Since its inception, dYdX Trading Inc. has supported an off-chain matching engine for the dYdX v3 protocol ("dYdX v3"). On September 27, 2024, dYdX Trading Inc. announced plans to sunset dYdX v3 (the "dYdX v3 wind-down").

As such, and in line with the dYdX Foundation’s purpose, we have prepared a list of FAQs relating to the impact of the dYdX v3 wind-down on dYdX v3 governance and ethDYDX and wethDYDX tokenholders:

I’m a user of dYdX v3, how will the wind-down impact my funds and positions?

In the official announcement (https://dydx.exchange/blog/v3-product-sunset), dYdX Trading Inc. has provided instructions for how users will be able to withdraw their funds and exit positions and associated timelines.

Are dydx.trade users affected by the dYdX v3 wind-down?

No, this change only affects users of dYdX v3. Users of dYdX Chain, dydx.trade or the v4 API are unaffected by this change. The decision to wind down dYdX v3 enables the dYdX ecosystem and the dYdX Trading Inc. team to focus their resources exclusively on further developing the dYdX Chain open source software.

What implications does the v3 wind-down have for the DYDX token?

The dYdX v3 wind-down will not have any impact on the functionality of the dYdX Chain Layer 1 token DYDX. The dYdX Chain DYDX token will continue to operate as the governance and staking token securing the dYdX community’s deployment of dYdX Chain. You can learn more about the dYdX Chain DYDX token here.

What will happen to ethDYDX and wethDYDX tokens after the v3 wind-down?

ethDYDX token holders may use the one-way wethDYDX Smart Contract (the “Bridge”) to exchange 1 ethDYDX token for 1 DYDX token on the dYdX Chain plus 1 wethDYDX token on Ethereum. 

ethDYDX and any wethDYDX received by holders who have sent ethDYDX to the Bridge the will continue to hold their existing governance rights over the dYdX v3 smart contracts, although the practical utility of those voting rights may be diminished on dYdX v3 after the wind-down of dYdX v3.

How do I bridge my ethDYDX from Ethereum to dYdX Chain?

This five minute video tutorial explains how ethDYDX holders can leverage the permissionless bridging process.

How does the bridge smart contract work?

Information on the Bridge and the migration of ethDYDX tokens from Ethereum to the dYdX Chain is available here and here.

How long will the ethDYDX to native DYDX bridge remain open?

As of September 26, 2024, 77.3% of the total supply of ethDYDX has been bridged to dYdX Chain while 22.7% of the total supply remains on Ethereum (dune dashboard here). There is no pending community discussion about the Bridge. In the future, the dYdX Chain community could choose to cease support for the Bridge, but this would only occur after community discussion and governance vote. 

What is the difference between ethDYDX, wethDYDX, and native DYDX?

ethDYDX and wethDYDX are Ethereum-based governance tokens for dYdX v3, with wethDYDX being a wrapped token received by ethDYDX token holders who have interacted with the bridge smart contract. DYDX is the governance token for the dYdX community’s deployment of the Layer 1 dYdX Chain. More information about each token is available here.

What will happen to the dYdX v3 community and rewards treasuries post wind-down of the v3 protocol?

The dYdX v3 community has already voted to effectively bridge ethDYDX tokens in the community treasury, the rewards treasury, and each respective vester contracts to dYdX Chain, to fund trading rewards, incentives, and community grants and initiatives on dYdX Chain. Therefore, no impact or consequences are expected for the community and rewards treasuries on dYdX v3 as a result of the dYdX v3 wind-down. You can learn more here.

What will happen to earned but unclaimed ethDYDX in the v3 Rewards Treasury?

As of September 26, 2024, 6.8M ethDYDX remain in the v3 Rewards Treasury smart contract. Users with earned but unclaimed ethDYDX held in the Rewards Treasury smart contract can withdraw them at any time. Therefore, no impact or consequences are expected for the Rewards Treasury as a result of the wind-down of the dYdX v3 protocol. You can learn more here.

What will happen to USDC staked to the dYdX v3 Liquidity Module?

As of September 26, 2024, 176K USDC remains staked in the dYdX v3 Liquidity Module. Users staking USDC to the dYdX v3 Liquidity Module smart contract can withdraw at any time. USDC staked in the Liquidity Staking Pool has not earned any rewards since September 29, 2022. Therefore, no impact or consequences are expected for the dYdX v3 Liquidity Module as a result of the wind-down of the dYdX v3. You can learn more here.

What will happen to the ethDYDX staked to the dYdX v3 Safety Module?

As of September 26, 2024, 1.3M ethDYDX remains staked in the dYdX v3 Safety Module. Users holding stkDYDX after staking ethDYDX to the dYdX v3 Safety Module smart contract can unstake and withdraw ethDYDX at any time. ethDYDX staked in the Safety Module has not earned any rewards since November 28, 2022. Therefore, no impact or consequences are expected for the dYdX v3 Safety Module as a result of the dYdX v3 wind-down. You can learn more here.

What will happen to the dYdX v3 governance smart contracts?

Deployed dYdX v3 smart contracts (DydxGovernor, Executor, Priority Timelock, Governance Strategy V2, Safety Module, Liquidity Module) on Ethereum are governed by Ethereum-based ethDYDX and wethDYDX holders and may be changed in the future via dYdX v3 governance. A detailed overview of the technical architecture of dYdX v3 governance smart contracts is available here.

How can I distinguish between information about dYdX v3 and dYdX Chain online?

It’s prudent to exercise caution when reading about dYdX software upgrades because publishers often get things wrong. To keep things simple, you can remember that any content that mentions Ethereum is likely outdated and talking about dYdX v3 (which will be sunset at the end of October 2024). Content that includes dYdX Chain and the native DYDX token is likely talking about dYdX Chain. 

What is the purpose of the dYdX Foundation?

The dYdX Foundation’s purpose is to support and grow every aspect, technical or otherwise, of the current implementation and all future implementations of the dYdX protocol, including but not limited to the ecosystem related to the dYdX protocol (the “dYdX Ecosystem”), and to foster participation from others who seek to support and grow any aspect, technical or otherwise, of the dYdX ecosystem or the current implementation and all future implementations of the dYdX protocol. We’re confident that intensifying the ecosystem’s efforts on dYdX Chain will further strengthen its position as DeFi’s pro trading platform.

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Disclaimer 

The dYdX Foundation has no control over dYdX v3, including the off-chain orderbook, the off-chain matching engine, the respective front-ends, v3 governance, or user funds, and has no access to or ability to control dYdX v3 user funds in any way.

Nothing in this document should be used or considered as legal, financial, tax, or any other advice, nor as an instruction or invitation to act by anyone.  ethDYDX, wethDYDX and DYDX token holders shall conduct their own research and due diligence before making any decisions.  The dYdX Foundation does not vote or participate in dYdX v3 or dYdX Chain governance.  The dYdX Foundation may alter or update any information in this post in the future at its sole discretion and assumes no obligation to publicly disclose any such change. This post is solely based on the information available to the dYdX Foundation at the time it was published and should only be read and taken into consideration at the time it was published and on the basis of the circumstances that surrounded it. The dYdX Foundation makes no guarantees of future performance and is under no obligation to undertake any of the activities contemplated herein

The Bridge smart contract and the dYdX Chain software are open-source software to be used or implemented by any party in accordance with the applicable licenses. At no time should the Bridge smart contract or the dYdX Chain and/or their software or related components be deemed to be a product or service provided or made available in any way by the dYdX Foundation. Interactions with the Bridge smart contract or the dYdX Chain software or any implementation thereof are permissionless and disintermediated, subject to the terms of the applicable licenses and code. Users who interact with the Bridge smart contract or the dYdX Chain software (or any implementations thereof) will not be interacting with the dYdX Foundation in any way whatsoever. The dYdX Foundation does not make any representations, warranties or covenants in connection with the Bridge smart contract or the dYdX Chain software (or any implementations and/or components thereof), including (without limitation) with regard to their technical properties or performance, as well as their actual or potential usefulness or suitability for any particular purpose, and users agree to rely on the Bridge smart contract software and the dYdX Chain software (or any implementations and/or components thereof) “AS IS, WHERE IS”.