Empowering the dYdX Community: The Need for Decentralized Decision-Making [Repost]

The dYdX protocol has emerged as a leading force in the decentralized finance (DeFi) landscape, offering innovative solutions for perpetuals. However, the platform’s long-term success depends on embracing true decentralization and community-driven decision-making. This essay outlines the importance of delegating power from the current centralized decision-makers in the dYdX protocol to the broader community, even at the expense of additional liability and legal risks, in order to create a thriving and successful dYdX DAO.

I. The Benefits of Decentralization

A. Enhanced Trust and Security

By distributing decision-making authority, the dYdX protocol can ensure that no single entity wields excessive control, which could lead to manipulation, fraud, or even collapse. Decentralization enhances trust and security in the network, attracting more users and investors.

B. Fostering Innovation and Creativity

A decentralized community-driven approach allows the dYdX ecosystem to tap into the collective wisdom and creativity of its participants. This can lead to more innovative solutions and faster growth for the platform.

C. Network Resilience

Distributed decision-making authority ensures that the platform remains resilient to external threats or internal failures, as it is not overly reliant on a single entity or small group of decision-makers.

II. Encouraging Participation in the DAO

A. Incentivizing Active Involvement

The current centralized decision-makers must be willing to participate in the DAO’s discussions, share their expertise, and encourage others to do the same. Incentives and recognition should be used to promote active involvement.

B. Accessible Information and Education

To enable meaningful participation, the dYdX community must have access to accurate, up-to-date information and educational resources. This will empower them to make informed decisions, contribute meaningfully to discussions, and hold decision-makers accountable. Information must not be kept from the community if we hope to ever achieve true decentralization. All forms of information asymmetry should be eliminated by those currently holding most of the power within the protocol.

C. Transparent and Efficient Governance Processes

The subDAOs should establish clear, transparent governance processes that enable members to express their opinions, vote on proposals, and see the results of their actions. Efficient processes will encourage greater participation and ensure that decisions are made in a timely manner. Leaders of any subDAO should be required to be active community members within governance discussions.

III. Leading by Example and Embracing Decentralization

A. Centralized Decision-Makers as Role Models

To foster a successful transition to a dYdX DAO, those currently holding power must lead by example. By actively participating in the DAO, engaging in open discussions, and welcoming diverse opinions, centralized decision-makers can inspire new members and encourage them to follow suit. Demonstrating commitment to the DAO’s principles and processes will motivate others to contribute and create an inclusive, collaborative environment.

B. Acknowledging the Transfer of Power

Decentralization inherently involves a shift of power from a concentrated few to the broader community. Centralized decision-makers must recognize that letting go is a necessary part of the process, as it allows for a more equitable distribution of decision-making authority. By embracing this transfer of power, they can demonstrate their commitment to the collective’s best interests and foster a sense of ownership and responsibility among community members.

C. Supporting the Collective for Long-term Success

The ultimate goal of decentralization is to create a robust, thriving ecosystem that benefits all participants. By actively supporting the shift towards a dYdX DAO, centralized decision-makers can ensure that the platform remains adaptable, innovative, and resilient. By putting the collective’s interests first, they can drive long-term success and create a stronger, more sustainable platform for all stakeholders.

IV. Encouraging Delegation and Incentivizing Participation

A. Urging Token Holders to Delegate Voting Power

The success of the dYdX DAO hinges on the active engagement of all major stakeholders, particularly those with significant voting power (1m+). This essay urges these token holders to actively seek endorsed delegates and distribute their delegations among them. While some have already taken this step, it is crucial that every large token holder engages in this behavior for the sake of a successful DAO. Decentralization is not an automatic outcome; it requires intentional actions by those holding the most power.

B. Retroactive Incentive Program for Smaller Community Members

To further promote active participation in the dYdX DAO, it is strongly recommended that the community considers creating a retroactive incentive program targeting new community members with less voting power (less than 1m). By offering meaningful rewards to those who contribute to the decision-making process, this initiative can help empower and motivate smaller stakeholders to get involved in the platform’s governance.

C. Ensuring Fair Distribution of Rewards

To maintain fairness and inclusivity, the retroactive incentive program should be designed to reward only smaller community members. This approach can help balance power dynamics within the DAO, fostering a sense of belonging and shared ownership among all participants.


In order to ensure the long-term success of the dYdX protocol, it is crucial for centralized decision-makers to actively embrace the principles of decentralization and participate in the platform’s governance. By doing so, they empower the community to partake in decision-making processes, fostering innovation, resilience, and trust within the dYdX ecosystem. This ultimately paves the way for a thriving and successful DAO. While there are legal risks and potential liabilities associated with this approach, the rewards far outweigh the risks, making it essential to embrace the pioneering spirit for the growth of the DeFi landscape.

Centralized decision-makers play a critical role in the successful transition to a dYdX DAO. By leading by example, embracing the transfer of power, and prioritizing the collective’s interests, they can inspire new members to actively participate in the DAO and ensure the platform’s long-term success. Decentralization offers the opportunity to create a more inclusive, innovative, and resilient ecosystem, and it is incumbent upon those currently holding power to lead the way in making this vision a reality.

Creating a successful and thriving dYdX DAO demands that centralized decision-makers commit to the principles of decentralization, while large token holders actively delegate their voting power among endorsed delegates. Furthermore, implementing a retroactive incentive program for smaller community members can encourage active participation, fostering a more balanced and inclusive ecosystem.

By taking these intentional actions, the dYdX community can cultivate a truly decentralized and democratic decision-making process, ensuring the platform’s long-term success and sustainability. Embracing these initiatives will not only fortify the dYdX ecosystem, but also serve as a model for other projects in the DeFi space aiming to achieve meaningful decentralization.


@Alucard, your ideas here deserve greater consideration. In advance of the launch of the DYDX DAO, would you or the foundation host a webinar or AMA on decentralization? If so, we would be happy to participate if time permits.

1 Like