Context

As the dYdX ecosystem approaches the release of a fully decentralized version of the protocol - the Mainnet launch of dYdX V4, it is probably in the community’s best interest to start discussing the current and future state of the dYdX DAO. Consequently, the dYdX Foundation is releasing this blog post about a potential short-term roadmap for the dYdX DAO, so the dYdX community may discuss and iterate on it and take the necessary steps to be prepared for the Mainnet launch of dYdX V4 and beyond.

TL;DR

• The dYdX DAO will likely consist of several autonomous subDAOs in the near future that each work on core functional areas of the dYdX protocol and are ultimately accountable to the dYdX community.
• With the full decentralization of the dYdX protocol, we believe the dYdX community should start thinking about and discussing the dYdX DAO at different time intervals: (i) today, (ii) at the time of the Mainnet launch of dYdX V4 (scheduled for Q2 2023), and (iii) beyond the launch of dYdX V4.
• The first and only subDAO formed so far at the direction of the dYdX community has been the dYdX Grants Program (“DGP”). To best position the dYdX DAO for the Mainnet launch of dYdX V4, it is probably in the community’s best interest to actively promote the growth and expansion of the dYdX DAO in the coming months.
• An Operations subDAO would probably be essential for the success of the dYdX DAO, even in the short term. The formation of an Operations subDAO and any subsequent subDAOs would require (1) a dYdX Request for Comments (“DRC”) on the community forums, (2) a proposal that follows the proposal lifecycle, and (3) a successful on-chain vote to transfer DYDX from the Community Treasury to the respective subDAO.
• After the potential formation of an Operations subDAO and the creation of a DAO playbook, it will likely be important for the dYdX community to establish additional subDAOs to focus on other key functional areas of the protocol and the DAO, such as finance and treasury management, growth, risk management, community, and/or others.

Introduction

On January 11, 2022, dYdX Trading Inc. announced a path towards the full decentralization of the dYdX protocol in what is now known as dYdX V4. Later, on August 23, 2022, dYdX Trading Inc. announced the V4 Milestones and the target launch of dYdX V4 Mainnet in Q2 2023. As mentioned in both of those posts, dYdX V4 will be open source, fully decentralized, and entirely controlled by the dYdX community. We encourage the community to read through the two above-mentioned posts in detail.

With the full decentralization of the dYdX protocol, the dYdX DAO and its contributors will be even more essential for the growth and success of the dYdX protocol. The dYdX community will be empowered to make decisions relating to the dYdX protocol, and the dYdX DAO will be the driving force behind the dYdX protocol. Fundamentally, dYdX V4 will mark a turning point in dYdX’s decentralization and the empowerment of the dYdX DAO.

As a consequence of the above, we believe that the dYdX community should assess the current state of the dYdX DAO and the potential implications that dYdX V4 will have on the dYdX DAO. It may be helpful for the dYdX community to discuss the target state of the dYdX DAO by the launch of dYdX V4 and the preparatory steps that could be taken between now and the launch of dYdX V4 on Mainnet to ensure that the dYdX DAO has the resources, tools, and infrastructure it needs to lead a fully decentralized version of the dYdX protocol.

dYdX DAO’s structure: potential next steps

The dYdX DAO will likely consist of many autonomous subDAOs in the near future that each work on core functional areas of the dYdX protocol and are ultimately accountable to the dYdX community.

The first subDAO formed at the direction of the dYdX community was the dYdX Grants Program or DGP. On March 21, 2022, the dYdX community almost unanimously voted in favor of forming a Guernsey purpose trust (the “Grants Trust”) by appointing an 8 person multi-sig committee as trustees (the “Trustees”) and Reverie as the enforcer (the “Enforcer”) of the Grants Trust ​​and reflecting the Trustees’ control of 752,000 $DYDX tokens. The Trustees manage the DGP by making distributions in furtherance of the dYdX protocol and ecosystem. In Epoch 12, the proposal to launch v1.5 of the DGP passed and the Grants Trust received an additional 2,582,000 $DYDX tokens from the community treasury.

To best position the dYdX DAO for the launch of dYdX V4 on Mainnet, it is probably in the community’s best interest to actively promote the growth and expansion of the dYdX DAO in the coming months.

In this post, we suggest a potential short-term roadmap for the development of the dYdX DAO in preparation for dYdX V4, which contemplates the creation of an Operations subDAO. Let’s explore why we believe an Operations subDAO is important and how it could be created by the dYdX community.

Operations subDAO

Why?

A good operations team is essential to enable an organization to function properly. The same is true for a group of people operating autonomously, as in the case of a DAO. Without a solid operations team, the most insignificant mistake -like, for instance, forgetting to make a payment or renewing a vendor’s contract- can result in important processes and operations grinding to a halt. The importance of an operations team is magnified in the context of a DAO because there is generally no initial infrastructure to interact with the off-chain world. Systems and processes are needed to enable other subDAOs to autonomously execute on their core objectives. On that basis, an Operations subDAO would probably be essential for the success of the dYdX DAO, even in the short term.

How?

Among other potential competencies, an Operations subDAO could be responsible for the following: (1) creating a bank account and payments system; (2) establishing and maintaining a DAO communication platform; (3) sourcing and establishing relationships with different vendors and service providers; and (4) enabling the dYdX community and future subDAOs by creating a DAO playbook for optimal subDAO formation, operations, and management. With time, subject to the evolution and performance of the Operations subDAO and to the community’s decisions in connection with it, the Operations subDAO could also be responsible for other ancillary functions such as the creation and operation of a user support service available 24/7/365 for all dYdX users.

To ensure the accountability and alignment of the Operations subDAO, objectives and key results (OKRs) should be articulated in any proposal to form an Operations subDAO. The objectives for the Operations subDAO could be: (1) DAO enablement and infrastructure; (2) increasing transparency and efficiency of the dYdX DAO; (3) reducing barriers to entry for new subDAOs; and (4) contributing to the alignment of efforts within the dYdX DAO. Attainment of the Operations subDAO’s objectives could be assessed by the following key results: (i) registering for a bank account; (ii) establishing and documenting a strategy to convert $DYDX tokens into stablecoins and/or fiat; (iii) establishing systems and best practices for payment, payroll, and financial reporting; (iv) establishing a medium and processes for internal subDAO communication; (v) create a playbook for optimal subDAO formation and management; and (vi) draft, iterate with community feedback, and ratify a set of core values, mission, and vision for the dYdX DAO.

What’s needed?

If the community decided to form it, an Operations subDAO would need resources to fund its operations and expenses, including in relation to its formation, the costs associated with vendors or service providers to be retained and managed by the Operations subDAO, the costs associated to the preparation and production of a DAO playbook, or the costs associated with the employees and/or other contributors to be hired by the Operations subDAO. The Operations SubDAO core team could include key employees and/or contributors consisting of an Operations Lead, DAO Operations Associates, a Corporate Lawyer, and/or a User Support Lead.

After the formation of an Operations subDAO, it could be important for the dYdX community to establish additional subDAOs to focus on other key functional areas of the protocol and the DAO, such as finance and treasury management, growth, risk management, community, and/or others, either before or after the Mainnet launch of dYdX V4.

Note, the structure of the dYdX DAO, any execution timelines, and the formation of any subDAOs or working groups are at the entire discretion of the dYdX community and that this post solely contains suggestions and potential scenarios for the dYdX community to consider and iterate on.

Procedural considerations

The creation of additional subDAOs by the dYdX community funded by the community treasury would need to go through the following steps:

1. A discussion would need to be initiated in the community forums. It is advisable that the initial post should include the most relevant information around the proposal that is being brought forward to allow for an effective discussion amongst dYdX community members, including, for instance, things such as:
2. the name and/or members,
3. the purpose,
4. alignment with the values, mission, and vision of the dYdX DAO,
5. the objectives and key results,
6. a budget, and
7. any other important details that are relevant for dYdX community members to take into consideration.
8. Such discussion should then follow the proposal lifecycle.

New subDAOs would be established after a successful on-chain vote (DIP) that results in the subDAO’s budget being funded from the Community Treasury.

One important thing to note is that should the dYdX community decide to form the Operations subDAO as the next dYdX subDAO and entrust it with the responsibility to work on a DAO playbook (among other things), it may be advisable that any proposals to form other additional subDAOs are brought forward by community members only once the Operations subDAO has finalized and published the DAO playbook, to leverage it - although please be reminded that this is just a suggestion to the community.

Conclusion

The release of dYdX V4 on Mainnet will mark a turning point in the decentralization of the dYdX protocol. The dYdX DAO will, from that point on, be solely and fully responsible for all aspects of the operation of the dYdX protocol. Such responsibility triggers a vital need for the dYdX DAO to (a) understand where it is today, (b) define where it needs to be when dYdX V4 is launched, and (c) figure out and execute the steps that it needs to take to successfully get from (a) to (b), as well as to create a strategy around the future state of the dYdX protocol and the dYdX DAO.

To be in a position to effectively and efficiently lead the dYdX protocol upon the launch of dYdX V4, the dYdX DAO likely should expand and evolve its current structure and operations in the coming months. This post contemplates the creation of an additional dYdX subDAO: an Operations subDAO, and serves as potential guidance that the dYdX community can use as inspiration and, eventually, could decide to follow or iterate on in the coming months.

We are extremely excited by the level of community engagement so far and look forward to the dYdX community making substantial progress in building out the dYdX DAO. We encourage the dYdX community to discuss this post on the dYdX community forum.