TL;DR

• The process for adding new markets to the dYdX Chain is a decentralized and permissionless one; the dYdX community is sovereign to decide which new perpetual markets they would like to endorse or support for trading on the dYdX Chain.
• Open-source software enabling the fully permissionless creation of new markets on the dYdX Chain without a governance vote is expected to become available later this year.
• Any asset (or, even, anything at all) can be tokenized, priced, and traded; however, not all tokenized assets may be viewed equally by various jurisdictions or applicable laws.
• We are excited about the potential of new market listings and permissionless markets but invite the community, proposers and voters to think deeply before adding new markets that could carry regulatory risk and therefore may cause harm to the dYdX Chain and its ecosystem. 

Introduction

The dYdX Chain mainnet was launched on October 26, 2023.  Full-production trading was later enabled by the dYdX community via a governance vote that was executed on November 28, 2023.  Since then, the growth and adoption of the network have been on a constant uptrend, with more than $30 billion of cumulative trading volume to date and close to half a million trades executed daily, on average. 

The dYdX Chain launched with 33 initialized markets in post-only mode.  On November 13, 2023, the dYdX community voted to enable trading on all markets by updating the status of all markets to ‘Active’. Shortly thereafter, the dYdX Operations subDAO announced that a user interface and an indexer were fully operational to enable full trading functionality.  Moreover, as part of separate governance decisions, the dYdX community voted in support of: (i) adding the TIA-USD pair to the dYdX Chain on December 22, 2023; (ii) adding the JUP-USD pair to the protocol on February 7, 2024; and (iii) adding the AAVE-USD pair and the BNB-USD pair to the protocol on 12 February 2024, increasing the total number of supported perpetual markets to 37. 

New Trading Pairs & Permissionless Markets

As illustrated above, the process for adding a new market to the dYdX Chain platform is a decentralized and permissionless one; any asset with a reliable price feed that dYdX Chain validators subscribe to can be added and traded on the dYdX Chain, subject only to a successful governance vote and its subsequent implementation.  The dYdX community is therefore sovereign to decide which new perpetual markets they would like to endorse or support for trading on the dYdX Chain. 

At the dYdX Foundation, our vision is that the dYdX Chain will become the underlying infrastructure for the largest DeFi protocol in the world.  For that vision to materialize, a large number of new markets would need to be added to the protocol.  This will undoubtedly require active, conscious, and responsible contributions from the dYdX community.

While the process for adding new markets to the dYdX Chain is already permissionless, there are several technical constraints, notably oracle sources, that currently limit the type of assets that can be added to the protocol.  To learn more about the addition of new markets to the dYdX Chain, check out dYdX Trading’s recent piece on new market proposals.

At this time, all new markets are added to the dYdX Chain’s cross-margining system by default, meaning an account can open multiple positions in different assets that share the same collateral.  Collateral is held in USDC (displayed as USD throughout the product as USDC is redeemable 1:1 for USD), and the quote asset for all perpetual markets is USD.  Therefore, adding assets that are considered risky to the cross-margining system could increase overall protocol and solvency risks.  An isolated margining system for new assets would help isolate or reduce the protocol and solvency risk to a particular asset, which would ultimately help with the process of creating new markets on the dYdX Chain in a permissionless way; therefore, an isolated margining system would likely be a valuable addition to the technology stack of the dYdX Chain.

In addition to verifying transactions and validating data, the current validator set of the network is also responsible for determining and verifying the oracle price for each supported asset. Oracle prices are aggregated prices that provide up-to-date price data for different assets. The oracle price for each trading pair is used for ensuring that each account is well collateralized after each trade, determining when an account should be liquidated.

Every validator runs a continuous process to calculate the fair market price for relevant assets.  The block proposers suggest any needed price changes within the proposed blocks.  Other validators then apply certain rules to agree on the prices in a manner that prevents misuse.  If the block is accepted, the prices also get approved.  By following a new price-acceptance criteria, this logic helps validators make sure that the new suggested price is reasonable and not too far from the existing oracle price before the update.  In a nutshell, it ensures that sudden and extreme changes in an asset’s price are controlled and reasonable.

At this time, the dYdX Chain open-source software only supports one oracle system, requiring price feeds from eligible centralized spot exchanges for each supported asset.  It is recommended that, for an asset to be supported on the dYdX Chain, such asset should already be listed on at least six of the following exchanges: Binance, Coinbase, OKX, Bybit, Gate, Kraken, Kucoin, and MEXC.  The following exchanges could also be used, if necessary: HTX (previously Huobi) and Bitstamp.  In the future, new types of oracle sources and systems could be used from a technical perspective to increase the number and types of markets that the protocol can support.

Further to the above, open-source software enabling the fully permissionless creation of new markets without a governance vote is also expected to become available later this year (permissionless markets are mentioned in dYdX Trading’s recent publication outlining their product roadmap for 2024).  The fully permissionless addition of new markets will enable any party to create and launch a new market by specifying its oracle, market parameters, and potentially providing some initial liquidity, without the need to rely on any action by others and, specifically, removing the reliance on a successful governance vote before a new market can be added to the protocol.  This approach is conceptually similar to Uniswap’s pool listing model, but would be specifically designed for perpetual markets.  With permissionless markets live, the process for the creation of new trading markets would be exponentially more efficient than it is today, empowering users to permissionlessly scale the number of assets tradeable on the dYdX Chain with close to no friction. 

Disclaimer Related to Future New Markets

The dYdX Foundation encourages the dYdX community to make a responsible, diligent and conscious use of the technology enabling the creation of new markets on the dYdX Chain, and to only promote discussions, proposals and actions with regard to the addition of new markets to the dYdX Chain after conducting thoughtful research and diligence on the new markets that are being proposed for adoption on the platform and the potential legal, regulatory and other implications that could be derived for the protocol and its participants from such adoption.  In particular, we discourage any action, engagement or participation by any party directed at promoting, encouraging, enabling or facilitating the addition of new markets to the dYdX Chain when those markets may carry a significant regulatory risk or otherwise have a material regulatory impact on the dYdX Chain or those involved with the dYdX Chain

The dYdX Foundation may, in its sole discretion, choose not to (i) participate in discussions and/or governance processes relating to the creation of certain new markets, (ii) make any public statements in connection with certain discussions, proposals or processes, or (iii) help or support parties involved in the promotion or creation of certain new markets.