Large node operator here. Very glad to see this work on improving capital allocation. A sorely needed effort. Would like to address some key points from this post and then on follow-up goals.
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Strong agree that spend on growth so far has been too high in amount - its also poorly structured. Right now token holders / stakers / validators are being hit with double whammy of aggressive dilution from rewards to traders AND downward sell pressure as those traders proceed to sell rewards asap. Think its clear that using the DYDX token as main reward token here has proven suboptimal for all parties with vested interest in DYDX success longer than 30 days (or however long each epoch lasts).
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Don’t fully agree with framing of “security” as a “cost”. Understand it from perspective of building treasury surplus / the treasury is the “owner.” But ultimately DYDX token stakers / validators are the ultimate end owners of the software here. The USDC accruing to token stakers / validators is “Owners Earnings / Dividends” - it is certainly not a cost to them. So income statement and balance sheet should really be framed from DYDX token POV given it is UBO for all practical purposes.
On moving forward:
A) Trader rewards programs “growth” would be much better if USDC was used as reward token instead of DYDX token. Don’t see an issue with reducing validator rewards if it means halting all emissions of DYDX token for “growth.” Growth is worth investing in. And so far using DYDX as reward token has achieved net effect of diluting long term holders (validators) to reward short term holders (traders who sell their rewards asap). Not good.
B) Stakers and validators are already down bad (see above). Anyone left at this point is basically ride or die DYDX. Just reducing USDC rewards outright would be another gut punch. No more, please.
So believe strongly that any reduction of USDC being paid to validators should be paired with increase in DYDX token emissions. Investment in this cohort of long term supporters would go a country mile. Certainly would not be a “cost” to anyone either.
C) Would the proposed Treasury concept here be in addition to the Foundation that’s been funded already? Forgive me but i’m not sure I understand why another entity is needed here. Especially if its going to be removing value flows from direct protocol level into a separate pool from protocol-level value flows going on here.
DYDX Trading Inc already has its mandate to develop tech and def has the funds to do it. The parties are bangers. So tech dev is not a cost that needs funding like other DeFI protocols with use treasuries to fund tech dev - see LDO, MKR, AAVE.
Also DYDX Foundation already has mandate and funding for marketing and BD. So why do we need another function for “growth” that’s going to redirect funds away from the protocol? Instead of keeping all this value in the protocol and reinvesting into growth directly all onchain (like suggested dydx <> usdc rewards swap).
So, would certainly like a bit more clarity here and input from other holders of DYDX. Other vested community members too.
Will add that Lido as an example is very concerning. Have lots of respect for Stakehouse analytics work on Dune. And have no idea how involved they are in LDO governance so pls dont take this as any direct dig at Stakehouse (<3).
LDO’s “treasury” has been SO poorly run that although as a business Lido absolutely PRINTs revenue as a de-facto MONOPOLY in the LARGEST market in all of DeFi (eth staking), they somehow manage to operate at a LOSS. Negative profit frfr.
LDO token would be on Mars rn (like AAVE) if they managed to run even at 10% profit margins, let alone 80% + (where they should be tbb). So lido has been one of the worst displays of governance DeFi has to offer. Lets pls not go down that same path. It only spells doom and destruction.
Thanks all for discussion on all this very important work.
Fin/