Powering v4 Permissionless Listings - Elixir Protocol

Governance/DAO Discussions
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Hey everyone,

Cole here from Elixir Protocol. With the dYdX v4 chain code now open source, we are excited to announce that we have begun development of our permissionless listing engine as the first decentralized application on dYdX chain.

Orderbook exchanges face a fundamental issue in bootstrapping liquidity - it is near impossible for retail parties to supply liquidity to pairs. For permissionless markets this issue becomes even more prevalent.

This application, powered by the Elixir Protocol, will allow retail users to trustlessly, one-click supply USDC liquidity to any permissionless market, earning subsidized APYs (through liquidity incentives).

Elixir is building the industry’s decentralized, algorithmic market making protocol. Through the Elixir Protocol, anyone will be able to passively supply liquidity to orderbook pairs on perp DEXes across the space, earning subsidized APYs from existing long term liquidity incentive programs offered by exchanges.

Elixir has raised ~$15m and has had its smart contracts audited by Trail of Bits. Many of the leading perp dexes are natively integrating Elixir, launching in the coming weeks (e.g. Vertex Protocol, Injective, RabbitX, Satori, Orderly/WooFi, and Bluefin).

Elixir will serve as crucial infrastructure for dYdX v4, enabling ecosystem participants to provide liquidity to orderbook pairs via a purpose-built, decentralized DPoS consensus protocol in development for over two years. Elixir utilizes the orderbook equivalent of x*y=k curves, similar to Uniswap v2, to build up orderbooks and tighten the bid/ask spread, bringing a familiar delta-neutral risk/return profile for liquidity providers.

After over a year of discussions with the governance participants, the dYdX core/foundation teams, and large token holders, we are excited to build out this new primitive. We are self-funding development of the application, building it with a target deployment on dYdX chain at launch. We’ll keep everyone posted with our development efforts in this thread.

Before that time, we’ll propose a subDAO within dYdX that will help set Elixir parameters and govern how Elixir’s application interacts with, and drives value to, the broader dYdX ecosystem.

Happy to answer any questions! Excited to engage with the community further.

(Side note: Elixir is co-hosting an event with dYdX Trading and dYdX Foundation for Messari Mainnet in New York City this Wednesday, September 20th. We would love to connect with anyone from the forums if you are in town: https://twitter.com/dYdX/status/1703772356273996261)

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Hey @cole_elixir ,great initiative, I totally support it.

Although we don’t know the distribution process of fee in V4, if market makers are incentivized through fees on certain markets, I think decentralized market maker is a cool opportunity to earn income for independent LPs.
I see only benefits in this, dydx will get deeper order books and users will be able to earn additional
income by supporting their favorite project.
You got my full support.

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Hey CMS here, we are long term investors in dYdX both from VC side, liquid side, and also users so we span the entire vertical stack.

Agree, more independent LPs are better, especially in the newer markets that are more volatile, the existing market makers might be wider whereas a amm will not be discriminate. More liquidity and more options to provide liquidity are always better and I see this as an unique opportunity to provide liquidity, especially on the less liquid pairs. I am in support.

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Hey @cole_elixir, we are more than grateful for Elixir’s initiative of building a decentralized liquidity layer for orderbook pairs on perp DEXes. This is definitely a proper way of enhancing the liquidity for any DEX and especially for dYdX v4.

I do believe Elixir is adding a layer of transparency and stability that will enable traders to securely apply their trading strategies without having to worry about pumps and dumps meant to liquidate their positions.

Bware Labs will definitely support Elixir on this path as we think innovation will drive this industry to success.

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Hey @cole_elixir, firstly, a massive shoutout to you and the entire Elixir Protocol team for undertaking such an initiative! We’ve been closely following the developments of dYdX, and it’s heartening to see such promising advancements in the form of the Elixir Protocol’s decentralized liquidity layer for orderbook pairs.

The liquidity issues on v3 have been a concern for many, so this proactive approach to tighten spreads and improve liquidity is commendable. The capability to allow retail users to effortlessly supply USDC liquidity to any permissionless market is a monumental step in making the ecosystem more robust and inclusive.

Elixir’s vision of a decentralized, algorithmic market-making protocol is innovative and a much-needed solution in the industry. The integration with leading perp dexes further solidifies the potential impact Elixir is set to make.

Lastly, kudos on the collaboration for the event with dYdX Trading and dYdX Foundation for Messari Mainnet. It’s a wonderful opportunity for community engagement and to build stronger relationships.

Keep up the amazing work, and please know that you have our unwavering support. We’re eagerly looking forward to the next updates!

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Hey everyone, posting a quick update here. Our protocol went live with our Vertex Protocol integration (called Vertex Fusion - allowing for users to supply liquidity to the orderbooks), and within 30 seconds increased their liquidity by ~40%: https://defillama.com/protocol/vertex-protocol. This is with a hardcap we set, which was hit within 30 secs.

We’ve begun development on the dYdX v4 front and will be posting updates here soon once we have something more tangible. As always, feel free to send over any questions

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