DYDX buy back and burnging

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What do you think of the model of buying back and burning with the usdc received as a transaction fee, not the current way of paying usdc to dydx holders?

I think the problem with dydx at the moment is that there is no attractive reason to hold the token.

Of course, receiving usdc as a fee can be a big reason to hold it, but it seems that there are more dydx sold on the market than the usdc received as a fee, so it is less attractive to hold the token.

You can see this by looking at the market value of dydx right now.

In order to increase the status of dydx, I think it is also important to increase the value of the token.

I think it is good in the long run that the more scarce and highly utilized tokens become, the more users want to get the token and the higher the trading volume. Like bnb.

DYDX should create a reason for holders to hold the token for the long term.

I think it is better to increase the value of the token itself through burn than to allocate usdc in the short term.

What do others think🤔?

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I very much agree that there should be an additional reason to hold and stake $DYDX.

In the end the proposals we see to have Protocol-Owned-Staking should not be needed if staking the asset is very very attractive.

We have seen that a chain does not necessarily need inflation (for example KUJI) to still have a decent value accrual. Not sure if token burns cut it tbh, but things like fee reductions for higher amounts of $DYDX might be an option (a model like $BNB)

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half the tokens shd be burnt

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Previously, dYdX offered numerous incentives, including fee reductions and rewards bonuses. Subsequently, the decision-makers chose to discontinue these benefits. This decision was quite perplexing.

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Damn, why change a winning formula people normally say…

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does anyone have the latest breakdown of where the tokens are>? there is no question that the constant dilution for various projects is the main reason the token doesnt do well. that as well as the fact it cant really be offered on robinhood coinbase etc. Hopefully quite soon here they will begin to run out of tokens to dilute with, though the latest coingecko has about 50% coins unlicked and trading, given a mkt cap of 1B or so at $2.

rather than buyback and burn at present time (though you can argue that large community staking DYDX that the community or treasury has staked should burn with its share of USDC fees)

I think things should be done to try and increase the fees, the fees really are quite reasonable and especially for taker fees and people trading at the market and really sucking liqudity, i think there is room to charge more of a fee for that andstill have everyone be happy.

remember too a large percentage of TRADING FEES are rebated in the form of DYDX, eventually this just has to stop really especially for more vampirtic traders on DYDX. DYDX is providing a service by having a market place for decentralized trading. there also should be little or no fees on leveraged trading, you shouldnt get a huge reward on a trade where you used high leverage and rather you should be charged more of a token fee (to accrue to stakers) when users trade with leverage. Robinhood charges 8% fees on margin.

at the same time I understand the desire to build the platform and increase traders etc. but there is no question it obliterates the token value wiht the amount of dilution going on every day week month.

I still think its worth holding onto all the tokens you acrue. once the dilution calms down some the token should perform quite well as it does have that cash flow. a sustained bull in crypto would help as increased users / volumes will solve many of these problems.

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I was just thinking about this question myself. I was wondering what the stride staking proposal was to inform investment decisions and found the proposal on mintscan.

DYDX Proposal 44 - Mintscan

Stride Fee Reduction

Given the amount of stake contributed to the Stride protocol with this proposal, Stride is offering to reduce its protocol fee on the community pool stake by 2.5%. As a result, based on current staking APRs (21%) approximately $420,000 of USDC will accrue in the dYdX community treasury per year.

Rather than being auto-compounded, this portion of the rewards is simply sent directly to the community treasury.

With the fee reduction, the staking reward breakdown allocations for the staked position are as follows:

  • 90% of rewards used to auto-compound DYDX into the treasury’s staked position, growing it over time.
  • 2.5% of rewards flow directly to the dYdX community treasury as USDC.
  • 7.5% of the rewards flow to the Stride protocol

Using this model, the treasury gets the benefit of both auto-compounding to increase security and USDC inflows to help diversify the treasury’s holdings.

I am generally impressed with the tokenomics of this arrangement, but like you all there are additional amendments that I feel could be beneficial.

Instead of 90% of the rewards used to buy and autocompound the DYDX, I would propose that 50% of those 90% of rewards are used to buy DYDX for autocompunding and 50% of the rewards was used to buy DYDX to burn.

Furthermore - I’ve also given some thought to the dilution issue. Instead of people putting sale pressure on DYDX - a more responsible path would be using DYDX or stDYDX to mint Silk on Shade or USK on Kujira, IST on Agoric, ect…

These eco-system synergies should be something to champion and it’s the responsibility of those interested in maintaing value to use their bag(s) to unlock more capital in ways that still encourage healthy price action. We don’t have to sell our tokens to capture and trade their worth. Mint stable coins with them and make additional trades that way.

To recap: I do think the buy and burn strategy is a good long-term decision. Both with the 2.5% of USDC that the DYDX treasury gets from the staked DYDX and the 90% rewards. Also, I’m sure as time progresses honing in on the fee structure on this protocol is a necessary objective, but please concise proposals with the maths on that end.

There is other favorable regulatory alignment with ISO-20022 that this chain will need to/should comply with in the near term.

Here’s my post on the Cosmos forum about the standardization.
ISO Standardization - Conversation - Cosmos Hub Forum

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There is a lot of misunderstanding of financial mechanisms here… To give a more realistic representation to the community we’ll try to bring a relevant example to explain the range of possibilities.

  1. You might be familiar with “dividend stocks”, often called “value stocks” as they generate sustainable revenues to the shareholders on a periodic basis. The coupon (dividend) is derived from the generated net revenue of the company and distributed proportional to the amount of shares each investor owns. As the profits generated are disbursed via these coupons, the price of the stocks is more stable as most of the profits are externalized. To drive supply and demand for the stock, investors then use the discounted cash flow (DCF) valuation. This economic model puts a price on the asset based on the future cash flows (discounted by the cost of capital). This is what most people don’t understand with dYdX. The token itself has a measurable value based on the DCF calculations of the future cash flows.

  2. On the other hand, let’s assume the same company is compounding the net profit (accounting for everything that is left after deducting all operating costs and investments). As this generated cash flow is now part of the company’s treasury instead of being disbursed to investors, then in this situation the trading price of the underlying stock is immediately affected to the upside, as a stock is a claim on a share of this company. To model the price mechanics of such asset, investors will generally look at FCF (Free Cash Flow) and its evolution through time (the rate of change) to balance supply and demand, and therefore the market price.

Of course the reality is much more complex than that but let’s say this is an high level overview to express our purpose. Now comparing the two versions of this stock, one is delivering constant revenue flows directly proportional to the company’s revenue, the share price itself remains relatively stable over time, the actual profit comes from the dividend distribution (in the case of dYdX we’re talking about the USDC you receive each block). Now to the second case, by setting an automatic compounding mechanism, you’re essentially removing the dividend payment and direct it to create direct buying pressure instead. This transpose into the second case mentioned before. The revenue is directly transposed into the asset price.

Key Element: Now if you truly look through the surface, both these mechanisms are the same for the long term investor. The value generated will either transpose into dividend payments or price appreciation. But there is one big caveat though… Short-term speculation. As you might have guessed, the actual value doesn’t change in both cases… But one will result in more volatile prices than the other. Moreover, the first method incentivize users to hold the token and dispose of the coupons to their own will, where the other forces the investor to arbitrage the price volatility.

Without getting into too many details… this volatility arbitrage can be very costly for a long term investor with sizable amounts invested. The TLDR is that dividend stocks generally favor more stable, long-term investors. At Govmos (the governance arm of the PRO Indicators’ validator), we share that vision and we think it is essential to remain focussed into long term sustainability instead of looking solely at raw price appreciation and short-term speculative behaviors. Surely the crypto market is boasted with speculation, but dYdX does not have to play this game. The reason they are not is one of the main factor that has brought us to choose them among other competitors to participate in their consensus.

To conclude, we will firmly oppose any attempt to change this business model beyond certain acceptable limits. We think each individual investor should have the ability to choose on its own whether to compound their rewards or not, the chain itself shouldn’t have to impose a decision on this front.
pro-delegators-sign

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I’m primarily speaking to the staked DYDX from the community pool on stride protocol. No ones personal staked DYDX would be affected, and all dividends would accrue to the staker as normal.

I’m not sure this statement applies to the discussion above, and although the stock comparisons and accounting principals are decent analogies there is ambiguities such as - I’ve never heard of community stocks owned by a pool of shareholders.

The above, for example - is a comparable relevant fee model of a similar product that could be evaluated to maximize value for both the token holder/staker and protocol user.

Since this a new paradigm and allows the community to propose and alter every imaginable feature of the protocol it’s responsible to draw comparisons to traditional systems, but also clearly outline the difference in operational costs and overall operational functionality. The mean earnings per share (EPS) for the S&P 500 Financials sector index as of September 2018 was $14.92. Earnings per share (EPS) is a company’s net income subtracted by preferred dividends and then divided by the average number of common shares outstanding This number is an ideal revenue target to start evaluating any blockchain protocol. I’m suspicious that new financial modeling concepts will emerge with these systems, but just as the term ICO is a play on IPO - there are references to guide how these new evaluations can be developed.

Back to my original proposal, based on the mean earnings per share you can see that if we reduce the overall supply of DYDX it would have a direct affect in calculating (EPS).

  1. Dividends from the 20M staked from the community pool is not a large percentage of the overall supply, approx. 0.23% of the total supply, and the annual dividends from this small portion of supply nominal to the overall dividend payments - calculated to be about $420,000 in the proposal.

  2. 90% of those projected dividends are being used to buy DYDX off the market and autocompound DYDX in to the stDYDX derivative , based on those numbers this attunes to approx. $375,000 annually or at current prices approx 189,000 DYDX.

  3. What is proposed is to burn 50% of those purchased DYDX tokens to reduce the overall supply and use the other 50% to compound into stDYDX appreciated value.

It should be noted that many whale wallets are liquid. If these are staked it will effect the total USDC APR accrual as we saw in the dip with the 20M from the community pool that were staked. As you might infer from my reasoning - more thought and detailed financial modeling are pertinent for the long-term opportunities of Defi or DeFi/TriFi collaborations.

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yeah jason I hear you, I guess what this other guy is saying is they wanted to auto compound it in the treasury account (which is routinely looted with little to no oversight or accountability for the success of projects) … I think there is room for DYDX holders to collect some money on fees, most notably takers should be paying a premium and most definitely not be reimbursed anything in the slightest. and substantial fees should be placed on margin, my 8% robinhood comp is only for 2% margin… if you have a 5k account and are routinely taking position of 50 grand. I mean you must ( and the trader will) pay a premium fee for borrowing that capital. NO ONE ELSE ON THE PLANET (save another crypto type exchange) will let you borrow capital to trade aggressively like that so it must be compensated…

WHAT IS CLEAR, is that the dilution is major and for the DYDX token to not be able to sustain a real run here as ETH BTC SOL come back to basically ATHs, think shows that the treasury of tokens in its various forms are being mismanaged and simply dumped on the market place. DYDX has a solid product and yes a cash flow can be found for it. but it is very difficult when there is so much constant overhead selling which is seen crystal clear in the price this cycle last few months. DYDX UNABLE TO SUSTAIN A MOVE HIGHER, and once BTC ETH SOL the macro comes in SLIGHTLY, the token moves quickly back to lows.

This is clearly a result of the overhead dilution.

IMO, they need to stop any rewards on TAKER fees immediately (and begin to accrue fees from these types of trades)

up the fees for heavy margin to something a little more substantial given the risk to the system for loaning the margin…
(question would be what do you think someone with a 5K account in fees should pay on a 50K ETH short he holds for 2 hours, 10$ ? 30$ ? , should he pay more if the trade wins? say 1%-3% of gains on a winning trade? etc etc)

Also I think someone should keep an eye on the ratio of “money looted from the community treasury” / user (traders) growth at DYDX.

For all of this money and dilution are we sure we are getting a run of traders? should DYDX be running twitter ads in all eligible country tareting crypto users. It is very easy to sign up for an account, and the margins available are fantastic. I am not sure what the actual numbers are

but say if DYDX comm Tx has spent lets say 5M in the last 6months on various projects, and only got 1,000 new traders on the platform. That is a “user acquisition cost” of like $5,000 a trader. so IMO

someone should be monitoring closely that "user acquisition cost " number and the treasury people should be held accountable for success and failures there. As of now the treasury is mainly providing jobs and money for the people that work in and with the treasury. but its not growing markets, fees, or users well. and that is clear from the token price and the data.

The treasury doesn’t mind selling 10MM tokens at 50cents. they dont care what the price its they seem to always have another half crocked idea they need another million for.

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I agree that DYDX should discontinue paying rewards and instead implement Maker and Taker fee structure without DYDX compensation. This fee structure would automatically account for the amount of leverage traders are using. For instance, someone trading with $500 but leveraging 10x to enter a $5k position would pay Maker/Taker fees based on the $5k position. Charging traders extra for their wins could be counterproductive. Funding rates already address this and ensure market balance over time.

Regarding user acquisition costs, it’s essential to discuss the profitability of various strategies. Referral schemes, trading commissions, and Twitter ads have proven successful in acquiring users. Many YouTubers share referral links to earn rewards, demonstrating the potential for long-term gains. Comparing user acquisition costs with existing strategies could provide valuable insights for optimizing the platform’s growth. Afterall, we do need to reach to the platforms where crypto truly resides.

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I’m more of an engineer than I am a trader. I’m not really keen on maker/taker schemes, but user acquisition and retention is something that would be in the realm of my competencies. @sagar’s on point with the marketing regarding that. Not much to add there - I agree.

As an engineer my contributions would be alignment with ISO-20222 standardizations and that could be attractive to institutional investors.

I’m guessing the reward structure is the way it is as a V4 marketing cost - probably not long term. Eventually I would like to see those fees go to the community treasury and a buy/burn program. There’s lots growth potential with this platform, it’ll be interesting seeing how it evolves from this launch.

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