Everything you need to know about the $DYDX Token

TLDR

- Token utility & value accrual mechanism
- Token distribution, unlocks & supply schedule
- Investors and funding
- Protocol revenue & real yield paid in $USDC
- The DYDX Flywheel

What is DYDX

dYdX is the world's leading Perpetuals DEX. It's a fully sovereign Appchain, purpose-built & specialized in perps trading, allowing users to trade any asset with up to 30x leverage.

dYdX chain is built on the Cosmos SDK, IBC compatible & fully decentralized.

DYDX's History

- 2017 dYdX was founded by Antonio Juliano, one of the first engineers at Coinbase
- 2019 Launch of dYdX v1 on Ethereum Mainnet
- 2020 Migration to StarkWare (ETH L2)
- 2021 Launch of the $DYDX token
- 2022 Series C Funding: $65M raised
- 2023 Transition to standalone Appchain => Launch of dYdX v4

Token Overview

- Genesis supply: 50M
- Circulating supply: 706M / 71%
- Max supply: 1B
- Market Cap: $602M
- FDV: $766M
- Token Price: $1

Token Utility

1) Security: The $DYDX tokens can be staked to secure the dYdY chain.

2) Staking: $DYDX stakers earn $USDC rewards for their effort. More than $32M have already been paid out to stakers.

3) Governance: Stakers can also voice their opinion on network proposals & chain upgrades via on-chain governance.

Investors and Funding

Seed Round:
- Date: December 2017
- Amount raised: $2M
- Investors: Andreessen Horowitz (a16z) & Polychain Capital

Series A:
- Date: October 2018
- Amount raised: $10M
- Investors: a16z, Polychain, Paradigm

Series B:
- Date: February 2021
- Amount raised: $10M
- Investors: Three Arrows Capital, DeFiance Capital, Wintermute

Series C:
- Date: June 2022
- Amount raised: $65M
- Investors: Paradigm, Electric Capital, Delphi Digital, HashKey Capital

Total money raised: $87M

* Price per token: Was not publicly disclosed

Token Allocation

A total of 1B $DYDX have been minted on August 3rd 2021 and will become accessible over 5 years.

Roughly 50% of the tokens went to the community & 50% to team and investors.

The detailed allocation of the max supply can be seen in the chart below.

Token Unlocks

On December 1st, 2023, the first big unlock of $DYDX occurred.

- 30% of the team and investor allocation was unlocked on December 1st, 2023
- 40% was monthly released from Jan 1, '24 to June 1, '24
- 20% will be distributed monthly from July 1, '24 to Jan 1, '25
- 10% will be unlocked until from June 1, '25 to June 1, '26

Supply Schedule

Currently, 70,5% of all $DYDX are unlocked, with the remaining 29.5% being monthly distributed until June 1, 2026.

Whit more than 70% circulating supply, dYdX already went through the majority of token unlocks, which is generally a bullish indicator. Less sell pressure outstanding.

Zero Inflation

dYdX chain has no inflation!

There's a fixed token supply of 1B, which is partly vested and unlocks over time to various stakerholders as we've seen above. However $DYDX stakers do earn staking rewards in form of $USDC.

Tail End Inflation

Commencing five years post-launch, governance might introduce an inflation rate of up to 2% per annum to secure the protocol's development and expansion.

Such changes must be approved by governance and are limited to a maximum of 2% inflation per year.

$USDC Staking Rewards

With the launch of dYdX chain, an innovative staking reward mechanism was introduced.

Rather than paying inflationary rewards to stakers, dYdX pays 100% of the protocol's fees, based in $USDC, to stakers who are providing security to the network.

Staking APR

The staking APR hinges on 3 variables:

a) Daily trading volume: The more daily volume, the more yield will be accrued by the protocol and paid out to stakers.

b) Bonded Tokens: The more tokens are bonded, the less yield per staked token. Only bonded/staked tokens earn yield.

c) $DYDX Price: As the DYDX price increases, the staking APR goes down, since the same amount of yield is paid out to a higher amount of staked capital & vice versa.

Hence, unlike other PoS chains, the DYDX staking APR varies.

According to daily volume, bonded tokens and $DYDX price, the staking APR lies somewhere between 5% - 35%.

The monthly average staking APR is currently 16.24%.

The following chart illustrates total DYDX staking value (green) and daily rewards in USDC paid to stakers (blue).

If we compare this chart with the chart above, we can clearly see that an increase in reward value (blue) leads to a higher staking APR!

Real Yield

dYdX is one of the few protocols in Web3 that has found PMF and pays real yield to stakers, rather than inflationary rewards.

The following chart displays trading fees accrued over the last 30 days.

- $3.8M cumulative fees
- Daily fees range somewhere between $70K - $250K

Some stats:

- Cumulative trading volume: >$200B
- USDC distributed to $DYDX stakers: $33M
- Number of traded markets: 116
- Daily active traders: 700 - 2500 (mostly institutions)
=> dYdX is the worlds largest perpetual DEX by daily volume.

Community Treasury

The dYdX treasury currently holds:

a) 81M $DYDX

b) 19.4M $stDYDX (liquid staked DYDX; earning staking yield)

This values the treasury at $115M, holding 14% of the circulating supply.

Community Treasury Vester

- Another 128M $DYDX are linearly vested until June 1st, 2026 that will replenish the treasury over time.

- At genesis, 26.1% of the total supply was allocated to the Community Treasury.

Learn more about the Community Treasury on Mintscan: https://mintscan.io/dydx/address/community-pool

Protocol Revenue

Since the launch of dYdX chain (dYdX v4) on November 15, 2023, the protocol has generated $33M in trading fees, which were fully distributed to stakers.

This makes DYDX one of the most profitable crypto protocols.

DYDX Flywheel

Since there are no inflationary rewards paid out to stakers & validators, no sell pressure derives from these players.

Instead, stakers rather use their $USDC rewards, to buy more $DYDX tokens and stake them, to earn even more USDC rewards in the future.

This creates a "perpetual" buy pressure for the token.

Sell Pressure

Until June 2026, the remaining 30% of the total supply will be unlocked on a monthly basis, most likely leading to some sell pressure, as early investors & team members will receive their tokens.

CEX and DEX listings

$DYDX is listed on all major exchanges:

1) CEXs: Binance, OKX, Gate-io, Coinbase, KuCoin, Crypto-com

2) DEXs: Osmosis and Uniswap

This large distribution + a growing product, could easily offset sell pressure due to token unlocks.

To sum it up: The Good

- Protocol with clear PMF & real revenue paid in $USDC
- Standalone and fully sovereign Appchain
- Visionary founder with Antonio Juliano
- Very strong technical team
- Well known & established barnd
- Institutional client base

The Bad

- 30% of the total supply will be unlocked over the next two years, probably leading to some sell pressure.
- The Perps market is a very competitive one, with new perps DEXs launching every month.

Conclusion

DYDX's year-long experience, their deep connection to institutional traders and the fact of having control over their own Appchain, positions them well to innovate, grow their product offerings and remain the world's leading Perpetuals DEX.

#TrandAnything

Hedgies

Hedgies are the official mascot and community NFT of dYdX.

The NFT collection has a total number of 4200 pieces and NFT holders enjoy some minor perks when trading on DYDX.

The secondary market for Hedgies can be found here: https://opensea.io/collection/hedgies

DYDX Network Stats

For everyone curious to dive deeper into the dYdX utilization data, we highly recommend checking out this site linked below.

https://app.mode.com/dydx_eng/reports/58822121650d?secret_key=391d9214fe6aefec35b7d35c

Thanks for reading folks, we hope you've found this article helpful.

Disclaimer

This article is intended to educate readers about certain topics and should not be considered financial advice in any way.