[Proposal] - dYdX Surge

dYdX Chain
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Summary

This proposal serves as a temperature check for the tentative allocation of between $13M and $20M in notional $DYDX from the treasury, earmarked for a 9-month dYdX Surge, Rewards Program on the dYdX Chain. The primary objective of this program is to increase trading activity further on the dYdX Chain. The focus will be on re-engaging historical users of dYdX v3 and v4 through boosts tailored for them, as well as new users who are looking for a CEX-like experience on-chain.

Committing to nine months of user incentives ensures stability for all dYdX users, maintaining incentives and related activity throughout the remainder of 2025. The first six months of the Surge Program will prioritize increasing trading activity, while the final three months will allocate a portion of the rewards pool to enhancing liquidity.

Over the course of the dYdX Surge Program, the monthly budget will grow, subject to market conditions.

Should this proposal gain approval, the actual distribution of incentive rewards and each season’s allocation will be contingent upon a governance vote after each trading season.

Motivation

dYdX is firmly positioned as a top three perpetual futures trading DEX in an increasingly competitive DeFi landscape. Over the past few years, numerous competitors have entered the market, making the competition for traders more intense than ever.

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During this time, dYdX has introduced advanced trading features and built deep liquidity, enabling it to compete not only with on-chain perpetual DEXs but also directly with centralized exchanges. To attract and onboard more traders to explore the product, additional targeted incentives are necessary in the current competitive landscape.

The Surge Program is designed to build on the successes of the dYdX Chain to date, and motivate traders to bring their activity to dYdX. This is a pivotal moment where momentum lost could undo much of the success and sweat of the past 18 months.

Proposed Incentive Program Design

A detailed evaluation of the program’s historical performance, alongside the protocol’s strategic direction, highlights the need for key adjustments to maximize future impact. These changes are driven by clearly defined objectives, with the program structured to align accordingly.

Objectives

The dYdX Chain has been live for approximately 18 months. The exchange software is fully functional, and many novel features have been rolled out, creating a world-class trading experience for perpetual futures traders.

In addition, dYdX Chain has developed deep liquidity, allowing for the safe execution of large block trades in its major markets. With the product now well-established, the next critical step is to showcase its capabilities to a broad segment of traders and scale trading activity.

With this in mind, the following North Star objectives will guide the upcoming incentive program term:

  • Drive new trader acquisition and re-engage past traders on dYdX.
  • Boost trading volumes to maximize fee distribution for token holders and operational workstreams.
  • The program should be easy to understand and the actions required to earn and optimize rewards should be clear to all users.

Season 10 of the Re-Launch Incentive Program has initiated a strategic shift from prioritizing deep, liquid on-chain markets to actively stimulating trading activity. With approximately one week remaining in the season, average daily trading volumes have already increased by 42%, despite prevailing macroeconomic conditions being less favorable for trading.

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Building on this foundation, we can drive accelerated growth through a targeted incentive program aimed at re-engaging previous dYdX v3 and early v4 traders while attracting a diverse segment of new traders seeking an on-chain venue that competes with centralized exchanges.

Incentive Program Design

Following the re-prioritized objectives above, the proposed incentive program design will evolve further.

For the first 6 months of the program, all incentives will go to takers on the dYdX Chain. Growing the number of traders and the amount of trading activity are the priorities, so this is where rewards will be focused over this period.

Trading activity will continue to be measured in points. Three distinct allocations of trading points will ensure that rewards reach a wide range of users efficiently.

The allocations will be:

  • General: Trading fee-based rewards, targeted at increasing activity as efficiently as possible.
  • Retail: Reserved for activity through one of the web or mobile user interfaces.
  • Activation: Feature launches, hot markets, v3 trader reactivation, staking boost, etc.

For the first 6 months of the Surge Program, we are targeting 50% of incentives for the General segment, and 25% for each of the retail and Activation segments.

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In the final three seasons of this term of the Surge Program, a portion of the reward budget is allocated to support maker activity once again. At this stage, further deepening of liquidity is expected to become a priority as trading activity continues to grow.

As we have done throughout the program to date, the outcome of the specific program design will be closely monitored. Where any alterations become necessary, they will be reflected in the program going forward.

Program Term

The next term of the proposed Surge Program will run from April 1, 2025, to December 31, 2025, encompassing nine calendar month seasons. Each season will run from the first day of the month to the last.

Program Size

The proposed total value of DYDX rewards for the Surge Program will be between $13m and $20 m. The dollar value of rewards for each season will only be announced at the end of the season. The final season allocation will require DAO ratification to alleviate any potential misuse concerns.

The budget allocated to each season will grow over time. As more activity is onboarded, the rewards budget will increase to match it, compounding the effect over time and maintaining hype and attention over the full duration.

Flexibility in the rewards allocated to each trading season is intended to create excitement and hype around the program.

Reporting and DAO Oversight

As usual, Chaos Labs will report on all aspects of the incentive program at the end of each season. Reporting will

To provide sufficient oversight over the program, the dollar value of each season’s rewards and the rewards to be issued to each trader will be put to a DAO vote.

Wash Trading Detection

Chaos Labs will ensure that malicious actors cannot exploit the program for personal benefit by screening for wash trading using our wash trading detection algorithm at the end of each season.

For more details on Chaos Labs Wash Trading Detection for the dYdX Chain, see this post.

Previous Incentive Program Highlights

Highlighting some program achievements to date:

Over $285bn Trading Volume on the dYdX Chain

Only dYdX v3 and Hyperliquid have higher cumulative perps volume. What’s most impressive is that this was accomplished by a completely new protocol, just 18 months old, operating on an unfamiliar chain within a new ecosystem.

Since Launch, over $50m in net fees have been paid on the dYdX Chain. Growing revenue is a critical long-term driver of dYdX’s sustainability and success.

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Liquidity

The focus of the dYdX Chain after the launch of dYdX Unlimited was building deep, consistent liquidity and the incentive design reflected this. Since the start of the Re-Launch Incentives, liquidity in major markets has increased between 4x and 18x!

The impact has been broad-based across all market sizes and increased total liquidity on the dYdX Chain by 333%.

Market End Season 10 30 days Preceding the Program Change
BTC-USD $33,268,404 $8,118,849 310%
ETH-USD $28,981,751 $6,620,551 338%
SOL-USD $12,258,204 $2,977,961 312%
DOGE-USD $5,217,024 $435,445 1098%
XRP-USD $4,996,573 $285,515 1650%
ADA-USD $4,315,219 $287,249 1402%
LINK-USD $4,171,518 $346,899 1103%
Orderbook Liquidity Above $1000k Above $500k Above $250k Above $100k Above $50k Above $10k Total Liquidity ($m)
30 days Preceding the Program 4 4 17 47 50 71 33m
End Season 10 14 16 53 71 112 145 143m

Next Steps

In the absence of strong dissent, we will submit an on-chain proposal on March 25, 2025, to ratify the proposed incentive program and structure for the remainder of the year.

References

Disclaimer

The content of this document (this “Document”) is provided for general informational purposes only, and does not constitute, and should not be considered, or relied upon as, financial advice, legal advice, tax advice, investment advice or advice of any other nature. You agree that you are responsible for conducting independent research, performing due diligence and engaging a professional advisor prior to taking any financial, tax, legal or investment action related to the foregoing content. The content of this Document is not an offer, solicitation or call to action to make any investment of, or purchase, any financial or crypto instruments, assets or related services, of any kind. Chaos Labs makes no representation, assurance or guarantee as to the accuracy, completeness, timeliness, suitability or validity of any information in this Document or any third-party websites that may be linked herein.

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What is the proposal, what is it about, I didn’t understand anything.
I see that the dydx token after this program will cost 0.25-0.2 USD

delete again.. don’t like criticism.

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Will a trading league for retail traders, where participants compete based on PnL or ROI, be held?

I believe that such competitions are essential to genuinely invigorate dYdX.

Additionally, it would be helpful if the budget allocation were made more transparent, providing further clarity on how the funds will be utilized.

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To have a constructive dialogue don’t censor people. It’s absurd.

5

Where will this money come from? If from dydx reserves in tokens. Will there be 40-50 million tokens for this program?

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Hey chaos, long time no speak. Congrats on the Series A and all of the success yall have had :slight_smile: .

I do some market making on the platform and it’s pretty competitive, or at least it’s pretty difficult for me. I’d suggest keeping a bit of the MM rewards around, eg at their previous 20% value. Without rewards, you can expect that market share will consolidate into just the top two market makers, which isn’t healthy for the exchange.

What do you think of a 20-20-40-20 activation-retail-general-maker split? Or even just making it 30-20 general-maker ?

Ackowledging a conflict here: I market make on the platform, so I’m biased.

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If retail participation grows, MM will benefit from increased volume and activity. Right now retail is very low, so it makes sense to focus on capturing that segment.

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Hey, Max long time no speak. Maybe you disclose full conflict of interest and tell who is LP for your market making activity :wink: I think its quite important in that context

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As for the program itself, my opinion is that we should stop offering discounts on taker fees.
It’s better to incorporate that into the trading fees and lower them instead.
Zero cost of management and no token dumping.
HL has taker fees starting at 0.035%, while dYdX starts at 0.05%. Why offer lower fees through the token if we can simply reduce them?
For new users, we could implement 0 fees up to a certain volume.

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Good day.

How will this proposal affect the DYDX token price in the short and long term?

Isn’t it counterproductive to the recently passed buyback initiative?

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I love to see that dYdX allocates $13M-$20M DYDX for 9-month Surge Rewards, boosting trading, liquidity. Good move

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Hey guys, this is Thang from the Cito Zone team.

Firstly, I agree with RealVovochka as dYdX doesn’t need to provide incentives solely for takers; instead, it needs to lower the fees to be competitive vs. Hyperliquid and provide dYdX incentives based on trading activities (Both makers and takers).

Secondly, I think continuous incentives for market makers make a lot of sense to maintain deep liquidity on certain strategic pools :slight_smile:

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Love to see dYdX going hard on incentives, but quick Q: How do we make sure this isn’t just a short-term farm fest? 6 months of taker-only rewards sounds great for volume but could also bring mercenary flow. Any plans to keep traders around long-term & not just pump stats? Also, what’s the game plan for keeping LPs happy early on?

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Could you just reduce the trading fees to the competitive levels for retail users? Thanks.

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I’d like to see first the web app getting the expected update before announcing any type of rewards program. The program will attract both new and old users of DYDX, which have come and left for various reasons (one being the web experience not being good). If they come back to the same experience as before they won’t stay for long. The iOS app is fire, let’s implement a similar experience for the web app before making any big announcements

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Agree with @RealVovochka

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Thanks for the thoughtful discussion on this thread all. Responding to some points raised:

@eguegu No there will not be trading leagues in this proposed iteration of incentives. These have served their purpose in the past, but in this iteration the focus is on initiatives to engage a range of segments of retail traders.

@RealVovochka @kaenoru

Lower fees and rewards don’t have to be mutually exclusive or a trade-off. While the optimal fee structure is a separate discussion, rewards play a crucial role in attracting attention to the dYdX Chain in a competitive perpetual DEX market. Staking boosts for DYDX are designed to encourage traders to reinvest their rewards, fostering long-term alignment. Prioritizing only fee competition overlooks a key segment of users who value token rewards and the gamification aspect more than just lower fees.

Rewards are a better marketing tool to attract attention in a competitive space than low fees. As the space matures, we expect this to shift towards fees, but for now, rewards have a place.

@max-holloway @lethang
While we understand makers’ concerns, the current priority is to maximize taker activity within the constraints of a limited reward budget. Allocating more rewards to retail traders in the short term is expected to drive higher taker volume. Makers should still benefit from the influx of uninformed flow generated by the activation and retail reward segments, which together constitute half of the surge program’s budget.

The overarching goal is to optimize budget impact each season, with retail trader onboarding as the current focus. As taker volume grows, reintroducing a dedicated maker reward segment will become necessary. The program will continue to be closely monitored, and adjustments to allocations will be made as needed.

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@chaoslabs

I oppose the current dYdX Surge Rewards Program proposal for these key reasons:

  1. Poor user acquisition (only ~200 new users/week) despite the large $13M-$20M budget
  2. Incentives favor MMs over retail traders who drive sustainable growth
  3. Missing engagement mechanisms like trading leagues/competitions (PnL/ROI-based)
  4. Ineffective KOL engagement - the past 6 months show MM incentives don’t motivate influencers

We’re developing a Trading Board enabling anyone to host competitions. I request at least 5% of the budget be allocated to this kind of initiative to properly engage retail traders.

If there are concerns about manpower for running these competitions, our team is ready and willing to collaborate.

Ex: Hosting 100 competitions with $10,000 prizes would cost $1M but would reach far more retail traders than the current approach. This would be a much more efficient use of funds.

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I think what @eguegu is proposing makes sense. We need more innovative ideas rather than just doing the usual “I’ll give you tokens to trade on our platform” routine. What Crypto Learning Club is working on is an actual product, that will be live and running long after the dYdX Surge program ends (on December 12, 2025), it makes sense to allocate more of the community funds for such initiates, which offer users a new way to experience dydx. The Trading Board initiative probably deserves its own proposal, with a higher allocation than what is suggested here (5%). I think dYdX Surge and Trading Board could run in parallel. My only suggestion would be to change the name from Trading Board to dYdX Arena or something similar, I think Trading Board doesn’t do it justice considering that what is being worked on is way more than just a board showing traders’ rankings

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All @chaoslabs offers for the last 6 months are against retail customers. 80% of all payments are received by 7 controlled accounts, look at the table of recipients and everything will become clear. It all started when they decided not to share rewards with trading leagues.

1 Like