Liquid Staking DYDX with Stride

This document gives a comprehensive overview of Stride protocol, and outlines some of the reasons Stride liquid staking would be beneficial for dYdX. Consider this post Stride’s introduction to the dYdX community.

  • Stride is the largest liquid staking provider in the Cosmos ecosystem with >85% of the ATOM LST market share.
  • Stride supports 10 Cosmos chains (and counting)
  • Stride is a sovereign appchain secured by Interchain Security, which means that the chain is secured by over ~$1.4B in ATOM.
  • Stride is compatible with any blockchains that have IBC v3 enabled.

In the next couple weeks, a specific proposal will be posed to discuss implementation details around stDYDX and solicit community feedback.

Why liquid stake at all?

Liquid staking could be an important tool to help grow and secure dYdX chain as it transitions to being a dPoS chain in the Cosmos ecosystem. On Ethereum, liquid staking enables users to stake their ETH without having to run their own validator. However, in the dPoS model, liquid staking allows token holders to stake in order to secure the chain and accrue staking rewards whilst preserving liquidity. Eliminating the tradeoff between staking and staying liquid encourages even more staking (therefore more security), as well as more utility and greater use for DYDX. This is because liquid staking eliminates the DeFi hurdle rate: the additional returns DeFi needs to offer so that users are compensated for the opportunity cost of staking DYDX.

Here is a list of key reasons dYdX chain may want to adopt liquid staking:

  • Increased Economic Security: A significant pain-point in Cosmos-ecosystem staking UX is the unbonding period. Making the staking process as frictionless as possible further incentivizes staking. Enabling liquid staking incentivizes DYDX holders to stake, as there will be stable markets such as Osmosis where they are able to exchange their stDYDX for DYDX. Additionally, Stride is working on instant unbondings (see below).
  • Additional LST functionality: There are various instances where stDYDX could supplant DYDX to increase the capital efficiency of the dYdX v4 blockchain. For example, stDYDX could be used for gas instead of naked DYDX. This allows the holder to compensate the validator with a yield bearing asset that is also securing the chain. Similarly, DYDX rewards accrued by trading could be automatically liquid staked, improving both chain security as well as user yield with every trade.
  • Increased Token Utility: Liquid staked DYDX would allow the DYDX token to preserve, and perhaps even increase, its utility in DeFi. There is currently $2.5m+ of DYDX traded on Uniswap. The proposed token migration to Cosmos will catalyze an outflow of tokens from Ethereum, as holders claim their Cosmos DYDX tokens. While it’s true that holders of the Cosmos-based DYDX token are likely to stake their tokens to earn real yield, it is equally likely that they want to continue using DYDX in DeFi. As such, stDYDX would be a significantly better option for both the Ethereum and Cosmos DeFi ecosystems, as holders will be able to leverage their DYDX in DeFi while continuing to earn real yield.
  • Organic Validator Set Decentralization: With dYdX transitioning to a Cosmos SDK based blockchain and migrating all its tokens over from Ethereum, it’s important to optimize for having a decentralized validator set as soon as possible. Liquid staking can avoid the dangers of validator set decentralization, by delegating across the genesis set – either evenly or with certain weights. For example, Stride uses a council method, where a council approved by dYdX governance proposes a delegation set, which is in turn approved by Stride governance. This allows for dYdX chain to decentralize stake distribution effectively shortly after launch (see “Alignment with Host-Chain” below).

By increasing the utility and capital efficiency of DYDX and the dYdX chain, as well as mitigating the frictions caused by staking, Liquid Staking significantly improves UX.

Why an appchain model over same-chain liquid staking?

  • Minimalism: The appchain approach reduces onchain complexity for dYdX. The core dYdX code can remain more minimal, and be optimized for on-chain functionality. This results in less resource intensive activity on-chain, a smaller attack surface on dYdX, and provides more time for dYdX contributors to focus on building a best-in-class exchange product.

  • Security: Another benefit of the appchain approach is that an appchain that is solely used for liquid staking has the ability to highly optimize for security. For example, Stride has built in health checks that are executed with each new block and even with each new transaction. These checks can ensure all liquid staking functionality is working as expected, halting functionality otherwise. Adding similar checks to DYDX would be intrusive and add complexity. Stride’s codebase has already been audited many times and has been running on mainnet for over 12 months, whereas same-chain liquid staking would require deploying new untested code and undergoing fresh audits.

  • Reduced Maintenance Costs: In addition to reducing complexity and increasing security, maintenance isn’t free, and using an appchain liquid staking provider (through ICA) guarantees regular and timely updates if core SDK staking logic changes (e.g. SDK upgrades, delegation logic changes, etc).

  • Ease of Onboarding: Onboarding an external liquid staking provider is extremely simple, and only requires minor code changes from dYdX. In particular, (1) upgrading to IBCv3 and (2) enabling a few “AllowMsgs” to allow external chains to stake, unbond, etc. Stride contributors are more than happy to submit the relevant PR to the dYdX repo. This code has been audited by Informal Systems and has been running in production on many Cosmos blockchains for over a year.

Why Stride?

Stride’s core mission is very closely aligned with dYdX’s: building the most secure DeFi application possible with the best UX possible. Stride achieves this by focusing on the following themes:

  • Minimalist Chain: Stride itself is a minimal chain, only focused on liquid staking. Stride has no plans for other functionality on-chain, like DEXes or other DeFi protocols. This gives Stride contributors more time and energy to focus on core liquid staking functionality, as well as reduces the odds of an unintentional bug being introduced. Given no other products live on Stride, Stride has no conflicts of interest when working with other protocols. Furthermore, by remaining minimalist, Stride is able to have as small of an attack surface as possible, ensuring commitment to Stride’s ethos of safety and security.

  • Security: Stride is committed to safety and security, and Stride takes a number of steps to remain the most secure liquid staking provider. For instance, Stride is secured by Interchain Security from the Cosmos Hub. This provides Stride with billions of dollars of economic security. Furthermore, Stride has completed 3 audits of its whole codebase, and engages Informal Systems to do ongoing audits of the codebase. In terms of on-chain measures, Stride has rate limiting enabled onchain, which limits the damage in a “worst-case scenario” to 10-20% of what it could ultimately be. Additionally, Stride runs blockly health checks to verify that all liquid staking functionality is working. These will soon be transactional checks. Stride has a rigorous 5-step deployment process for any mainnet changes to ensure that upgrades work as expected, and no core functionality is ever altered unexpectedly.

  • Features and UX: There are many additional features that users can expect with Stride, aside from staking and unstaking their LSTs. These include (1) safety checks, (2) deep liquidity for the stToken, (3) integrations of these tokens in DeFi protocols (see below), (4) governance rights, (5) simple UX, and more. Stride supports all of the key features you would expect from a liquid staking provider, including staking, unstaking, and frequent on-chain safety checks. Additionally, Stride supports a 1-click liquid staking UX, where users can liquid stake their DYDX from dYdX in 1-click. In Stride’s next software upgrade this will also allow users to receive their stDYDX on dYdX as well. This will allow users to liquid stake their DYDX and use it without ever feeling like they’ve left the chain (the user signs 1 transaction, and ends up with stDYDX on the chain of their choice). In terms of integrations, DeFi protocol integrations take substantial BD and technical work to integrate into various protocols throughout crypto. Existing LST providers have already done this work, and will continue to integrate into upcoming major Cosmos DeFi protocols as well. Stride is actively working on governance for its stTokens, and expects to deploy governance very soon. Stride has a proven, highly technical contributor team, and has shipped many best-in-class features. For example, the Stride team helped onboard the live Stride chain to Interchain Security, without any loss of chain functionality or meaningful interruption to chain liveness.

  • Alignment with Host-Chain: Stride and its contributors are heavily aligned with the success of its host chains. Outside of providing hands-on support at the time of integration, as well as other technical support during key upgrades etc, Stride contributors have undertaken a number of initiatives for supported chains. One area of surprising complexity is designing a safe and reliable delegation strategy for the DYDX tokens the LST holds. Stride is a pioneer on this front with its council-based approach which allows dYdX community members to select a custom validator set based on quantitative and qualitative parameters (code contributions, uptime, engagement in extractive behaviour, marketing).

  • Integrations: While DeFi protocol integrations of LSTs are very important, it takes substantial BD and technical work to integrate into various protocols throughout the Cosmos. Stride has already done this work, and will continue to integrate into upcoming major Cosmos DeFi protocols as well. Stride is deeply integrated into protocols in Cosmos. These include protocols like Axelar, Osmosis, Mars, Umee, Shade, Crescent, Kujira, Forge, Evmos, and many others. Stride has gone through the integration processes for all of these chains, including setting up Oracles, writing custom integration scripts, running through security verification, etc. This is costly work to reproduce. If Stride launches stDYDX, it can automatically integrate into any of these partnerships! Much of the groundwork has also already been laid for future integrations. Stride also has the vast majority of TVL in Cosmos, demonstrating PMF and adding to the lindiness of the protocol.

Next Steps

There are a few next steps to launching stDYDX:

  • IBC Connection: Stride and dYdX contributors have set up an IBC connection between the two chains – this is “channel-1” on dYdX v4.
  • ICA: Stride contributors would submit a pull request to the DYDX Github repository to add Interchain Accounts (ICA). This is a small ticket item (only around 12 lines of code) which is currently live on a number of blockchains and has been audited by Informal Systems.
  • Testing: Stride contributors would then run through all the routine testing flows.

Speaking as Stride contributors, we are incredibly excited that dYdX has come to Cosmos, and we greatly admire the product and community. We understand that this post is at times technical and that there may be things about Stride or the Cosmos stack that the Community might be unfamiliar with. If anyone has any questions about Stride, please let us know and we are happy to answer them. We look forward to being a part of the dYdX v4 journey.


Thrilled to see Stride coming to dYdX. Stride has shown its leadership in the LST market within the Cosmos ecosystem, therefore it was evident that they will offer liquid staking on dYdX Chain.

I’m very curious to see how Stride will design the stDYDX. Staking on the dYdX Chain has a slightly different approach compared to traditional Cosmos chains. As I understand it, dYdX stakers will receive trading fees in USDC as well as transaction fees only. I anticipate that a significant portion of the staking yield will be come from trading fees, which are in USDC. Given Stride’s usual design with staking rewards that are autocompounded, I’m curious to see how you will handle the USDC component when it comes to dYdX staking.

Super cool to see this discussion starting already!


Myles from Reverie here.

Full Disclosure: We are investors in Stride.

Sharing some thoughts and support for partnering with Stride to enable stDYDX liquid staking.

Why is Stride great for users?

  • Ease of Staking: Once users bridge their DYDX to v4, many holders will want to stake their tokens in order to receive a share of the protocol’s trading fees. Users that wish to stake will have to decide which validator/s to delegate to. In a perfect world, users would evaluate these operators based on a number of metrics, distribute their stake across many validators to mitigate risk, and monitor their delegations on an ongoing basis. In reality, this is not fair to expect of users nor is it good UX. Users should not be expected to learn how to evaluate validators nor should they have to take on this time consuming task. Stride alleviates both of these pain points. As we’ve seen on Osmosis, Stride works closely with the communities they support to evaluate, select and monitor a set of validators that meet the highest security and performance standards. And with a single click, users can have their stake allocated across this validator set.

  • Added Utility: As detailed in the original post, Stride will let users stake to enjoy staking rewards while still retaining liquidity for their DYDX tokens. Users can take their stDYDX to earn additional fees in liquidity or lending pools, and could even use it for gas if and when dYdX implements the fee abstraction module.

Why is Stride great for dYdX?

Put simply, Stride will do a better job at distributing stake across the validator set than users who select their validator delegations themselves. dYdX can have a much healthier stake distribution if a significant portion of stake is deposited through Stride.

  • Stride will decentralize stake among high-performing validators. The council can take into account factors like geography, ecosystem contributions and MEV. As mentioned above, it’s unrealistic to expect that users will take the time to evaluate validators and then distribute their stake across many validators in the set. As we’ve seen with other Cosmos chains, the vast majority of users will choose to stake with a few large validators that have brand recognition and proven track records. While this is totally reasonable from the perspective of the user, this leads Cosmos chains to have top-heavy validator sets with very little stake distributed to the long tail of validators. A concentrated validator set presents significant risk for the dYdX chain, as only a small number of validators would need to collude to take over the chain.

  • In contrast, when users deposit to Stride, their stake is allocated across a large set of validators that have been selected based on meeting a number of standards related to security, performance, and community alignment. Users enjoy the UX that is equivalent to staking with a single validator, and dYdX enjoys the benefits of having a much healthier stake distribution than if this task was left in the hands of the average user.

In summary, we believe that taking the necessary steps to enable liquid staking with Stride will be a win for users as well as a win for dYdX v4.


Hi all, I believe it’s crucial to bring more stake across to dYdX (bonded rate is still very low) and liquid staking is a great staking option both for newcomers and DeFi users. I was curious to hear an update on where the Stride dYdX integration is at currently?


Excited to have stDYDX coming. My main concern would be on the default delegation method Stride currently uses; with such a top-heavy set it is important that it adequately helps with the set decentralization instead of making it worse.

For reference to others, Stride currently defaults to a top “X” delegation for a host-chain validator set. In the cosmos hub it was top 30 initially, now it is better distributed but that takes time. Ideally the set should have a better distribution from the beginning, especially considering dydx’s validator set size.

What plans does Stride have to help in DYDX’s specific situation?


Dear Stride Contributors and dYdX Community,

We’re thrilled about the proposed partnership between Stride and dYdX. The in-depth dive into Stride’s liquid staking aligns perfectly with our vision for dYdX. This collaboration holds great promise, especially in terms of boosting economic security, improving DYDX utility, and growing our validator set organically.

We’re expecting a real buzz around the liquid staked version of the DYDX token. Teaming up with Stride feels like a win-win, and we’re excited about the positive impact this collaboration could bring.

Bests from Govmos, the governance arm of the PRO Delegators’ Validator.

I second your question.
How will the dYdX redemption rate be managed ?


Thank you for the proposal.

Is the economical model for stDYDX to use $USDC reward to buyback $DYDX and provide them as “compounding rewards”?

If the model is turned in this way, we would support the proposal as it will generate an healthy buy presure that will depend of the overall fees generated by the platform.

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Yes that’s correct - during the latest Community Town Hall #7, Vishal from Stride team provided insightful updates on the Stride Integration on dYdX.
stDYDX is set to automaticly convert $USDC into $DYDX and restake, maximizing the compounding effect.

The official release is scheduled for January 2024.

If you missed the live session, you can catch the replay here:

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Amazing, thank’s for the link and we gonna support this

curious how Stride answer this question for this implementation.


It could easily be solved by implementing an algorithm that would avoid staking with the top 33% VP and automatically choose the following 30 positions (Stride native standard is starting with 30 validators if I’m correct).

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Hi all, Vishal here! I’m a contributor to the Stride protocol, and can hopefully help answer some of these questions.

Regarding stDYDX’s economic model and redemption rate, the plan is to take USDC rewards, send them to Noble, and then to Osmosis. Once the USDC is on Osmosis, the protocol will swap it for DYDX (the swaps occur hourly in small sizes, to minimize market impact). The accumulated DYDX will get sent back to the dYdX v4 chain, and then staked. The redemption rate will increase proportional to the new DYDX. This all occurs fully trustlessly through ICA. In the near future, we’re aiming to abstract this to a generic “auction” module on Stride, that uses an oracle to set a floor price. That will allow the protocol to use liquidity from Osmosis, Astroport, CEXes, etc. However, in the short term, we’re very confident that on-chain liquidity will be more than sufficient for the swaps the protocol needs to do.

Regarding Stride’s delegations for dYdX, it’s a great question! The current plan is something slightly different than Stride’s typical approach. We’re working with a “lightweight council” to pick an initial validator set on dYdX, consisting of ~10-15 validators to begin with. This council and their selections will be submitted on the dYdX forum to achieve rough social consensus, as well as submitted to Stride governance for approval. Every week thereafter, ~4 validators will be added to the set, until there are 32 validators in the set.

The rationale behind starting with a slightly smaller set initially is the dYdX validator set is still in-flux, with some turnover in the active set. The goal is to choose validators outside of the top spots, but still be confident that those validators will be in the active set. Over time, as the protocol has more tokens to stake, we can safely expand Stride’s delegation set while ensuring that those validators are active and receiving staking rewards.

There will be a forum post covering this in more detail soon, but the “lightweight council” is aiming to prioritize validators that (1) are not already heavily delegated to, and (2) are making meaningful contributions to dYdX. This might be through helping with testnet, running infrastructure, helping with GTM, and many other contributions. A few months after stDYDX is live, contributors will also run the typical “Stride Delegation Council” to refresh the weights and make sure that the delegations still align with dYdX’s goals.

Please let me know if you have any questions at all on this!


Hey Vishal, welcome. I would personally suggest that you use Astroport for the swaps initially, since currently they have 10x the liquidity that is on Osmosis.

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Thanks for the feedback @shellvish !

Good to see that the initial approach is different from the standard procedure, and thereby contributing to decentralizing the chain.

Thank you for the additional context to the program.

I would further point out that crows-nest and luisqa have been doing an incredible job of supporting validators and community in the dydx discord.

As an aside, have you consideres implementing two pools. One that converts rewards to dydx and another that makes regular distributions of usdc to pool token holders?? I think this would povide a good option to those that are invested in dydx to benefit the decentralisation of dydx while simultaneously earning passive income in stablecoin. Not all investors want to compount into the asset risk.

Thanks in advance for your thoughts on this.

Null, Kingnodes.

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