 by the best uptime & performance?:
Crosnest
Cosmostation, 1st overall score
Chorus One
Cosmic Validator, 3rd overall score
Rhino
Audit ONE
Keplr, 2nd overall score
Enigma
CryptoCrew
Meria
Consider staking with these validators and others also with top performance in a decentralized way so that the dYdX Chain will have the best performance and the traders in dYdX v4 will have the best experience with the lowest latency and best possible performance. Stay tuned also for the upcoming MEV dashboard by the Skip Protocol team and monitor closely the MEV score of each validator, to make sure you are staking only with the most honest validators not performing any MEV.
Great conversation here.
We are also monitoring the validator distribution. It evolves and improves daily.
We celebrated 1,000,000 blocks not long ago. As the network ages, decentralisation ratios will improve.
The foundation shall be able to stake in the coming weeks within a framework favouring decentralization and periodic reviews - among other criteria.
Great to see the foundation’s willingness to stake in support of decentralization! At Everstake, we strongly believe that the improvement of the decentralization ratio is vital for ensuring the network’s health and resilience.
What’s also worth taking into account upon stake distribution is the contribution of validators and their role in the community.
Given that validators serve as the backbone of the network, it’s imperative that their efforts and contributions are duly incentivized. This practice is fundamental in establishing a robust foundation for the ongoing development and growth of the network.
We are glad that the foundation is going to show supports on improving the decentralization of the staking ratio. Looking forward to learn more about the detail in coming weeks!
