curiou about this as well, we are about to launch unlimited and Megavault (which is the main release and which everything else depends on it, like persmissionless listings) is making a loss. One of the vaults for example has a loss of up to 25k. Here the relevant link by the way: https://vaults.dydxgrants.com/
Since we are ignored I did my own calculations.
Total taker fees by all vaults are around $2400.
Total Volume is around $11M (THIS FIGURE IS INCORRECT see the @carlbergman calculation below)
most of the volume is vs dydx14dltc2w6y3dhf0naz8luglsvjt0vhvswm2j6d0 (Wintermute) 43% and dydx18p7nz5rqezkyscdz9pv9rchnsesjyjjyfe92t3 (RavenDao) 7.1%, dydx15u3dtsf4twdxttvy7850dkex7tcf3ps2y8wcuf (Mathrix) 3.5% etc
Personally, I hardly see any retail presence here. Professional market makers might be exploiting the vault strategy, resulting in everyone making money except for the protocol.
While $1.5m was deployed, probably $250k was paid to @max-holloway to manage the vaults. Losses are dynamic but in a range of $40k-$60k.
Seems like a money burn to me
@carlbergman and @max-holloway Correct me if my calculations and conclusions are wrong
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I hope people are starting to figure out why. @ nethermind
Offers these solutions:
In order for market makers to earn on MegaVault
MegaVault will never be profitable.
Losses will be covered by 50% of the trading commission.
Market makers, instead of direct rewards, will receive from the ineffective formula of MegaVault.
It remains to answer the question of what the fate of the DYDX token is.
As we explained in the article, the opportunity lies in providing counterparties to traders as a whole, similar to what other protocols do and how it is done in the traditional world with derivatives brokers. In general, the group of investors in these leveraged brokers tends to be unprofitable; sustainable trading operations are challenging to achieve. However, by providing liquidity to a market, we may find participants who identify arbitrage opportunities at the expense of the market makers.
We have seen this with some financial attacks where, in low-liquidity markets, the price of the underlying asset was manipulated to take advantage of leverage in derivatives markets
Hey @RealVovochka
Lattice Research, as part of their grant, will release a report in the next month. The MegaVault upgrade will include vault withdrawals, at which point we’ll start to transition grants funding out while deposits flow in, marking the end of our initiative.
Those numbers look off to me. Here’s what I see using the following query on Numia:
Total Volume: $100,748,455.75
Total Taker Fees: $26,938.18
In other words, ~$1.5M of capital deposited has facilitated upwards of $100M trading volume in about five months. Keep in mind that our capital deployment was very small at the beginning. Tracking volume over time, we see a positive increase that trends with our increase in capital deployed and number of markets supported:
I just about agree with your market maker numbers. The addresses mentioned have the following share of volume against vaults:
- dydx14dlt: ~42%
- dydx18p7: ~9%
- dydx15u3: ~3%
However, it’s worth noting that these are some of the most active market participants on dYdX. In October, those same addresses had the following share of ALL dYdX volume:
- dydx14dl: ~33%
- dydx18p7: ~3%
- dydx15u3: ~10%
Overall, Vaults facilitate trading volume by improving spreads and liquidity. It shouldn’t really matter who the counterpart is – they were able to trade thanks to the liquidity provided by vaults, ultimately making dYdX a better venue. Adverse selection will always exist in markets, but that’s where the MegaVault will need to adjust its strategy to protect against losses while still facilitating volume.
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hello, @carlbergman
Thank you for the clarification. I realize I made an error when calculating the volume. While my estimation of the taker fees paid by the vaults seems accurate, I agree with the reasoning in your query. Given that vaults typically act as makers, it makes more sense to focus on the taker fees generated in those trades, which can often be paid by the counterparties.
Even if the vaults generated $100 million in volume, that figure is still extremely low. It’s important to put this in context by calculating it as a percentage of the total trading volume. When it comes to market makers, they engaged in these trades because the vaults placed orders inefficiently. Professional participants identified these inefficiencies and acted as takers in those trades. I wouldn’t consider this trading volume to be a meaningful advantage for the vaults.
I understand that over 90% of trading volume across the market involves algorithmic trading battles. However, if the vaults have a negative expected value (–EV) when facing these professional participants, then why provide liquidity under such conditions? Who would want to be a liquidity provider for the vaults if they aren’t able to turn a profit?
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