This is Polkachu, one of dYdX’s community validators on both testnet and mainnet. We are also a validator on Fetch.ai, which is mentioned in this proposal.
Simple Summary
Fetch.ai (FET) and SingularityNET (AGIX) will undergo significant changes to their underlying tokens as part of the Superintelligence Alliance initiative on June 11, 2024. Given these developments, we propose to wind down the FET-USD and AGIX-USD markets on the dYdX Chain and proceed with their final settlement.
Abstract
This proposal seeks to wind down the FET-USD and AGIX-USD markets on the dYdX Chain and initiate their final settlement. The underlying tokens, FET and AGIX, will be renamed to ASI on June 11, 2024, due to the Superintelligence Alliance Token Merge. This proposal acts as a precautionary measure caused by the transition to maintain market stability and protect traders.
Motivation and Rationale
The Superintelligence Alliance Token Merge involves significant modifications to the FET and AGIX tokens. These changes can introduce uncertainties and potential risks to the markets if not addressed proactively. By winding down the FET-USD and AGIX-USD markets and proceeding with their final settlement:
Traders are protected from potential volatility and disruptions caused by the token changes.
The integrity and stability of the dYdX Chain trading environment can be maintained.
Specification
The dYdX Chain open-source software v3.0.0 allows the dYdX community, through governance, to wind down a market by changing the status of a clob pair to FINAL_SETTLEMENT.
We propose to change the status of FET-USD and AGIX-USD markets to FINAL_SETTLEMENT through this proposal. If the community approves this proposal, the FET-USD and AGIX-USD markets will have open positions closed at the oracle price and open stateful orders canceled. All trading for these markets will be disabled upon execution of this proposal.
Test Cases and Implementation
The implementation of this proposal will be tested on dYdX Chain testnet before being proposed on mainnet.
Next Steps
In the absent of strong dissent, we will submit the testnet proposal on June 6, 2024 and the mainnet proposal on June 7, 2024 to align with the underlying token changes of FET and AGIX on June 11, 2024.
Oh this is a really good catch. I imagine there will be a lot of volatility in advance of and during the merge process, as well as some confusion on how legacy tokens will be handled at the oracle sources. Fully support this.
One somewhat tangential question. Will this be followed by a proposal to list the ASI-USD market following the merge? I haven’t been following the merger so am pretty out of the loop on how they’re planning to do the migration from a liquidity / listing standpoint and whether there will be a reliable oracle for the new token close to launch.
I think we will have to assess the post-merge situation before deciding if and when we will put up a proposal to list the merged token. Hard to give a timeline because a 3-way token merge can have all sorts of unexpected issues. For now, we can simply wait and see
Chaos Labs supports this proposal to wind down the FET and AGIX markets on the dYdX Chain. When the time comes, the new ASI token should be evaluated separately.
As it no longer makes sense to incentivize the growth of these markets, they will no longer count towards Launch Incentive Program trading points. Market-making points will continue to maintain healthy liquidity.
We’d also like to highlight some risks involved with the winding down process and give the community an overview of these markets’ current state.
Market Wind Down Risks
The major risks involved in winding down perpetual markets are:
Reduced liquidity which increases the risk of bad debt should a large position need to be liquidated.
Potential manipulation of the final settlement price for profit, potentially at the expense of the insurance fund.
In future market winddowns, it could be preferable to increase the initial market fraction to 1 as part of the proposal to limit the attack surface and risks involved.
The current State of the Markets
Neither market poses a significant risk in its current state.
FET
FET has $412k of open interest (up 60% over the past 24 hours, which should be monitored). No large positions have greater than 1x leverage, meaning there is minimal risk of bad debt as the market stands.
AGIX open interest is $46k. There are no large positions with over 1x leverage here, either, meaning there is very little risk of bad debt as the market stands.
The pre-emptive approach is the one we advocate for to tackle this issue. As the merging nears, liquidity is likely to become more unpredictable and volatile. It’s best to avoid exposing dYdX users to potential risks. Therefore, announcing a clear sunset date and proceeding accordingly is the prudent choice for risk management.
The PRO Delegators’ team fully supports this proposal.
