Trader Retention in dYdX

[cryptoplaza]

This chart provided by @RealVovochka about user activity and volume on dYdX’s web platform is really interesting.

It’s an aggregated chart of users, which doesn’t allow us to accurately attribute the data that could demonstrate retention. A first conclusion could be that the incentive program is not successfully attracting a massive number of new traders, which would certainly offset the loss of current traders. The second conclusion is that, assuming there isn’t a significant influx of new users, there is a strong trend of these traders leaving the platform.

Can we solve this problem with incentives? I don’t think that’s the solution. The reality for derivatives brokers is that most of their leveraged users do not manage to be profitable in the long term. This table summarizes the issues. On some platforms, this rate even exceeds 85%, and that’s despite the fact that the statistics in some cases downplay these percentages. This is why CFD brokers are among the companies with the largest marketing budgets (we can see them advertising with the most important football teams in Europe). This is partly because it is common for them not to hedge clients’ trades in the market, but rather to take the opposite position directly against the clients. This creates a huge conflict of interest. Can we change this reality? I believe there are mechanisms to do so, and also to partially subsidize these clients’ losses to give them opportunities to become profitable. But I think that simply subsidizing the losses, without providing education and without seeking to offer more sustainable trading operations, is a short-term strategy. To identify those traders who are indeed profitable—which are few—it is necessary to allocate a large part of the budget to attracting more traders to the platform. As I suggested, we should focus on funding those who prove to be sustainable, as they are the clients with whom we really have some hope of achieving retention. Incentives in crypto, I believe, are an excellent tool to open the door to creating value for the project, but we need to understand the dynamics of traditional futures trading models, because with such similar operations, I believe we can learn a lot about how to grow these brokers.

20 million is an excellent budget that I believe we must ensure generates significant value. In 2024, the project has achieved fees of 24 million, highlighting the considerable effort this program represents for the protocol.

[Kalmaron]

Here’s some thoughts from someone who left.

If the general consensus is that people leave because it’s not profitable, then perhaps implement a loss incentives feature. There’s a lot of rewards for winning on the platform, but there’s not much for the losers.

However, from personal experience, I stopped using the platform after few epochs for a few reasons.

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A lot of work and focus gets put into non trader initiatives. For the launch of v4, there were actually less features as a trader than v3 and took more than one epoch to catch up.

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As a developer, I appreciate and think that It’s pretty cool you can do stuff like spin up a market on chain, but as a trader I hate it. It just divides liquidity, distracts traders, and requires putting more incentives to market makers to be viable. (May have changed since I first looked at it).

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UX in general is an issue. When I withdrew funds using the integrated squid protocol, it charged me ridiculous gas fees, where I could I have manually done for cents. I did a test transfer first, and I didn’t realize that the selection gets reset on the currency so it was ETH USDT and it took a crazy route to get there, namely because it didn’t leverage CCTP at the time.

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I have a subscription with tradingview and like interactive trading and visualization. The charts in the open source UI are very clunky and not interactive as far as making trades.

Setting orders and stop losses through charts is much easier than typing in four hopefully valid 10 decimal inputs. Easy stop losses means less losses. Even just clicking a point on the chart to fill the price would improve quality of life.

I’m not saying integration in tradingview as a broker is a requirement for me, but orders should be possible with little effort and time.

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Airdrops were a huge thing in the summer, on many other chains (TON, OnChain Summer, …etc), which has far more transparent, lucrative rewards with additional airdrops to attract users. I didn’t see anything on social platforms from DyDx at all in this regard so missed a large sum of potential users by not participating or not spending on marketing.

An interesting marketing campaign could’ve been non withdrawable trading funds based on the losses users incurred
In the past. This could have let users return and see that there may be better tools available to succeed this time and requires to use the platform.

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It really doesn’t matter how much you reward the community when only a few actors reaps the majority of the rewards over multiple epochs and lack of transparency (ChaosLabs rewards) about points being calculated only gives further advantage to the few who took the time to figure it out or had the information shared with them.

Even if they may have made otherworldly contributions to the protocol with their elite level trading, I still hate them for causing my allocation to drop by factors of 10 times. Perhaps a different prize pools could have been determined so the featherweights don’t have to compete with the heavyweights.

This leads into an issue of insufficient validation performed for bad behavior of gaming the rewards. Most of the ones found were brought up by the community and announcements is met with “we will keep an eye on for this in the next epoch”. A pretty big turn off if you want traders to stay long enough for the next one.

On culture:
Lastly, it seems like there’s a lot of infighting and lack of genuine interaction in the forum. Conflicts are rarely resolved (at least publicly) and bubbles over into future posts. I didn’t see much positivity in general outside of announcements. I’m not helping in this regard, but it is feedback for the topic ;).