On May 16th, the dYdX Foundation hosted a discussion on Discord regarding general updates, current governance proposals, and an Epoch 9 review. The discussion was followed by a community hangout and AMA with the dYdX Trading team.

A redacted transcript is available below:

James (dYdX Foundation): Welcome everyone again. Thanks for tuning in. I know this is pretty late for those who are in Europe, so thanks for staying up to give this a listen. Again, we're excited to continue these AMAs and Epoch reviews with you all, with a focus on continuing to become more transparent and open with our thoughts and everything related to dYdX and the dYdX Foundation. We've got a POAP for those who are attending today, and this will be dropped midway through this Epoch review, so make sure you're listening. It will also be posted in the Hedgies-general where people will have to insert a secret word and then they can go and claim their second POAP for the Epoch reviews.

Let's start with a few housekeeping rules again, please keep the questions you want to be answered posted in the Discord. As usual, after the Epoch review, we'll open up the stage for the AMA. Please request to speak and we'll invite you up. If you are invited up, again, please refrain from any price discussion, this won't be answered. Also, Any discussion related to iOS beta rewards will not be discussed. Here today from the Foundation team and myself, David and Josh, Carl from the Grants team has joined us on stage again, and from the dYdX Trading team, our routine speakers, Corey and Marc.

I think it would be great to hear your thoughts on how we can run these meetings more interactively, so if you've got any suggestions, we're really happy to hear them in the comments and/or at the end of this. To give you a TL;DR of today, David will spend some time going through everything related to Epoch 9, questions will be addressed to the Trading team and touch on everything new at dYdX. I know Marc will then touch on the potential recent DeFi principles doc that he shared on Twitter. Then Carl, from the Grants team, is back again and will touch on the dYdX Grants Program (“DGP”) and news there. Finally, David will finish answering some questions related to the Foundation. At the end of that, we'll have an open platform for all questions.

David, over to you.

David (dYdX Foundation): Thanks, James. Thanks, everyone for joining our Epoch 9 review and AMA session. As per the typical format, I'll walk through some of the Epoch 9 highlights, we'll recap everything and post on the blog later today or tomorrow. Throughout Epoch 9, total volume on the protocol decreased to approximately $32 billion, with average daily volume decreasing approximately 50%, to $1.1 billion. It's been quite a few weeks of volatility. We've seen some of our volume metrics track that volatility, with ending open interest decreasing to $782 million, and total value locked decreased slightly to approximately $900 million. In terms of trading rewards, approximately 7,000 unique wallets earned 5.8 million $DYDX tokens through trading, liquidity provider and staking rewards. Over the course of the nine Epochs, approximately 52,000 unique wallets earned $DYDX rewards from the retroactive trading and liquidity mining rewards program.

Currently, there are about 22,000 unique wallets that currently hold $DYDX, and approximately 3,000 unique wallets that currently hold $stkDYDX. These unique wallets that hold either $DYDX or $stkDYDX have remained relatively flat quarter over quarter. We continue to see the trend of an increasing number of users stake $DYDX to the Safety Module, which is encouraging.

In terms of other updates, there are currently 44 addresses that were eligible for LP rewards, with the majority earned by two market makers. We do see a lot of competition in the pool with a lot of new market makers being added, but we still do see the concentration of rewards. A reminder that market makers meeting the 25 basis points threshold in Epoch 9 are now eligible to earn rewards in Epoch 10.

There are now 43 addresses, 36 existing ones, and 7 new ones that meet that threshold, and thus are eligible to participate in the LP rewards program in Epoch 10. Most notably, over the last Epoch there were a lot of discussions on the forums and within the community around changing the LP rewards formula. The community voted almost unanimously in support of updating the LP rewards formula. That formula has now changed to include a maker volume factor with a parameter weight of 0.45, and a reduction of the parameter weighting of $stkDYDX, depth and spread to 0.2 and 0.35. This is a very significant change for the LP rewards formula. There's a lot of fantastic discussion on the forums with a lot of community members, market makers, and other participants sharing interesting thoughts around market structure and incentives for LP’s. I encourage everyone to take a look at that, and I am encouraged to see these formulas continue to change and move in a positive direction as market structure changes and we get more data on the success of these rewards functions.

The second major update on the governance side was that the community voted in support of updating the trading rewards formula based on research that Max Holloway and the Xenophon Labs team put together. This resulted in a change to the trading rewards formula, which increased the fee weight parameter to 0.8 and decreased the open interest weight parameter to 0.15. This is a very significant change to the two trading rewards and the LP rewards. Both of these changes were implemented at the start of Epoch 10. It's great to see community buy-in and support, and active discussion in the forums. We’re looking forward to seeing the community continue to provide feedback and discuss the trade-offs and future iterations of all of these formulas and the ways that the $DYDX tokens are distributed.

In terms of the Safety Module, there are currently 33 million $DYDX from approximately 3,000 users that were staked to the Safety Module at the end of the Epoch. As I mentioned, this number has increased Epoch over Epoch, which is great to see longer-term holders staking their $DYDX to the pool and earning more $DYDX. In terms of the liquidity staking pool, at the end of the Epoch, there was approximately 270 million $USDC staked from approximately 700 users. At the start of the Epoch, there were about 250 million $USDC actively staked and earning rewards. There's about 83 million $USDC from that pool that's currently borrowed by market makers providing liquidity on a platform. In terms of the total supply, there's an additional 5.8 million $DYDX which will go into circulation in the next day or so, at which point there will be 10.7% of the total supply, excluding the Treasury funds that will be considered liquid and in circulation.

There's more than 10% in the hands of the community, who can actively vote and submit proposals and make any change from a short time lock vote to a long time lock vote to change any of the governance contracts and factors that the community has control over today. If you currently hold $DYDX and/or $stkDYDX, but don't have time to review proposals, gas is too expensive to vote, or you just don't have enough information, Josh from the Foundation team, has been spearheading the Endorsed Delegate program. There are currently nine Endorsed Delegates who've submitted information on Commonwealth. Take a look at their profiles, and feel free if interested to stake your voting or proposal power to them. If you're interested in becoming an Endorsed Delegate, look at the forums and complete the requested information to be considered for that.

Over the course of Epoch 9, the Foundation distributed 14 out of the 205 Hedgies to active community members or governance participants. Again, we get this question all the time, how do we pick who gets a dYdX Foundation Hedgie? It's community members who are active in governance and who figure out a way to provide value to the dYdX community. We have about 190 or so left and we plan to distribute those on an ongoing basis. We are looking forward to encouraging more active community and governance participation more broadly. Another big update in the last Epoch is that the dYdX Foundation announced and launched the Ambassador Program. We had over 2,000 applicants for this program and we ended up selecting 16 Ambassadors that we've onboarded into the six burrows for what we're calling Season 0. There's the analytics burrow, the governance burrow, the media burrow, the risk analysis burrow, the student burrow, and the user onboarding burrow.

We decided to keep these quite small at the start, just to try to provide some structure around Season 0. The teams have been heads-down thinking through the role of these burrows and how they provide value to the overall ecosystem. They will be sharing more frequent updates on Commonwealth and it's been great to see the quality of output from our Ambassadors, and we are excited to see that scale and the impact that they have over time.

On the call today, we have Carl from the Reverie team and the DGP. I'll let him speak to a lot of the updates there. In the last Epoch, they distributed about $170,000 in funding throughout two rounds. There's been at this time close to 62 or so grant recipients who have received over $2 million in pledge funding.

The DGP did make some major announcements last week, which I'm sure there are some questions about, and I'll let Carl address them. We’re very encouraged by all of the grant recipients and we are starting to see some great high-quality grant recipients share their projects and build community development tools more broadly. Last few updates on the dYdX Trading side. The major update was the launch of the iOS app. I want to give a huge shout-out to all of the iOS beta testers for their time and efforts in providing feedback on the app. We encourage all of our community members to continue to provide feedback on the product. The dYdX Trading engineers take that to heart and can build a better product with all of the feedback that people provide. Major thank you again to all those who did contribute their time.

Lastly, there were some changes to the dYdX fee schedule in the last Epoch. To celebrate the release of the iOS app, the dYdX Trading team announced a second indefinite fee holiday effective as of May 10th. Fees are really low and if you're considering trading, dYdX is the venue to do that. Lastly, on the administrative side, Epoch 9 ended on May 10th at 3:00 PM, UTC. As per usual, Epoch 9 rewards will be claimable on the community website on May 18th at 22:04 UTC, which is approximately seven days after the end of the Epoch. There was a 31 hour delay due to some engineering work, which has since been fixed. Once tokens have been claimed they can be transferred, staked to the Safety Module or delegated to dYdX governance. That's it on my side. Thanks, James.

James (dYdX Foundation): Thanks, David. Let's move on to the AMA questions. Marc, if you don’t mind, we'll start with you. Would you be able to touch on the importance of the recently produced DeFi principles doc and why you think people potentially should pay attention here?

Marc (dYdX Trading): Sure. The DeFi principles doc is not a dYdX specific effort at all, but I do think it's very relevant for dYdX. The general idea behind this document was that I think folks in DeFi recognize that from a policy and regulatory perspective, it's important that DeFi meets certain minimum principles. We don't want people running around not caring about the code they're putting out, things of that nature. We also don't want to be overly regulated in a way that likely doesn't make a lot of sense. So the idea was to get broad industry input into a set of common-sense principles that the DeFi space could all align behind.

It was a group of about probably 15-20 people that initially put it together, then we got feedback from another 30-40 people in the DeFi space. Contributors were devs, lawyers, and growth people across the space. Somebody then posted it on GitHub looking for further comments, which we haven't received much on. But the general idea is that eventually after giving it enough time, and we're probably approaching that time, it'll be something that we'll try to see some of the DeFi projects align behind, and hopefully others as well. They're just common sense principles that help the space as a whole.

James (dYdX Foundation): Awesome. Thanks, Marc. Yes, I encourage everyone to check that out and give that a good read. Moving on then to Corey, from the dYdX Trading team. Corey, could you give us an update on how the iOS launch has gone for dYdX Trading?

Corey (dYdX Trading): Yeah, certainly. I think the iOS launch generally went well. We've received a lot of great feedback that the app itself is super high functional and looks good. We've had very minimal complaints about the app itself. From a product perspective, I think it went great. Marketing perspective, generally it went fairly well, and it's an ongoing thing. We are launching a variety of paid marketing campaigns just to get more distribution of the app itself, and to better onboard new users to the platform via some of these paid ads.

On the coverage side of things from media outlets, this was a little bit unfortunate. The Terra downturn dominated market cycles over the last week. The day we launched the app was pretty much the worst day for the Terra meltdown. Almost all of the major media publications were exclusively focusing on that. However, we did get some coverage, which got distributed around a lot of different international media publications as well. Also, Antonio was on Bloomberg. He had a couple interviews there, which was also a positive event, he mentioned the iOS app specifically a bunch as well. A little bit of a mixed bag on that front of things, but overall it was pretty good.

James (dYdX Foundation): Awesome. Thanks for that update. And another question from the community, with an impending recession and the recent issues surrounding the Terra ecosystem and crypto, how has this, if any, impacted the decisions made at dYdX currently?

Corey (dYdX Trading): This is a really good question and something we just talked about internally. At dYdX, we try to view the longer-term time horizon when making many product decisions at dYdX. Some short-term things might change on our front, which most likely won't affect anyone listening on this call. We may just slow down a little bit on the hiring side and focus a little bit more on developing the product as it is today. We’ll also be putting a decent percentage of our engineering team and time on V4. From the growth side of things, we might just spend a little bit less on that front as well. Again, our goal is really to become the largest exchange in crypto on a five-year time horizon. So we might grow a little bit less aggressively over the next few quarters, but over the long-term, I think things remain on track.

James (dYdX Foundation): That's awesome. Thanks for sharing that. Now that the iOS app is released, is there anything in the near term, within the next quarter, that can be shared with the community?

Corey (dYdX Trading): Yeah. As I mentioned, we are moving more and more engineers over to the V4 side of things. I mean, on the near-term roadmap, in terms of major releases there's probably not going to be too much. We are iterating on the product itself, adding additional order types, and adding more social functionality to the product. The self-serve affiliate program will hopefully be live within the next few weeks. So things of that nature, which I'm sure a lot of our users will appreciate quite a bit as many of these things were pretty front-end facing.

Once we launch these things, a lot of people on social media and KOLs will be incentivized to talk about and share what they are doing on dYdX a lot more. The virality loop that we're creating will become that much better. Overall, I'm excited along that side of things in terms of more social functionality and new order types. The product itself will continuously make small to medium improvements over the next 3-6 months. The major thing is focusing on V4.

James (dYdX Foundation): Awesome. Touching on V4, is there anything that you can inform the community now? Are there any updates on V4, or is that still largely in the background currently?

Corey (dYdX Trading): Yeah, still largely in the background. I'll just say, as I mentioned a few times already, we are moving more of our engineering resources to the V4 development. What that means is, (A) we're trying our best to be on track for the V4 launch, and (B) some of the engineering resources are now taken away from the current version of the protocol. But overall, things are looking very positive. That's pretty much all I can touch on at the moment.

James (dYdX Foundation): Corey, last few questions. Are there any plans to launch APE token and other popular DeFi tokens like this in the future?

Corey (dYdX Trading): Yeah, this is a really good question. In my opinion, I would say yes, absolutely, we should launch more tokens like this. As a lot of people know, it's really up to the community to add a lot of these newer tokens to the smart contracts. These things have to go through a governance vote. Maybe David or the Grants team could talk a little bit more about this in the next section, but it does sound like there are some really interesting things coming down the pipe here as it relates to Grants being more involved in the listing process.

James (dYdX Foundation): Thanks, Corey. That's great. Moving on to the Grants team then. Carl, is it possible to have a broad update on the current state of the DGP?

Carl (dYdX Grants): Absolutely. As probably everybody saw already, we have put a pause on new approvals for the DGP. Both just as a result of all the grants that we approved, we had limited funding and we hit the max on this. The market downturn did reduce our funding capabilities, but we're just really excited to have come to the end of this V1 of the DGP, and we're super happy about all the grants that we've issued. This now allows us to focus all of our attention on completing the grants and working with our existing grantees to make sure their grants are maximizing the value to the community. Also, we will make sure grantees are iterating on projects based on community feedback and that grantees are hitting their milestones so that we have all the products and tools that we funded available to the community as quickly as possible.

As always, I encourage the community to provide as much feedback as possible for any grants that are published in the Discord, or that we're tweeting out. Let your voice be heard. We always love hearing from you about what we can do better.

In terms of the next steps here, we announced in that blog post that we're going to be working on a new proposal to the community to get new funding so that we can continue DGP operations. We have no intention of stopping here and hopefully the community is in support of that, given the value that we've seen from these grants programs.

In addition to that, to Corey's point, we are also working on a few other things, including a new asset listing working group. With grants, we're transitioning now to hoping to launch working groups around specific projects and functions for dYdX. The first one that we're tackling is this new asset listing process, which we think could be brought more to the community and engaging with opinions and feedback from the community members. We are very excited about that, we're very close to having the process complete and we'll be sharing an update probably by the end of this week with a more detailed outline of what that will look like and how the community can contribute and play a role in listing new assets going forward. As I said, we have new and existing grants getting completed in the pipeline and you’ll keep hearing from us with regards to new things getting done, changes to existing grants that have already been done, all the sponsorships that are going out, and all that good stuff.

James (dYdX Foundation): Awesome. Thanks, Carl. That's helpful. Just quickly, everyone, if you want to claim your POAP right now, it is in the hedgies-general channel. The secret word is there that you need to fill in the form with, it'll be on there for the next four minutes. So go into the channel to claim your POAP as it will be closed in four minutes. Unfortunately, if you don't do it within the next four minutes, you won't get your POAP. Moving on then to David. David, a few questions for you. How is the dYdX Foundation team viewing Treasury diversification, especially with the current state of the market?

David (dYdX Foundation): Yeah. This is a good question. It's something that we spoke about in the Foundation all-hands today. The $DYDX token price, along with the rest of the market, has been quite volatile, and that certainly impacts the size of the Treasury. There's a great website on Boardroom that tracks the amount that's currently vested in the Treasury. I can share that on Discord after. That's the tool that I use to look at the Treasury. One hundred percent of the Treasury is currently denominated in $DYDX tokens. At the current price, there's about $150 million worth of $DYDX that is allocated to the Treasury to be distributed over five years. Of that, there's approximately $60 million worth of $DYDX that's currently vested. Similar to a startup, the community should be thinking about the Treasury and how best to utilize those funds to fund growth sustainably.

Part of that is thinking through, what are the working capital needs for the DAO? What are reasonable assumptions over the next 12-24 months around spending on growth and various initiatives? Looking to explore different options for diversifying parts of the Treasury potentially into stable coins to be able to fund parts of those operations. Obviously, with token prices being close to an all-time low, I think there are some considerations around, what's the right timing for diversification? What's the best way to do that? On diversification, I know several community members that have been funded by the DGP, and then other people on Discord have started to talk about that. This is important and ultimately, as Corey said earlier, I think the community has to have a long-term view on a 3-5 year horizon around building the largest crypto trading platform that is community and DAO controlled.

For that DAO and community to be able to operate sustainably, we must understand and discuss what's the right size of the Treasury that should be earmarked and diversified potentially into stablecoins to be able to fund and support that. I think this is likely to be a very important topic that is to be discussed over the next few weeks. Timing is quite hard and there's probably never a good time to diversify, but I think it's really important for the community to have these discussions openly, and for the best ideas to surface.

James (dYdX Foundation): Thanks, David. I guess this is coupled with that question. A community member is interested to know if priorities shift for a DAO during a down market like this? Many DAOs have never experienced a down market like this. It would be great to get your opinion there.

David (dYdX Foundation): I think for anyone who's been in the crypto ecosystem for a while now, these cycles happen. There are bull markets that are filled with enthusiasm, a lot of projects, and excitement all around. The bear markets are sudden, brutal, and take a toll on the industry as a whole. I think collectively, internally, a lot of people are positioned, or at least have a strong opinion that the next 12 to 18 months are likely to be quite challenging. Without positive catalysts, at least market cap and price action across the industry, and then activities such as what happened in the Terra and Luna ecosystem certainly impact market sentiment. Where we shine and what differentiates our ecosystem is, we continue to build. Having that long-term view over a 3-5 year horizon is really what we're optimizing for. As Corey mentioned earlier, there may be some impact on slowing down certain growth initiatives over the next 6-12 months, but collectively we feel like we've been hiring and building out a best-in-class team. Certainly, at the Foundation we've expanded the size of the team, we'll have onboarded 10 full-time members in the next month or so. We've brought on a lot of community managers that have done an excellent job. We've brought on 16 ambassadors and are kick-starting that process. We have volunteers all over the world that are continuing to build for that long-term vision. I think the reality is, that it's likely that a lot of other projects run out of funding, don't survive, and/or pivot. We've built a really strong foundation for growth and we have the right talent and capital to be able to sustain this bear market and grow when the market does recover, which it always will.

James (dYdX Foundation): Thanks, David. Apart from the Treasury diversification piece, are there any other governance-related posts, voting, or forums that the community should pay attention to in this Epoch?

David (dYdX Foundation): Yeah, I think there are quite a few. Carl alluded to this, but there's a lot of activity and discussion around the new asset listing process. I know the Chaos Labs team has been working on a proposal there and a process that they'll be releasing soon. One of the key differentiators for dYdX, relative to centralized exchanges is at this point the community has control over which assets get listed and which markets get added to the smart contract. This is something that we've talked about for a while, but proving that the community can come together and add the markets that people want to trade, and test that process end-to-end is something that I'm looking forward to being discussed and hopefully implemented in this Epoch.

The Treasury diversification piece I talked a little bit about, but clearly that's very high impact given all of the work that's being done on the Ambassador Program and DAO planning more broadly. I encourage, again, the community to discuss that and try to think through different strategic alternatives to solve that. In tandem with that, the DGP announced that they were pausing funding on any new grants, having run out of funding. From my perspective, seeing the DGP fund over 60 projects in just a few months is encouraging. The community should be thinking about what the next version of a DGP looks like? This ties nicely with some of the Treasury diversification discussions that I mentioned earlier.

I guess other threads that I'm particularly excited about, that I've been thinking a lot about is, there's one thread by Parad0xprince. He published a research paper on a future structure for the dYdX DAO that's really interesting and great food for thought. There's another thread on Commonwealth on the utility of $stkDYDX and its role within the ecosystem. I think there's a great discussion there. Overall, encouraged by the level of involvement and excited to see active and productive discussion on the forums.

Josh (dYdX Foundation): I have one more thing to add. Last Epoch we saw great discussion around trading rewards and LP rewards. I want to remind everybody that evaluation of these rewards formulas is very much an iterative process. These formulas can be changed by just a snapshot vote and they will be changing over time with continued research and analysis from active grantees in the ecosystem, as well as active community members. So appreciate all of the community feedback there.

James (dYdX Foundation): Awesome. Touching on that, for those who are interested in these proposals, LP rewards, and treasury diversification, but don't quite have the full understanding of the impact that this will have on the DAO and the general ecosystem, how would you suggest them having an impact here? Is it by delegating their tokens? Is it by creating educational content? What are your thoughts there?

Josh (dYdX Foundation): We are keeping in mind how much time people have to review proposals. I know from my perspective at the Foundation, that we work in this space full-time, and are always on Commonwealth and always in and out of the Discord. One of the initiatives that I would pay special attention to in the upcoming few weeks is similar to what we did with the LP rewards formula, where we're going to actively have community members, and grantees, trying to arrange the knowledge centers about the proposals into more structured AMA formats. This is to distribute the knowledge a little bit better just so these rewards formulas and proposals are less of a black box for the community.

I would say other initiatives that we're trying to do is communicating smaller sound bites to the community, so this content is a little bit more digestible. Finally, I'll echo what David said in the Epoch review. If you find that you're not having enough time to review proposals, or it's tough to engage, I would strongly encourage you to delegate the voting power and proposing power of your tokens to one of our Endorsed Delegates. They have an active thread on Commonwealth where Endorsed Delegates are posting their profiles and pitches, they've been doing great so far in getting engaged with the community. That would be my shortlist of ways to get involved.

James (dYdX Foundation): Awesome. Thanks, Josh. That's great. Another thing that the Ambassadors are currently working on is also trying to help digest that content down into easy-to-read and easy-to-understand pieces of content. Hopefully, these initiatives will start releasing content during Season 1 of the Ambassador Program.

That's everything from the pre-populated questions, we can open the floor to any questions from the community. Just to stress that anything price-wise or with the iOS beta rewards won't be discussed. If anyone has any questions related to dYdX, the Foundation, the DGP, or DAO more broadly, it would be great to pull you up here. So if anyone's got any questions, feel free to raise your hand.

No questions? Short and sweet, but we'll leave that there then. Thanks to everyone for tuning in. I'm aware this time zone is a little bit difficult for people in Europe, and it might be a reason why fewer people have turned up. Thanks for posting your questions and asking the team detailed questions and getting responses from them. Keep up the comments and interaction. It's encouraging to see all the support and knowledge that you guys have.

Let's end on that note. Again, as usual, this will be deciphered and posted as soon as we can. There's a process that goes on in the background, but we'll keep you updated as soon as the blog post is up and ready. Apart from that, have a great week and we'll see you next Epoch.