The Governance Burrow and the dYdX Foundation are excited to bring you the mid-Epoch 14 governance report! This review provides a summary of all governance-related discussions, dYdX Request for Comments (“DRC”), and proposals discussed so far in Epoch 14.

Epoch 13 Review

On September 5th, the dYdX Foundation hosted a discussion on Discord regarding general updates, current governance proposals, and an Epoch 13 review. The dYdX Foundation also summarized highlights for Epoch 13 in a deck and video.

dYdX - Epoch 14 Mid-Epoch Governance Report

Snapshot Polls

Ambassador Program Continuation

On September 7th, Alucard.eth posted a snapshot poll following up on the DRC on whether the ambassador program should be continued for Season 2. 13 Ambassadors and 5 Burrows (Analytics, Governance, Media, Risk and User Onboarding & Education) expressed interest in continuing as dYdX Ambassadors.

The snapshot poll ended on September 11th, with the following results:

• YES: 5.2M DYDX (65.5%) - 448 voters
• NO: 2.7M DYDX (34.4%) - 124 voters

ABSTAIN: 4K DYDX (0.1%) - 33 voters

Despite a majority of dYdX community members voting (65.5%) to continue the ambassador program, the minimum vote differential of 67% under the minimum requirements for binding snapshot votes was not met. As such, the program was wound down.

dYdX Request for Comments (“DRC”)

DRC: Add agEUR on dYdX

On September 15th, Angle Protocol posted a DRC proposing to list agEUR, a decentralized € stablecoin by Angle Protocol, to onboard Euro users on dYdX and pave the way for forex trading.

agEUR is an ERC20 token backed by reserves composed of USDC, DAI, FRAX, LUSD, WETH, and WBTC on the Ethereum mainnet. It can be minted and burnt at a 1:1 rate from USDC, DAI and FRAX. This allowed agEUR to keep a strong peg since its launch in November 2021, resisting the market turmoil after the UST depeg, and it even helped agEUR maintain the peg of other centralized Euro stablecoins like EURs through their common Curve pools.

agEUR is a decentralized and over-collateralized yet capital-efficient stablecoin available on 12 different blockchains, issued and managed through the Angle Protocol. The protocol itself is deployed on 4 chains including Ethereum, Polygon, Arbitrum, and Optimism.

Relevant Metrics:

• Average Daily Volume: $3M
• Total supply: $42M
• Total Value Locked: $75M
• Collateral Ratio: ~197%
• DEXs: Uniswap, Sushiswap, Curve, Quickswap, Velodrome, ZigZag, Serum, etc.
• Oracle data for agEUR is available on Chainlink

A long-term synergy can be found in Angle Protocol opening shorts on dYdX to ensure hedging of the protocol reserves, similar to the short trading made by UXD Protocol on Mango in order to ensure a delta-neutral position.

DRC: Move the dYdX Borrower Pool to TrueFi

On September 10, TrueFi  updated their DRC post to create a dYdX borrower pool on TrueFi. The potential benefits of this proposal include:

1. Higher utilization of funds and improved liquidity.
2. Use $DYDX token emissions to allocate capital to the most productive market makers.

This updated post explains the specifics of the proposal. TrueFi is proposing a 4-month trial of lines of credit for up to 20 individual borrowers. TrueFi plans to operate the trial with 1,260,000 $DYDX tokens from the dYdX Community Treasury to support this initiative as a subsidy to the real interest rate the borrowers pay.

For the initial 28-day epoch (of 5 borrowers), TrueFi intends to use 63,000 $DYDX tokens. If the price of $DYDX changes drastically during the 4 months and fewer $DYDX tokens are used, the balance will be returned to the dYdX treasury. After the conclusion of this trial, TrueFi would like to explore how to maintain and expand this program once dYdX moves to its own chain in V4. If this program is successful, they will consider building out the ALOC product to live on or be compatible with dYdX's Cosmos chain.

In order to give dYdX full control over this trial program, TrueFi proposes setting up a multisig that would be responsible for launching and managing lines of credit (onboarding borrowers, etc). This multisig would also be responsible for allocating $DYDX tokens for lender incentives on each line of credit.

The proposed 3 of 5 multisig would include the following signers:

1. 0xCLR
2. 0xCChan
3. Vijay Chetty (dYdX former head of business development)
4. Ryan Rodenbaugh (TrueFi contributor)
5. (Open slot) dYdX community member

As it stands today, the counterparty on the MLA signed by the borrower would be The TrueFi Foundation, a BVI Company.

DRC: Partner with Anchorage to Lend Out dYdX Tokens to Market Makers

On September 7th, Anchorage Digital posted a DRC proposing to lend out $DYDX tokens from the community treasury to qualified, institutional third-party liquidity providers (e.g. market makers) to generate interest and increase activity on the platform.

The goal of the program is to: (1) actively promote the growth of the dYdX protocol, (2) increase token liquidity, (3) generate incremental rewards for the community treasury, and (4) help diversify holdings by potentially denominating rewards in $USDC.

Anchorage Digital is proposing for the community treasury to approximately $5M worth of $DYDX tokens to Anchorage Lending for a lock-up period of no less than two months. Anchorage Lending would then lend the tokens on an open term, under-collateralized or unsecured basis to generate interest, which would be returned to the dYdX community-controlled aggregation entity (less a nominal fee). Anchorage Lending would require borrowers to only stake the tokens to the dYdX safety pool and set the loan interest rate to be the same as the safety pool rate (currently at ~13.9%) at all times to eliminate potential arbitrage opportunities.

Active Discussions and Announcements

dYdX Safety Staking Review

Xenophon Labs has written an analysis of dYdX’s Safety Staking Module. The full analysis can be found here, and a succinct summary can be found below.

• The dYdX safety staking module (SSM) is a pool that contains DYDX token that can be slashed by governance and used to pay off protocol debts in the case of a protocol shortfall event. This can be understood as an insurance pool to cover a protocol worst-case scenario, such as an exploit.
• The SSM currently holds 36M $DYDX tokens and pays ~14% APR. However, both historical empirical evidence and game theoretical evidence suggest that in a realistic shortfall event scenario, the protocol would not be able to utilize the full current value of the safety staking pool to pay back protocol debts. We say that the current module’s insurance power, the amount of debt that the protocol could feasibly repay using funds from the safety staking module, is much lower than its nominal value.
• Xenophon Labs proposes four possible solutions to the problem of limited insurance power, with a preference for the 2nd option.

Meet the Delegates Series Ep 3

The new “Meet the Delegates'' series by the governance ambassadors helps the dYdX community to get to know their delegates! Following up on the second episode featuring Moe_L, Vitalii was featured in episode 3.

See more details on Vitalii on this tweet thread and on this blog post!

dYdXstats.com

The Analytics Burrow has built a native analytics dashboard, https://www.dydxstats.com/, to unify dYdX data into a powerful and user-friendly website.

dYdX Stats holistically captures data from the entire ecosystem and curates it in a way that benefits all stakeholders. dYdX Stats introduces a best-in-class dashboard setup which will be directly integrated into the dYdX online presence, benefiting traders, investors, and broader community members alike. See the discussion here.

Governance Burrow Venomics Research

The governance burrow is starting a governance research series to create a discussion that will help educate the community more broadly.

Part 1 - The series begins with a deep dive into VeNomics and its utility.

Part 2 - Part 2 covers vemodel pioneers: CRV (a time-weighted voting and value accrual mechanism that stabilizes the price of assets used in defi such as stablecoins and synthetic wrapped assets), FRAX (fractional-algorithmic stablecoin protocol) and their utility.

Part 3 - Part 3 covers an overview of Perp v2 as an iteration of the vemodel with commentary from the Ambassadors. The vePERP (vote-escrow model) is where vePERP is used to vote and a multiplier is received on PERP locked in the Locking Vault.

Part 4 - Part 4 covers Maple Finance to compare an alternative model (xModel) to VeNomics. Additionally governance colloborated with the risk analysis burrow to understand the trade offs in using the vemodel.

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 report demonstrate that the dYdX community is aligned with the long term success of the dYdX protocol.