This is the 7th edition of dYdX Epoch Review, presenting updates from the dYdX community and ecosystem. To stay up to date in real-time, join us on Discord, Twitter, and the Forums.

Epoch 6 Highlights

• Total volume on the dYdX Layer 2 protocol was approximately $73B, with Average Daily Volume decreasing to $2.7B. Ending Open Interest increased to $941M and Total Value Locked increased slightly to $916M.
• ~6.8K unique wallets earned 5.8M $DYDX through trading, liquidity provider, and staking rewards. 45K unique wallets have previously earned $DYDX rewards from retroactive, trading, and liquidity mining rewards. ~20K unique wallets currently hold $DYDX and ~2.2K unique wallets currently hold $stkDYDX.
• 17 addresses were eligible for LP rewards with the majority earned by 2 market makers. Competition in the pool is still strong. The dYdX community voted strongly in favor of reducing the LP rewards volume threshold for market makers from 1% to 0.25%. Market makers meeting the 0.25% threshold in Epoch 6 are now eligible to earn rewards in Epoch 7. 37 addresses (17 existing and 20 new) did more than =>0.25% of maker volume in Epoch 6, and thus are eligible to participate in the LP rewards program in Epoch 7.
• $315M $USDC from 737 users was staked to the Liquidity Staking Pool. 5 market makers have borrowed $USDC from the staking pool. At the start of Epoch 7, $191M $USDC is staked to the pool and earning $DYDX rewards.
• 25M $DYDX from 2,222 users was staked to the Safety Module. At the start of Epoch 7, 25M $DYDX is staked to the pool and earning $DYDX rewards.
• 8.99% of the total $DYDX supply (excluding unearned Retroactive Rewards transferred to the Treasury and the $DYDX vested in the Community Treasury) is considered liquid at the end of Epoch 6.
• The forum discussions and proposals continue to cover various important topics. Most notably, the community almost unanimously supported (1.1M $DYDX/$stkDYDX and 268 voters) implementing the borrowing framework created by the dYdX Foundation to onboard LPs to enable them to borrow $USDC staked to the Liquidity Staking Pool for market-making purposes. Second, the community strongly supported (27M of $DYDX/$stkDYDX and 99.8% of votes) reducing the threshold to receive LP rewards from 1% to 0.25%.
• The DGP has released two rounds of grant approvals with a total of $768,000 in pledged funding. The first round approved 9 grants with a total of $510,000.00 and the second round approved 8 grants with a total of $258,000 in pledged funding.
• dYdX Foundation posted an open call for Endorsed Delegates to jump-start delegation before a treasury-funded solution is developed.
• dYdX Trading Inc. announced the Hedgies, a 4,200-piece collection of NFTs. 2,443 Hedgies were included in the Initial Distribution to (1) users who voted on on-chain proposals (Feb 1), (2) active traders from Epoch 5 (Feb 2), and (3) the public (Feb 5). Over the next two years, the remaining Hedgies will be distributed by dYdX Trading Inc. and as rewards for top-performing traders in Trading Leagues.
• dYdX Foundation purchased 205 Hedgies to promote the growth of the dYdX protocol and governance. On February 14, dYdX Foundation posted a list of potential actions that may result in dYdX community members being rewarded with Hedgies.
• dYdX Trading Inc. announced Trading Leagues, a first of its kind product that enhances the trading experience and rewards traders with weekly prizes. There are 5 leagues: Bronze, Silver, Gold, Platinum, and Diamond. All traders will start in the Bronze League and work their way up each week, based on performance.
• dYdX Trading Inc. announced that the fee schedule was reduced up to 66% for a minimum of 3 months.
• Epoch 6 ended on February 15 at 15:00:00 UTC. Epoch 6 rewards will be claimable here on February 22, at ~19:31 UTC (7 days after the end of the epoch plus a ~4.5 hour delay). Once tokens have been claimed, they can be transferred, staked to the Safety module, or delegated to dYdX governance.

Performance Indicators

for Epoch 6 (January 18, 2022 15:00:00 UTC - February 15, 2022 15:00:00 UTC)

* No addresses were identified as wash trading during Epoch 6.

~20K unique addresses currently hold $DYDX and ~2.2K unique addresses currently hold $stkDYDX.

~45K unique addresses have previously claimed $DYDX rewards from retroactive, trading, and liquidity mining rewards.

Trading Rewards

3,835,616 $DYDX were earned over the course of Epoch 6 and will be distributed to 8,957 traders. Trading rewards were distributed proportionally based on a formula rewarding both fees paid, $stkDYDX, and average open interest.

Competition in this epoch remained flat, as evidenced by lower fees paid and the sum of all trader scores. However, the traders eligible for rewards and the number of active traders increased slightly.

A breakdown of the adjusted trading activity and Trading Rewards distribution can be found below:

Source: Foundation Metrics Page

dYdX Trading Inc. did not identify any Ethereum addresses that conducted clear wash trading during Epoch 6. Learn more about Wash Trading here.

As an input to the Trading Rewards calculation, users’ fees paid, $stkDYDX balance, and average open interest were reset to 0 at the start of Epoch 7.

Learn more about the trading rewards program in our documentation, or our recent blog post.

Liquidity Provider Rewards

1,150,685 $DYDX were earned over the course of Epoch 6 and will be distributed to 17 market makers based on a formula rewarding a combination of uptime, two-sided depth, bid-ask spreads, $stkDYDX, and the number of markets supported.

In Epoch 6, there were 17 addresses in total eligible for LP rewards. The following chart displays the rewards distribution by market maker over the course of the epoch:

Source: Liquidity Provider Rewards Dashboard

In Epoch 6, the dYdX community voted strongly in favor of reducing the LP rewards volume threshold for market makers from 1% to 0.25%. Market makers meeting the 0.25% threshold in Epoch 6 are now eligible to earn rewards in Epoch 7.

The Foundation Metrics Page has maker volume charts to see which addresses did >=0.25% of maker volume in a given epoch:

37 addresses (17 existing and 20 new) did more than =>0.25% of maker volume in Epoch 6, and thus are eligible to participate in the LP rewards program in Epoch 7.

As an input to the Liquidity Provider Rewards calculation, market maker’s uptime, two-sided depth, bid-ask spreads, $stkDYDX, and the number of markets supported are reset to 0 at the start of Epoch 7. New market makers providing >=0.25% of maker volume in Epoch 7 will be eligible to join the pool in Epoch 8.

Learn more about the trading rewards program in our documentation, or our recent blog post.

Liquidity Staking Pool

$315M $USDC was staked to the pool over the course of Epoch 6 from 737 users. 383,562 $DYDX were earned over the course of Epoch 6 and distributed pro-rata every second to stakers. At the start of Epoch 6, a large user withdrew $240M $USDC. This large user continued to stake $200M $USDC earning the majority of rewards even though this user requested to withdraw an additional $100M $USDC.

$USDC staked by address at the end of the epoch is as follows:

Source: Etherscan

65 users requested to withdraw before the Blackout Period in Epoch 6. These inactive $USDC funds can now be withdrawn and are no longer earning $DYDX rewards. Users must request to withdraw their funds before the Epoch 7 Blackout Window (last 2 weeks of the epoch) to withdraw their funds starting in Epoch 8.

dYdX Foundation has been working to provide the tooling to facilitate market maker borrowing from the Liquidity Staking Pool. 5 market makers borrowed $USDC from the staking pool. At the start of Epoch 7, there was $191M $USDC staked to the Liquidity Staking Pool. With the reduction of the LP rewards volume threshold to 0.25%, we are looking forward to more Market Makers completing the steps outlined in the borrowing framework and increasing liquidity on the dYdX platform.

Source: Dune

Learn more about the trading rewards program in our documentation, or our recent blog post.

Safety Staking Pool

25M $DYDX was staked to the pool over the course of Epoch 6 from 2,222 users. 383,562 $DYDX were earned over the course of the epoch and distributed pro-rata every second to stakers. The top 4 stakers account for almost 30% of $stkDYDX.

$DYDX staked by address at the end of the epoch is as follows:

At the beginning of Epoch 4, there was strong community backlash against large investors staking their locked tokens in the Safety Module. In the event of a shortfall, $DYDX staked to the Safety Module could be slashed. As a result, investors would be in default of their obligations and would be required to purchase an equivalent amount of $DYDX. While investors are technically permitted to stake their locked tokens, the dYdX Foundation requested for investors to not stake their locked $DYDX and to withdraw any $DYDX currently staked. Several large investors unstaked their $DYDX. Investors are required to comply with the transfer restrictions enforced through contractual agreements with the dYdX Foundation. The dYdX Foundation will continue to monitor investor wallet addresses and work with larger investors to ensure competitive returns from the Safety Staking Pool.

184 users requested to withdraw before the Blackout Period in Epoch 6. These inactive $DYDX funds can now be withdrawn and are no longer earning $DYDX rewards. Users must request to withdraw their funds before the Epoch 7 Blackout Window (last 2 weeks of the epoch) to withdraw their funds starting in Epoch 8.

Learn more about the safety staking pool in our documentation, or our blog post.

Community Treasury

Approximately 766,703 $DYDX vested in the Community Treasury over the course of Epoch 6. The Community Treasury now holds 29,305,724 vested $DYDX tokens.

In Epoch 5, Reverie officially launched the dYdX Grants Program (“DGP”) with 752,000 $DYDX transferred from the Community Treasury to the Grants Committee multi-sig. In the second round of approved grants, the DGP approved 8 grants with a total of $258,000 in pledged funding. We are excited about the level of community engagement and the diversity of applications.

We hope to see continued participation in governance and active distribution of vested $DYDX on an ongoing basis through contributor grants, community initiatives, liquidity mining, and other programs.

Learn more about the community treasury in the documentation.

What's next?

Epoch 6 has ended

Welcome to Epoch 7! Epoch 7 started automatically on February 15, 2022 at 15:00:00 UTC and will end on March 15, 2022 at 15:00:00 UTC.

Epoch 6 ended on February 15 at 15:00:00 UTC. Epoch 6 rewards will be claimable here on February 22, at ~19:31 UTC (7 days after the end of the epoch plus a ~4.5 hour delay). Once tokens have been claimed, they can be transferred, staked to the Safety module, or delegated to dYdX governance.

Circulating supply

8.99% of the total $DYDX supply (excluding unearned Retroactive Rewards transferred to the Treasury and the $DYDX vested in the Community Treasury) is considered liquid at the end of Epoch 6. These earned $DYDX tokens can be claimed in perpetuity.

Claim your $DYDX rewards

The Merkle root was proposed on-chain on February 15 at 19:31 UTC and the 7-day waiting period has begun. Epoch 5 rewards will be claimable here on February 22, at ~19:31 UTC (7 days after the end of the epoch plus a ~4.5 hour delay). Once tokens have been claimed, they can be transferred, staked to the Safety module, or delegated to dYdX governance.

The Merkle tree data, which is a list of (address, reward) pairs, is available here.

Under the hood, the Merkle Distributor smart contract will distribute $DYDX token rewards according to a Merkle tree of balances. The tree will be updated at the end of each epoch with each user's cumulative reward balance. An update is performed by setting the proposed Merkle root to the latest value returned by the oracle contract. The proposed Merkle root can be made active after a waiting period has elapsed. During the waiting period, dYdX Governance can freeze the Merkle root, in case the proposed root is incorrect or malicious. Root updates can be unpaused by a ShortTimelockExecutor.

Governance Forums

DIP (off-chain) - Liquidity Staking Pool Borrowing Requirements Framework - PASSED

On January 28, a community member created a Snapshot poll to implement the borrowing framework created by the dYdX Foundation to onboard LPs to enable them to borrow $USDC staked to the Liquidity Staking Pool for market-making purposes. The Snapshot vote concluded with almost unanimous community support in favor of implementing the borrowing framework (1.1M $DYDX / $stkDYDX and 268 voters).

To borrow $USDC from the Liquidity Staking Pool LPs must (1) qualify for LP rewards in the previous epoch, (2) create a public profile on the dYdX community forum, and (3) agree to abide by the revolving credit agreement. $DYDX holders can vote to change the following parameters: (1) adding new LP borrowers, (2) removing existing LP borrowers, and (3) changing the allocations of borrowed $USDC to approved borrowers.

With the reduction of the LP rewards volume threshold to 0.25%, we are looking forward to more Market Makers completing the steps outlined in the borrowing framework and increasing liquidity on the dYdX platform.

DIP 8 (off-chain) - Reduce the threshold for receiving liquidity provider rewards to 0.25% - PASSED

On January 28, Denis Tenchurin created a Snapshot poll to reduce the threshold for receiving LP rewards to 0.25%. The community almost unanimously supported (27M of $DYDX / $stkDYDX and 99.8% of votes) reducing the threshold to receive LP rewards to 0.25%. An off-chain DIP to reduce the Liquidity Provider rewards volume threshold for market makers from 1% to 0.25% was submitted by Denis Tenchurin. Market makers meeting the 0.25% threshold in Epoch 6 are now eligible to earn rewards in Epoch 7.

Reducing this threshold from 1% to 0.25% will provide better competition for tight quoting and uptime (especially on alt pairs, which have had quite wide spreads) and should result in better liquidity overall across the dYdX Protocol. By meeting the 0.25% threshold, 37 market makers are eligible to receive LP rewards in Epoch 7.

DGP Update

In Epoch 5, Reverie officially launched the dYdX Grants Program (“DGP”) with 752,000 $DYDX transferred from the Community Treasury to the Grants Committee multi-sig. The Grants Committee, consisting of 8 committee members committed to dYdX community growth, will manage the multi-sig to fund RFPs. So far, the DGP has released two rounds of grant approvals with a total of $768,000 in pledged funding. The first round approved 9 grants with a total of $510,000.00 and the second round approved 8 grants with a total of $258,000 in pledged funding. We are excited about the level of community engagement and the diversity of applications.

Delegation

On February 11, dYdX Foundation posted an open call for Endorsed Delegates. As we move towards V4, Endorsed Delegates are needed to help ensure community-led growth, development, and the self-sustainability of the dYdX protocol. If you’re interested in delegating the voting power and proposing power of your dYdX or you want to become an Endorsed Delegate please follow the instructions here.

Hedgies allocation

dYdX Foundation purchased 205 Hedgies to promote the growth of the dYdX protocol and governance. On February 14, dYdX Foundation posted a list of potential actions that may result in dYdX community members being rewarded with Hedgies. After receiving community feedback, we will provide a more detailed distribution program to distribute Hedgies.

Other active governance discussion threads

In response to dramatic increases in volume at the end of the epoch, Nibbio started a thread and suggested changing the rewards formula to incentivize users to trade actively every day of the epoch. Instead of calculating the score on the total fees paid over the epoch, Nibbio suggested that the score should calculate 28median(daily fees paid) or 28 24 * median(hourly fees paid).

0xVespasian started a thread to create (1) a veDYDX model to incentivize long-term locking and contributor stickiness and (2) gauges to determine the distribution of $DYDX for specific markets.

On January 10th at 17:00 UTC, a community member created a Snapshot poll to adjust the LP rewards formula by adding more weight to the spread. The change to the LP rewards formula was intended to encourage LPs to put orders as close to mid-price as possible and to increase the distribution of LP rewards. Although more individual addresses voted in favor of the proposal (153 v. 37), the majority of the dYdX community (5.9M $DYDX / $stkDYDX and 67% of votes) voted in favor of keeping the formula the same. The dYdX Foundation is reviewing the formula to ensure an equitable distribution of LP rewards.

The Snapshot poll to adjust the LP rewards formula by adding more weight to the spread highlighted several issues with using Snapshot polls to change the LP rewards formula and off-chain variables more broadly. The dYdX Foundation created a thread and included several minimum requirements for Snapshot polls that are binding and result in changes to off-chain variables:

• Voting Choice – Binary voting options,
• Voting Delay – 6570 blocks,
• Voting Period – 4 days,
• Minimum Quorum – 1M (0.1% of total supply),
• Minimum Vote Differential – 67% of votes, and
• Execution Grace Period – 1 Epoch.

dYdX Trading Updates

Hedgies

On January 26th, dYdX Trading Inc. announced the Hedgies, a 4,200-piece collection of NFTs. 2,443 Hedgies were included in the Initial Distribution to (1) users who voted on on-chain proposals (Feb 1), (2) active traders from Epoch 5 (Feb 2), and (3) the public (Feb 5). Over the next two years, the remaining Hedgies will be distributed by dYdX Trading Inc. and as rewards for top-performing traders in Trading Leagues. In terms of utility, holding a Hedgie results in a one-tier increase in $DYDX fee tier discount on the dYdX protocol. Explore the Hedgies on hedgies.wtf or OpenSea and follow the Hedgies on Twitter, @HedgiesOfficial.

Trading Leagues

On January 25th, dYdX announced Trading Leagues, a first of its kind product that enhances the trading experience and rewards traders with weekly prizes. Trading Leagues is a new type of competition structure that rewards elevated performance on a consistent basis. There are 5 leagues: Bronze, Silver, Gold, Platinum, and Diamond. All traders will start in the Bronze League and work their way up each week, based on performance. In addition to bragging rights, traders can compete head-to-head for top spots, Hedgies, and even cash ($USDC) prizes.

Fee Reduction

On January 18th, dYdX announced that the fee schedule was reduced up to 66% for a minimum of 3 months. $DYDX holdings discounts are still applicable for further discounts as well (with a 2 bps taker fee floor). The fee changes were implemented to keep in line with the market fee schedules of both centralized and decentralized crypto exchanges. dYdX fees are now extremely competitive with major exchanges in the industry. Read more about it here.

New features

• dYdX Trading Inc. launched a Hedgies explorer where you can filter by traits and ID. Read more about it here.
• On January 25, Season 1 of Trading Leagues officially started with 4,543 traders entering the Bronze League. Enter now to win part of the weekly cash prizes. Read more about it here.
• dYdX Trading Inc. added a dashboard to the rewards data page for traders to see the rewards boost they receive for staking $DYDX. Read more about it here.
• Congratulations to the winners of dYdX's first content competition and thank you to everyone who participated. Read more about it here.

Social

• The dYdX Grants Program (DGP) is accepting applications! The DGP represents one of the largest grants programs in DeFi to fund community initiatives. You can read more about it here or submit an application here.
• Antonio, founder and CEO of dYdX Trading Inc., created a new channel on Discord where he actively shares thoughts and strategic insights with the dYdX community. Read it here.
• dYdX partnered with EPNS to launch decentralized push notifications. Read more about it here.
• dYdX Foundation is hiring! Join us as a Governance Growth Lead, a Marketing Associate, a Business Operations & Finance Associate, or a Community Manager.
• dYdX Governance is now live on Boardroom. Get insights into governance, operations, and DAO activities. Read more about it here.
• dYdX governance documentation is now available in simplified Chinese, Japanese, Russian, and Korean. Read more about it here.
• Want to get your hands on one of the dYdX Foundation’s 205 perpetual-loving quill balls? Easy. Get active in Governance! Read more about it here.
• On February 17, dYdX Trading Inc. and dYdX Foundation hosted a discussion on trading, rewards, and governance with Kronos Research and WOO Network. Read more about it here.
• Marc, Chief Legal Officer of dYdX Trading Inc., spoke on Proof of Decentralization with Chris Blec about DeFi attorneys and VC influence in DeFi regulation. Read more about it here and listen here.