The Governance Burrow, Media Burrow, and the dYdX Foundation are excited to bring you a new mid-epoch governance review. This review provides a summary of governance related discussions, dYdX Request for Comments (“DRC”), and proposals discussed so far in Epoch 11.

Epoch 10 Review

On June 13, dYdX Foundation hosted a discussion on Discord regarding general updates, current governance proposals, and an Epoch 10 review. Before we discuss governance updates from the current Epoch, we wanted to share the Epoch 10 Review created by the Media Burrow: https://www.youtube.com/watch?v=E2IGxySqW_U.

Mid-Epoch Governance Review

Snapshot Polls

Adding 15 New Assets to the Starkware Priority Timelock Executor

On June 18, Reverie created a Snapshot poll to add 10 new assets to the Starkware Priority Timelock Executor (15 assets total). This is a follow-up to the previous proposal to add 5 assets to the dYdX exchange. The Snapshot poll ended on June 22 and there was almost unanimous support from the community (13M $DYDX and 279 voters) to add the 15 assets to the dYdX exchange.

The 15 assets proposed are APE, GMT, FTM, AXS, OP, WAVES, GALA, SAND, MANA, 1000SHIB, THETA, RSR, ZIL, VET, and ENS. These assets can be reviewed using the asset listing tool created by Chaos Labs.

Note, adding new assets requires an on-chain vote and the subject matter falls under the parameters of the Starkware Executor. If the on-chain proposal passes, it does not guarantee that the assets will be listed by dYdX Trading Inc.

dYdX Request for Comments (“DRC”)

DRC: Winding Down the Borrowing Pool

On June 16, Sixtant posted a DRC to:

1. Wind down the borrowing pool,
2. Pause the rewards generated by staking $USDC to the Liquidity Staking Pool, and
3. Send the rewards (383,562 $DYDX per Epoch) to the Community Treasury.

Sixtant outlined that the changes could benefit the dYdX community because

1. The dYdX community is paying $DYDX rewards for under-utilized $USDC capital,
2. Prospective borrowers provided inadequate disclosure, and
3. The structure of the borrowing pool negatively impacts competition among LPs.

Xenophon labs agreed with the main points of the DRC and shared a Dune dashboard to inform further discussion about how stakers and borrowers have interacted with the Liquidity Staking Pool and borrowing pool, respectively.

Additionally, Xenophon labs released a paper detailing their findings around the under-utilization of the Liquidity Staking Pool and alternative uses for $DYDX rewards leftover from the liquidity module if it were to be discontinued.

The alternative options include:

• Partnering with Hummingbot to establish a rewards program for liquidity providers on small-cap markets on dYdX.
• Increasing the R parameter on the Trading Rewards formula to increase the number of rewards that traders receive and the number of fees that they pay.
• Burning all the leftover $DYDX from the liquidity module.
• Modifying the Affiliate Program to include an affiliate rewards mechanism that distributes $DYDX pro-rata amongst affiliates.
• Funding additional marketing campaigns.

Deciding what to do with the remaining $DYDX is an important governance decision, and Xenophon Labs recommends further research on:

• Partnering with Hummingbot to incentivize lower-capital market makers to provide liquidity in smaller-cap trading pairs on dYdX; and/or
• Bolstering participation in the self-service Affiliate Program by incorporating the remaining $DYDX as some additional form of reward. Xenophon Labs suggested that further thinking needs to be done to protect against referral farming and to provide proper incentives for referred users to consistently trade on dYdX.

DRC: dYdX Grants Program v1.5

On June 22, Reverie posted a DRC to launch dYdX Grants Program (“DGP”) v1.5.

The DGP will focus on fundamental categories that the community will need to manage in V4, laying the bedrock for functional groups to form. This will be achieved by doubling down on the highest impact grantees and expanding the overall scope of the program to tackle additional funding categories. The core initiatives that DGP v1.5 plans to fund include:

• asset listing,
• risk management,
• international growth,
• analytics, and
• preparation for dYdX v4.

To accomplish the above goals, the DGP is requesting an additional budget of ~$8M. The ~$8M budget will ensure the program can continue operating until v4 launches.

DRC: Grants Committee Accountability & Transparency

On June 1, mxdydx.eth started a discussion about implementing a transparent and community-driven approach to the selection of the Grants Committee (“GC") and the grants approval process.

In response, Reverie listed the selection criteria here on the DGP website. The selection criteria include:

1. Relevance - Grants must involve, build on top of, or benefit dYdX in some capacity.
2. Benefit - Grants must result in beneficial progress contributed to dYdX.
3. Feasibility - Only realistic projects with tangible results will be funded.
4. Execution - A clear execution plan must be provided for completing the project and reaching the goals.
5. Qualification - Applicants must have some background or credentials to prove their capabilities.
6. Originality - Projects must contribute something new to the protocol, not just repeat existing grants or previous work.
7. Cost - Funding amounts must be within reasonable means, and the team will do its best to attract high-quality contributors with competitive funding without overspending.

To increase the transparency and accountability of the DGP, the DRC for DGP v1.5 explained that one new member of the GC will be a representative from the dYdX community.

DRC: $USDC Epoch Rewards Pool Proposal

On May 21, Starkwhale posted a DRC on improving the current reward mechanics to encourage greater trader engagement and better protocol health by

1. adding one staked $USDC pool for use as an Epoch reward credit line,
2. rewarding locked $DYDX to stakers in return for staking $USDC,
3. tailoring a variable APR correctly to meet market and protocol needs, and
4. creating a board to oversee pool credit to debt ratios and token sales.

The proposal has different vesting periods ranging from 24 months - 60 months. Some dYdX community members expressed concern about implementing such a large change with the uncertainty around V4.

DRC: Hedgies - Lens Protocol Collaboration

On June 12,  AndyGG created a DRC to establish a Hedgies-Lens Protocol collaboration to obtain early access. Lens Protocol, built by the Aave team, allows developers to create social networks on top of the protocol itself and aims to become a decentralized version of Twitter.

It is restricted to the public, and having early access presents the following benefits: free marketing, solidifying our brand name by choosing a unique Lens Handle, and an opportunity to test a new protocol.

Other NFT projects that are already participating include DeveloperDAO, LobsterDAO, PoolyNFT, Aavegotchi, and many more.

dYdX DAO restructure proposal for V4

Parad0xprince created a thread on the dYdX forum and drafted a research paper about the potential future structure of the dYdX DAO after V4. The research paper includes 4 phases:

• Setting up the $DYDX Book Value Treasury (“BVT”) - splitting the fees accrued by dYdX protocol 95% to the BVT and 5% to a pool for MMs. The BVT introduces a swap and burn mechanism.
• Setting up the DAO MM pool - 5% of fees go to the DAO MM pool to incentivize MMs to provide liquidity. Also, the MM pool includes a profit-sharing arrangement between MMs and the DAO.
• $DYDX token as collateral - the possibility to borrow $USDC with holders posting $DYDX as collateral. This phase enhances the DAO experience, creates a new revenue stream, and increases the utility of $DYDX.
• $DYDX options vault - $DYDX token holders can put $DYDX into an options vault that will sell options once a week. MMs will have the option of buying options in bulk.

0XCLR raised the following points for dYdX community discussion:

• tokenomics,
• capital efficiency,
• effect on the liquidity pool, and
• vault architecture and fit with dYdX.

dYdX Token Holder Questionnaire - NFT Giveaway

The dYdX token holder questionnaire concluded on June 24 at 13:30 UTC. Three respondents will be randomly selected from the pool of the top 10 most detailed answers and awarded with a Hedgie NFT.

Note that all submissions will be strictly confidential. More details are available on the dYdX community forum.

Metrics to Track dYdX Endorsed Delegates

Endorsed Delegates are needed to help drive community-led growth, development, governance, and the self-sustainability of the dYdX protocol. Recently, dYdX Foundation created a Dune query to provide $DYDX holders with more information about Endorsed Delegates. The information available includes voting history, voting power, proposing power, delegated voting power, and delegated proposing power. We hope that the information will increase accountability for Endorsed Delegates.

Conclusion

As we advance towards dYdX V4 - The dYdX Chain, the dYdX community will have a larger role in the development of the dYdX ecosystem and increasing the utility of $DYDX. So far, we are excited by the level of governance participation. The proposals and dYdX Request for Comments (“DRCs”) featured in this governance review demonstrate that the dYdX community is aligned with the long-term success of the dYdX protocol.