DYDX Liquid Staking (stkDYDX) with pSTAKE

TL;DR

  1. stkDYDX testnet now LIVE. DYDX liquid staking is now LIVE for the first time, only on pSTAKE testnet. Test it out here.

  2. pSTAKE’s Unique Features: stkDYDX has distinctive features:

  • Prioritizing dYdX Chain decentralization with support for pSTAKE’s new Automated Stake Delegation Model.

  • dYdX aligned liquid staking with potential PSTAKE and stkDYDX dual governance

  • Best-in-class DYDX staking experience with auto-compounded staking rewards (USDC and DYDX both)

  • Improved user experience with unique features such as 'Flash Unstake’.

  1. DeFi Integrations: stkDYDX is set to become a fundamental part of the liquidity base for major DEXs such as Dexter on Persistence and Astroport on Neutron, paving the way for a variety of additional use cases. Plans to integrate stkDYDX into Ethereum LSTfi protocols will also be considered.

Important announcement

Following the recent dYdX v3 testnet chain upgrade, which introduced Interchain Accounts on the dYdX testnet chain, pSTAKE wasted no time and swiftly unveiled its DYDX Liquid staking solution on the testnet. You can now test and experience what it feels like to liquid stake your DYDX for the first time on pSTAKE. To get started, visit the following URL: https://testnet.app.pstake.finance/cosmos and follow this guide.

The Case for Liquid Staking dYdX

With the shift to a PoS network, DYDX token holders can now stake their tokens to secure the dYdX Chain, earning staking rewards in USDC tokens. However, it’s important to note that staking DYDX tokens involves a tradeoff, as the funds become locked for an unbonding period of 30 days, rendering them illiquid and unavailable for use in DeFi.

Enter pSTAKE, which addresses this challenge and offers users the best of both worlds—Staking and DeFi—while setting itself apart from other Liquid Staking Providers.

Let’s see how:

Enhancing Decentralization

Due to the inherent architecture of pSTAKE, stkDYDX will further enhance decentralization for the dYdX chain, which was one of the main reasons for dYdX to transition to a sovereign chain.

Decentralization is vital for proof-of-stake (PoS) chains, as it ensures a resilient network, enhanced security, fair governance, and community trust.One of the best decentralization indicators is the Nakamoto Coefficient (the number of validators that control more than 33.33% of the network’s stake). For example, the Nakamoto coefficient for the Stargaze network is 13, signifying that 13 validators collectively control more than 33.33% of the network’s stake. Similarly, the Persistence network has a Nakamoto coefficient of 10, while Cosmos Hub stands at 7. Notably, the dYdX network exhibits the lowest coefficient at just 2, suggesting a higher concentration of stake control among fewer validators.

stkDYDX will launch with pSTAKE’s new automated stake decentralization delegation model that will constantly optimize for decentralization by using various parameters to suggest the final validator set and the amount of stake delegation to each validator in this set.

While there are various delegation models, pSTAKE contributors strongly believe liquid staking providers should not gatekeep validator delegations. Delegation should be driven by transparent on-chain data (source of truth).

Aligning with DYDX Governance

The DYDX token has been in circulation for many years, cultivating a dedicated community of holders. The transition to a Proof-of-Stake (PoS) model represents a substantial shift in tokenomics. Under this new model, 100% of the protocol revenue generated on dYdX will be directed back to the stakers. This change, coupled with the introduction of liquid staking, presents a novel landscape for DYDX holders.

Recognizing the significance of these changes, establishing a dual governance model for stkDYDX will be actively considered. Currently in the conceptual stage, this model would allow governance through the stkDYDX token, without requiring integration into the base layer, thus maintaining the transparency of the protocol’s fundamental operations. The objective is to ensure that some governance and guidance over the liquid staking functionality remain within the purview of dYdX governance, allowing pSTAKE to seamlessly provide Liquid Staking-as-a-Service (LSaaS) for the DYDX community.

As a suggestion, here’s an elaborate overview of what this dual governance model could potentially look like:

Dual Governance Mechanism

Primary Governance by PSTAKE Token Holders:

The primary governance continues to be driven by PSTAKE token holders, as they are responsible for proposing and voting on general protocol decisions, upgrades, and changes. This maintains the integrity and overarching governance framework of the pSTAKE protocol.

Veto Power by stkDYDX holders:

stkDYDX holders will have veto power over certain decisions, particularly for proposals that directly affect the DYDX ecosystem. If a proposal passes through the primary governance process but is potentially detrimental or not in the best interest of the DYDX stakeholders/stkDYDX holders, there would be a certain wait period for the stkDYDX token holders to challenge or suggest changes to the decision before it is executed.

If the DYDX and pSTAKE communities are receptive to this idea, more details regarding the mechanics and implementation of the dual governance model can be shared in the coming days.

Auto-compounded DYDX Liquid Staking

pSTAKE is deployed on the Persistence core-1 chain, the app chain for Liquid Staking DeFi (LSTfi) in Cosmos. Being built on Persistence allows pSTAKE to interact with other dApps like Dexter within the Ecosystem. This is vital to enable auto-compounding of stkDYDX so that users don’t have to claim staking rewards repeatedly and enjoy passive staking yield.

In the case of stkDYDX auto-compounding, all USDC rewards will be converted into DYDX tokens by swapping on the DYDX/USDC pool on Dexter and then staked with pSTAKE after every epoch in the background by the pSTAKE protocol.

Improving DYDX liquid staking User Experience

pSTAKE is committed to continuously innovating and improving the LSTfi user experience.

One example is the innovative ‘Flash Unstake’ feature that will allow instant redemptions or unstaking of stkDYDX for DYDX tokens. The notion of LSTs is incomplete if users do not have instant access to native token liquidity.

On pSTAKE, users will be instantly able to redeem stkDYDX for DYDX by paying a small fee. This works thanks to a state-of-the-art mechanism that will match daily DYDX deposits into the protocol with daily stkDYDX withdrawal requests.

Post-launch, pSTAKE’s core objective is to anchor stkDYDX firmly within the Cosmos DeFi Ecosystem. Right from the outset, pSTAKE will seamlessly integrate with key DEXs such as Dexter and Astroport. This strategic integration aims to establish robust liquidity and pave the way for a myriad of additional use cases.

Provide Feedback

We invite the DYDX community to come and test DYDX Liquid Staking on pSTAKE’s testnet.

pSTAKE is committed to offering a customised Liquid Staking-as-a-service to the stkDYDX users in collaboration with the DYDX community. Therefore, we request everyone’s feedback on the following:

  1. How was your DYDX liquid staking experience on pSTAKE’s testnet?
  2. What do you think about pSTAKE’s implementation for DYDX liquid staking?
  3. What are your thoughts on the aforementioned suggestion of the dual governance model for stkDYDX?
  4. Where would you like to see stkDYDX integrated in DeFi?
  5. Any other suggestions that you may have?

We look forward to hearing your feedback. Thank you.

About pSTAKE

Developed by Persistence Labs, pSTAKE is a pioneering liquid staking protocol known for unlocking the true potential of staked Proof-of-Stake (PoS) assets, such as ATOM. By allowing PoS token holders to stake their tokens onto the pSTAKE platform, they can mint stkTokens—representatives of staked assets that remain liquid and transferable.

Since mid-2021, pSTAKE has been providing ATOM liquid staking services, launching with stkATOM on Ethereum under the constraints of a pre-IBC Cosmos network and without the support of a mature decentralized exchange ecosystem. Nonetheless, it achieved a significant milestone, amassing a TVL of ~$35 million.

Like dYdX, pSTAKE underwent a strategic migration from Ethereum to Cosmos. Last year, in January 2023, pSTAKE launched its non-custodial Cosmos native implementation of stkATOM on the Persistence chain, which currently boasts ~$7 million TVL. Expanding its services beyond ATOM, pSTAKE now also provides liquid staking for OSMO within the Cosmos ecosystem. Furthermore, the platform supports the Binance Chain’s native token, BNB, with a current TVL of ~$5 million.

Taking a security first approach, pSTAKE has undergone multiple security audits and has a live Immunefi bug bounty program, ensuring robust security and protection for its users.

13 Likes

Glad to see this on testnet!

What I like about the pSTAKE solution is having the instant unbonding (with a fee) to maximize the asset liquidity. Can you expand further on how the validator delegations will happen? I know a little bit but I think it would be beneficial to share on the forum.

3 Likes
  1. DYDX Liquid Staking Experience on pSTAKE’s Testnet:
  • Same experience as to how $ATOM and $OSMO are being liquid staked. One issue I have is what will $stkDYDX serve as or what are the use-cases aside from being an LST. Will there be options for DeFI outside of Persistence?
  1. pSTAKE’s Implementation for DYDX Liquid Staking:
    The implementation addresses the common challenge faced by token holders - the tradeoff between staking and DeFi participation. However, the additive ‘Flash Unstake’ option contributes to a more user-friendly experience.

  2. Dual Governance Model for stkDYDX:
    The proposal for a dual governance model for stkDYDX, involving both PSTAKE and stkDYDX token holders, is an interesting concept. It suggests an effort to align with the DYDX community’s governance while still allowing pSTAKE to provide liquid staking services. This model could foster transparency and collaboration.

Overall, it looks good with the new concept being introduced. I think most of the community members would want more educational resources and guides that can help users understand the benefits and functionalities of stkDYDX and other Persistence LST’s, fostering broader adoption.

3 Likes
  • How was your DYDX liquid staking experience on pSTAKE’s testnet?
    Testing DYDX liquid staking on pSTAKE’s testnet was a smooth. The process was intuitive & would like to give features like ‘Flash Unstake’ a special mention here. It’s exciting to see new functionalities being introduced in the staking ecosystem for dYdX

  • What do you think about pSTAKE’s implementation for DYDX liquid staking?
    I liked the decentralization and the automated stake delegation model . It shows a commitment to enhancing the overall health and security of the dYdX network. So looks good to me

  • What are your thoughts on the aforementioned suggestion of the dual governance model for stkDYDX?
    In one word - Interesting
    Longer answer - Seems like a beneficial addition. It could ensure that both PSTAKE and stkDYDX holders have a say in key decisions, especially those affecting the DYDX ecosystem. This model could lead to more balanced and community-focused outcomes

  • Where would you like to see stkDYDX integrated in DeFi?
    IN most of the major DeFi dApps in Cosmos including Dexter, Osmosis & Astroport

  • Any other suggestions that you may have?
    Maybe some more educational resources for new users about the benefits and mechanics of liquid staking focused on dYdX ecosystem

4 Likes

Very very smooth. Tested staking, unstaking via the normal route and the flash unstaking (when I see buttons to click, I click :stuck_out_tongue: )
Two things to add:

  • after doing the action (unstaking or staking) clean the screen of values. Now the amount you have chosen to put in stays in the input field.
  • when hovering over the “days left” in the Dashboard it would be nice to see the time and date the funds become available

Good. Also the automatic delegation part is cool. Will it be with a dashboard like we see for Osmosis?

Sounds interesting. Looks a bit like how the SAIL DAO will be created for Osmosis and White Whale where the most important stakeholders have indeed the ability to sway certain decisions in case they really disagree. I’m looking forwards to this particular method for the execution. One thing to mention is that overriding votes should really be an exception. You don’t want to achieve a huge mismatch between the Persisence community and the (stk)dYdX community.

Lending, borrowing, etc :slight_smile:

  • Pool liquidity is relatively low for DYDX/USDC, will there be plans to make that pool deeper?
  • adding the testnet to Keplr is quite hard. There is a route, but not by simply clicking on the Keplr logo in the popup. That will require some investigation to check.
5 Likes

Shoutout to the Persistence / pSTAKE team for shipping stkDYDX on the testnet. Having a dYdX LST coming to Cosmos is very crucial. Here is our feedback on the testnet experience:

1. How was your DYDX liquid staking experience on pSTAKE’s testnet?
It was a smooth experience. All transactions have been executed fast. The UI/UX is straightforward on both, pSTAKE and Dexter. Liquid staking, swapping, and providing liquidity functioned well and were simple to understand.

2. What do you think about pSTAKE’s implementation for DYDX liquid staking?
The UI/UX is great. We think adding stkDYDX is a much-needed product and will be well-received among DeFi users.

3. What are your thoughts on the aforementioned suggestion of the dual governance model for stkDYDX?
We like the concept of dual governance. We believe it aligns both communities and provides an additional security mechanism for dYdX.

4. Where would you like to see stkDYDX integrated in DeFi?
Among all major DeFi projects inside Cosmos (Osmosis, Astroport, Umee, Mars, Nolus, Quasar etc.) and outside of Cosmos.

5. Any other suggestions that you may have?
Not a suggestion, but more a confirmation that we believe it is important for various LST players (such as pSTAKE) to exist and to provide us with sophisticated LSTs, which by themselves enable diversification, competition, and healthy LST markets.

6 Likes

How was your DYDX liquid staking experience on pSTAKE’s testnet?
Similar to liquid staking other assets. Demo on Twitter https://twitter.com/rebel_defi/status/1746147780706648099

What do you think about pSTAKE’s implementation for DYDX liquid staking?
Non-restricted validator set sounds like a sophisticated system.

What are your thoughts on the aforementioned suggestion of the dual governance model for stkDYDX?
Governance for liquid staked token holders is interesting for me.

Where would you like to see stkDYDX integrated in DeFi?
Collateral asset on Kujira - Blue, Neutron - Mars, Secret - Shade

Any other suggestions that you may have?
Continue building partnerships/integrations throughout Cosmos.

5 Likes

pStake’s standout feature is instant unbonding with a fee for enhanced asset liquidity. Validator delegations involve users choosing a validator to stake their assets, contributing to network security while earning staking rewards.

3 Likes

stkDYDX on the testnet. Having a dYdX LST coming to Cosmos is very crucial. Here is our feedback on the testnet experience:

Having a DYDX LST on testnet is a step forward to see what’s gonna be delivered. It’s gonna happen, hence, testnet! Important for DYDX eco and cosmos at large

1. How was your DYDX liquid staking experience on pSTAKE’s testnet?

UI/UX is great. That’s what matters. A smooth UI/UX gets us sticky masses who’ll come and come again and transact on Dexter and pSTAKE.

2. What do you think about pSTAKE’s implementation for DYDX liquid staking?

Adding stkDYDX is important! Adds more yield option for DYDX community

3. What are your thoughts on the aforementioned suggestion of the dual governance model for stkDYDX?
Good idea— dual governance. Solid yes security in Dydx

4. Where would you like to see stkDYDX integrated in DeFi?

Astroport, Osmosis, Nolus, Lido

5. Any other suggestions that you may have?

None atm. But it’s good we have this running and get more cosmos LSTs

4 Likes

Update on stkDYDX validator set

pSTAKE has implemented an automated on-chain data-driven delegation strategy that constantly optimizes for dYdX network decentralization.

This model will actively consider the following parameters and validator weights will be calculated on a daily basis:

  1. Voting Power - 0.05% to 5%
  2. Commission - 5% to 10%
  3. Uptime - 95% to 100%
  4. Governance Participation - 60% to 100%
  5. Part of the active set without any slashing instance

After running the initial scripts, pSTAKE would launch with 30 validators as part of the stkDYDX active set, subject to governance.

  1. Stakecito
  2. purple fog
  3. strangelove
  4. PRO Delegators
  5. Dora Factory
  6. Crosnest
  7. Nodes.Guru
  8. CryptoCrew X Defi Dojo
  9. Swiss Staking
  10. AutoStake
  11. Ledger by Meria
  12. Cosmostation
  13. Figment
  14. Staked
  15. HashKey Cloud
  16. Kingnodes
  17. Polkachu
  18. LTP
  19. ECO Stake
  20. Lavender.Five Nodes
  21. Validation Cloud
  22. Cosmic Validator
  23. Nocturnal Labs
  24. RHINO
  25. danku_zone w/ DAIC
  26. Frens
  27. Enigma
  28. Meria
  29. Coinhall
  30. Skycatcher

Being a strong force for decentralization on every network pSTAKE is live on will be always be a priority for stkTokens, including stkDYDX.

6 Likes

Just shared an update on what initial delegations could look like here.

Tl’dr 30 validators with weights calculated each day based on parameters like voting power, uptime, governance participation, commission etc. aimed at decentralziing the dYdX network.

4 Likes

Thank you for your feedback!

Will there be options for DeFI outside of Persistence?

Yes, absolutely! stkDYDX liquidity will be built on Dexter on Persistence and Astroport on Neutron.

Expect stkDYDX to be well integrated into Cosmos DeFi for minting stablecoins like USK, IST, SILK, etc. and collateral on borrowing/lending protocols like Umee, Mars, Nolus, etc. among others.

stkDYDX may also be ported over to the Ethereum LSTfi landscape.

2 Likes

Thank you for all your suggestions and the in-depth feedback points. We really appreciate that and will take those into consideration!

Good. Also the automatic delegation part is cool. Will it be with a dashboard like we see for Osmosis ?

Yes, absolutely! Decentralization for the win.

Pool liquidity is relatively low for DYDX/USDC, will there be plans to make that pool deeper?

We expect the liquidity to suffice in the initial days as USDC staking rewards are swapped into DYDX with plans for Dexter to deepen this liquidity with additional incentives and distribution once stkDYDX goes live.

2 Likes

Looks good to us
This form of automatic buying is really exciting for the asset!

2 Likes
  1. How was your DYDX liquid staking experience on pSTAKE’s testnet?
    It was easy to stake and adding liquidity as written on the guide, but i had some hard time understanding how i could add the network before connecting pstake testnet website(as a newbie in cosmos world, it was hard for me)
1 Like

Yeah, I am pretty sure it will be easier on the mainnet since a lot more boxes have been ticked in terms of information which can be utilized by plugins like Keplr.
But for the testnet it was kinda hard, I had the same experience.

Good news is that you’ve found it and managed to test the protocol, which is really cool :slight_smile:

4 Likes

Stride has declared opting for a narrow selection with equal weighted distribution, you have taken a different route with a broader selection and daily calculated weights. We were wondering if there was a specific reason no to disclose your calculation formula.

2 Likes

Great to see pSTAKE launching alongside stride with shipping a product already in testnet !
Here are our feeback on the proposal

1. How was your DYDX liquid staking experience on pSTAKE’s testnet?

The testnet is a pretty smooth experience, UX is great, without major problem, and liquid staking is similar with experience provided on other assets

2. What do you think about pSTAKE’s implementation for DYDX liquid staking?

Autocompounding is what need to be done; however, I got reservations about the long-term sustainability of relying solely on the Dexter pool. In the initial stages, Dexter will perform fine with a low stkDYDX TVL. However, it may become limiting.

3. What are your thoughts on the aforementioned suggestion of the dual governance model for stkDYDX?

The dual governance model is intriguing, and it’s a good thing to grant stkdYdX holders the authority to veto proposals.

4. Where would you like to see stkDYDX integrated in DeFi?

In all the major DeFi app on Cosmos, and ETH ecosystem also.

  1. Any other suggestions that you may have?

I’m uncertain whether this question has been addressed but,
Is pSTAKE planning to incentivize the Dexter pool, or/and will it propose to bootstrap liquidity in a manner similar to what has been done on the CosmosHub for dYdX?

3 Likes

I got reservations about the long-term sustainability of relying solely on the Dexter pool.

That is a great observation and the Persistence One community has discussed plans on further incentivizing the pool for deeper liquidity to facilitate stkDYDX auto compounding.

Is pSTAKE planning to incentivize the Dexter pool

Yes, stkDYDX liquidity will primarily be bootstrapped on Dexter and will be incentivized with PSTAKE at launch.

will it propose to bootstrap liquidity in a manner similar to what has been done on the CosmosHub for dYdX?

That would in fact be an interesting opportunity for the dYdX community to benefit heavily from the adoption of stkDYDX in the form added source of revenue, further decentralization of the dYdX chain, benefits from the stkDYDX auto-compounding flywheel, and more.

Should that be an interesting enough proposition, this should definitely be discussed on a separate forum post.

2 Likes

While there are various delegation models, pSTAKE contributors strongly believe liquid staking providers should not gatekeep validator delegations. Delegation should be driven by transparent, on-chain data (source of truth) that empowers chain decentralization.

Our different route lies in hand with the same.

One can find even more details about the delegation weights calculation here.

3 Likes