As many of you are aware, dYdX has recently launched v4 for trading. While this is an exciting development, there are critical aspects of the new fee structure that we need to discuss. Our goal should be to make dYdX not only competitive but also more attractive than centralized exchanges. To achieve this, it is crucial to have a fee structure that encourages high volume and user base growth.
Fee Disparity: The most glaring issue is the significant increase in fees from v3 to v4. For a platform aiming to increase its market share and volume, having higher fees than its predecessor is counterintuitive.
Tier Structure: The jump in trading volume requirements between tiers is considerably larger in v4. For instance, moving from a 30-day trading volume of $5m to $10m in v3 is now a jump from $5m to $25m in v4. This wide gap could deter traders from striving for higher tiers.
Taker Fees: There’s an increase in taker fees in v4 compared to v3. For example, at $5m in v3, the taker fee was 0.035%, while in v4, it’s 0.040%.
Suggestions for Improvement
Align Fee Structure: At a minimum, v4’s fee structure should align with that of v3, if not offer better rates, especially during its initial phase to attract more users.
Revise Tier Requirements: The tier structure based on trading volume in v4 needs reconsideration. More accessible tier jumps would incentivize traders to increase their trading volume.
We understand the complexities involved in structuring fees that balance the platform’s sustainability with user attractiveness. However, addressing these concerns is crucial for dYdX’s growth and competitiveness in the market.
Looking forward to a constructive discussion around this with the aim of a proposal being created if the community agrees on the new fee structure for v4.
We wish to convey our endorsement for the revised fee model outlined in this proposal. However, we want to underscore our commitment to keeping maker fees at the lowest feasible levels, recognizing their pivotal role in enhancing order book depth. Consequently, we propose a modification to the presented model, advocating for lower taker fees without necessarily adopting the initially proposed negative values. These adjustments should specifically focus on the lower fee tiers.
To add further context, I believe it’s crucial to compare the v4 fee structure with that of the competitors, particularly Binance. This comparison will help us understand where dYdX stands and how we can enhance its attractiveness in the market.
Binance’s Fee Structure for Context:
Binance, the leading centralized exchange, has a tiered fee structure that significantly relies on the holding and usage of their native BNB token. Their fees vary across different tiers, influenced by the user’s trading volume and BNB holdings. They offer notable discounts for users holding certain amounts of BNB, tying the token’s utility directly to trading benefits on their platform.
Incorporating dYdX Tokens: Following a similar path, we could consider integrating DYDX tokens into the v4 fee structure. For instance, allowing tier progression or fee discounts for users holding or staking DYDX tokens.
Enhanced Tokenomics: Such integration could significantly improve DYDX tokenomics, potentially increasing the token’s value and user engagement with dYdX.
Network Security and Stability: By requiring DYDX tokens to be staked for tier progression, we could also enhance the overall security and stability of the platform.
Proposed Actions:
Community Discussion: I urge the community to discuss and provide feedback on integrating DYDX tokens in a manner similar to Binance’s BNB.
Developing a Competitive Proposal: Based on community input, we should consider developing a proposal that not only focuses on competitive fee structuring but also on enhancing the utility and value of DYDX tokens.
In conclusion, while our current focus is on restructuring fees to make dYdX v4 more competitive, we must not overlook the potential benefits of integrating the native DYDX token into this new structure. This approach could be a game-changer in attracting a larger user base and competing more effectively with market leaders like Binance.
It’s surprising to see limited engagement on this crucial topic. From my perspective, the current fee structure might be a deterrent for many traders, including myself. I’ve stopped trading on dYdX following the fee increase in v4, and there are additional factors, like the inability to place a stop loss, that have influenced my decision.
It’s essential to recognize the competitive landscape where new decentralized exchanges (DEXs) are emerging with significantly lower fees. For example, some of the upcoming DEXs offer taker fees as low as 0.02%. That’s 60% less than what you pay on v4. This puts traders on v4 at a considerable disadvantage. The increased fees in v4, for takers, are higher than those in v3, which could be a critical factor affecting traders’ choices and the platform’s market share.
I believe it’s imperative for this community to actively discuss and address these concerns. A fee structure that is not competitive can hinder the growth and attractiveness of dYdX in a rapidly evolving market. To remain relevant and appealing to traders, there needs to be a serious reconsideration of the fee strategy, ensuring it aligns with, or is more favorable than, what’s available in the market.
Looking forward to more discussions and potential changes that can make dYdX a preferred choice for traders again.
Thanks for starting this discussion. There is a trade-off here, lower fees for traders in v4 will likely lead to higher volume. But since validators and stakers receive staking rewards from trading fee revenue, although lower fees in v4 would be good for traders, it will bring less revenues for validators and stakers, they could then decide to unstake and the security of v4 will decrease puting the chain at risk. Some advanced mathematical model analysis is required here before taking any action. In the model, several fee levels in v4 would be analysed and the potential outcomes in terms of volume increase in v4, change of revenues for stakers and validators, impact on the bonded ratio and more. Maybe dYdX Trading could do this advanced analysis? Or hire some maths/physics/computing researcher to do this research. I don’t think we should change critical variables based on some forum discussion, this is critical and needs to be backed with serious professional research in my opinion.
Do any of these DEXes have their own blockchain to run the DEX with a set of validators and stakers securing the chain, where the incentive to secure the chain is based on the trading fee revenue?
I agree that any changes to dYdX’s fee structure should be based on thorough, professional analysis. And while it’s true that not all DEXs have their own blockchain, being competitive in the market is still essential. Lower fees could lead to higher trading volumes, which should benefit everyone, including validators and stakers.
As a starting point; why has there been a choice to make the fees higher?
The product worked on v3, why then changing the fees to v4 and creating a method to patch the change?
Why not go back to the fees of v3 and work from there?
I remembered we have a grant to research on new fee structure before v4 going live but cannot find the post, I think current fee structure set based on that research output?
