DYDX and the Appchain Thesis
DYDX and the Appchain Thesis
DYDX and the Appchain Thesis

DeFi

DYDX and the Appchain Thesis

Date

June 3, 2024

It's been seven months since DYDX migrated from Ethereum to Cosmos in order to build out their own sovereign Appchain using the Cosmos stack.

Since then, the DYDX protocol has witnessed over $150B in trading volume with $25M+ rewards paid out to stakers in the form of $USDC, amounting to an APR of approximately 19%.

How are the vibes in the Cosmos Ecosystem?

The vibes are good and there's a very natural and fluid collaboration between teams regarding technical challenges, chain upgrades, or bridging needs.

After a few months, DYDX feels part of the Cosmos ecosystem.

The team is very closely collaborating with folks from @noble_xyz, @osmosiszone, @axelarnetwork, @SkipProtocol and many other Cosmos teams.

"As an appchain you have your own identity, but eventually you build with the entire village and are part of the broader ecosystem." @charlesdhaussy

Slinky Integration

Slinky is an on-chain native oracle built by @SkipProtocol tailored for Appchains.

With Slinky, DYDX will be able to expand their tradable markets from 63 today to more than 800, including RWAs like real estate, commodities as well as various meme coins.

CosmWasm Integration

CosmWasm (CW) is the virtual machine and smart contract layer of Cosmos Appchains.

The smart contract framework can be implemented on a permissionless or permissioned basis. In the end it's up to the DYDX community as they vote on this matter, but most likely CW will have a permissioned implementation on DYDX.

Real Revenue paid out in $USDC

- Staking $DYDX rewards stakers with trading fees paid out in $USDC.

- These fees are generated from users' on-chain trading activity.

- The more trading volume on DYDX, the more rewards will be paid out to stakers.

- This also means that there are no inflationary $DYDX rewards paid out to validators to compensate them for their work.

Trade-Drop Program

It's a program that enables communities and newly launched projects to incentivize trading of their token, for increased volumes and better price discovery.

E.g. The Bera community could incentivize $BERA trading on DYDX by rewarding traders with $BERA tokens.

The Trade-Drop Program works similar to DYDX trading program, where traders earn a small amount of $DYDX with every trade they place on the platform.

The same will be true for alternative tokens like $BERA, which can be distributed to DYDX traders of a certain pair => BERA/USDC.

In hindsight, was it the right move to build a Cosmos based Appchain?

The market is telling us it was the right decision.

Traders like the V4 upgrade and its novel features. We've seen an increase in trading volume on the DYDY chain which amounts to around $1B on average each day.

Furthermore, having our own Appchain, allows us to control the entire stack; from the application layer to the chain layer.

This allows us to build the best possible DeFi product for our customers.


Disclaimer

This is a research article with the purpose to educate readers about certain topics and not a financial advice by any mean.

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