Those interested in clearly defined measures of performance of the protocol and the DAO will find this an interesting read. It contains details over the volumes and fees going back to epoch 1, specifics over all service provider contracts with the DAO and more. As always feedback, comments or constructive criticism are strongly encouraged.
Some stand out metrics and changes we feel worth highlighting here are:
Slight drop in dollar volumes and fees in line with a gradual price drop over the epoch. Reduced open interest, but quicker OI turnover confirms this in our eyes that traders struggled with the change in market trend.
If you find this interesting please let us know what you like, what’s missing and what you don’t like. Reporting for DAO’s is still nascent, and there is definitely no standard model for reporting perpetual exchange metrics. We’d like to continue improving this, making DYDX a leader at reporting and DAO intelligence.
Excellent work, Craig!
This is a comprehensive overview of dYdX’s finances for Epoch 22. Profitability, revenue, and expenses are all included. Besides the assets and liabilities, the report also tells you how dYdX is doing.
I have some specific feedback on the report:
It’s well-written and easy to understand.
It’s well-organized and concise.
dYdX’s finances are outlined in the report.
As a stakeholder I appreciate the information that I’m seeing here.
The report doesn’t mention dYdX’s competitors. This information would be helpful in understanding the challenges that the company faces and how it is positioned to compete in the market.
Here are some additional changes that I may suggest:
I would make the report more visually appealing by using charts and graphs to illustrate the data.
Using shorter paragraphs and simpler language would make the report more readable.
It’d be nice if the report had a conclusion that summarized the key findings and recommended next steps.
What is the difference between Accrued Expenses and Committed Expenses?
Also much of the Ops SubDAO and Grants amount are in USD as well as the committed expense. Couldn’t find in the report how this cash USD is accounted for in the Treasury. Where does this roughly $500k cash come from?
What is the difference between Accrued Expenses and Committed Expenses?
Committed expenses are total expense amounts that come about from on-chain proposals. For example the ops subDAO renewal that just passed was for ~$6.6mm over 18 months. This $6.6mm is a committed expense.
Accrued expenses are the portion of each committed expense that is accrued in an epoch. The assumption made in this report is that expenses are accrued equally over the period. Using the ops subDAO example the accrued expense for this item over an epoch will be $6.6mm/18 = ~$367k.
Also much of the Ops SubDAO and Grants amount are in USD as well as the committed expense. Couldn’t find in the report how this cash USD is accounted for in the Treasury. Where does this roughly $500k cash come from?
If I understand your question correctly, you are asking about the source of funds and where it currently sits for the ops and grants subDAO?
The cash comes from the community treasury as a result of successful on-chain proposals. These come in the form of DYDX tokens that are then fully converted to USDC in the case of the ops subDAO and partially converted in the case of the grants subDAO. Slide 21 shows the current breakdown between DYDX tokens and USDC for the grants treasury.
since most of these Ops SubDAO and Grants amounts are only converted after successful on-chain proposals, does that mean the dYdX team doesnt maintain an USDC amount for operational expenses including salaries of team members? All operating expenses need to be converted into USD from the token?
can you explain the difference between Community Treasury and Community Treasury Vester?
Since there’s so much interesting data you posted, here are my thoughts about the Report:
The total volume drop is normal due to the stagnation in Bitcoin and altcoin markets.
To incentivize DeFi traders, more tokens can be allocated to the community treasury.
According to reports, when the rewards arrived, they were sent to the CEX’es in the following days, but this had no negative effect on the price of dYdX.This is positive, as we can see that raising the amount of reward given here will have no effect on sales pressure.
This year, I gave attention to dYdX’s governance and observed how much they appreciate incentives and grants. I believe the work being done in Governance will have a positive impact on the ecosystem, and dYdX will see the results of this in the future.
I appreciate your work and want to see more explanations in the future. Supporting the throughput with graphs is also an interesting part of your work, and I like that.
This is a great question that requires a quick overview of the DYDX DAO. Firstly there is no core team in the DYDX DAO. There are contributors to the DAO either directly to a subDAO or through grants. Other than rewards which are paid in DYDX, all operational expenses are handled by the subDAOs. The DYDX Financial Statement in the epoch 23 version of this report shows the structure and economics of DYDX more clearly.
The community treasury vester (and equivalently the rewards treasury vester) hold DYDX tokens that have been minted, but are not available to the community yet. The vester accounts hold unvested tokens, that gradually become available for use over time.
Thanks for your input. That has been very helpful.
I am curious what are the current revenue streams for dydx. The report shows it has 7mil in revenue in the epoch. But it is not clear what are the revenue streams for the protocol? And how this revenue stream is accounted for onchain including the wallet address holding this revenue.
Also the insurance fund number in the report. How did you find and verify that number?
Don’t you feel that DYDX’s marketing has failed? There has been no effective increase in transaction volume since the token was launched. The core of transaction mining is arbitrage. When the value of mined tokens is getting lower and lower, relying on transaction mining to increase transaction volume will not be beneficial in the long run. Unless the value of the token is high. If the token price cannot reach a high level, the best way to solve the growth problem is to find a balance between the token price and token emission, which not only ensures the growth of the token value, but also solves the problem very well. Token inflation, this is the best way to increase transaction volume, of course, the development of the platform is also very important.
Adding more utility to the token can solve the issue. Users are dumping the token after each epoch, considering token as a form of rebate to trading fees.
See the epoch 23 report for more detail, but all revenue is from trading fees.
Just note that in v3 fees are not controlled by tokenholders. In v4 they will be. For now revenue is useful to get a sense of what v4 can deliver, and to make decisions based on that.
This is an excellent point to debate. There are many here who are big fans of rewards. My personal opinions on this are:
There has been no effective increase in transaction volume since the token was launched.
This is not true, the token launch in August 2021 was the catalyst for a big increase in volumes immediately.
The core of transaction mining is arbitrage. When the value of mined tokens is getting lower and lower, relying on transaction mining to increase transaction volume will not be beneficial in the long run. Unless the value of the token is high. If the token price cannot reach a high level, the best way to solve the growth problem is to find a balance between the token price and token emission, which not only ensures the growth of the token value, but also solves the problem very well. Token inflation, this is the best way to increase transaction volume, of course, the development of the platform is also very important.
I would absolutely agree with this though. Trading volumes are definitely affected by the dollar value of rewards. The fact that the volume is so fickle indicated that the loyalty brought now, almost two years after launch of rewards is not particularly high and hence it is time to adapt. dYdX has bootstrapped its brand and has sufficient usage to justify reducing rewards towards a more sustainable long term level. This along with adjusting to external market conditions was the reason for the two decreases voted on by the community. That said they could be temporarily useful again in generating the initial usage that migrates traders from v3 to v4 and bootstraps markets there.
There is nuance however, and I also agree with @RealVovochka that token utility would certainly help mitigate pump and dump behaviour. I’m personally hopeful that v4 on a sovereign chain will bring this utility.
I hope that after the launch of the V4 mainnet, the community can adopt better strategies on token economics and find a good balance, so as to bring about a better community consensus. Another point, I think it is very important, when the decentralized exchange can solve the exchange of safe deposit and withdrawal of fiat currency, it will bring benefits to the growth of transaction volume, because I know that the safe entry and exit of fiat currency in some areas The gold channel is very important. If this problem can be solved well, then many traders do not need to go through the centralized exchange to deposit and withdraw money and then withdraw to the wallet to trade on DEX. If this problem is solved, then it will be even more Many traders can trade directly on DEX without going through CEX.
