
The dYdX Foundation is planning to rebalance its DYDX stake delegations (the “Foundation Delegation(s)”) as part of our ongoing efforts to highlight the central role that Validators play in the dYdX ecosystem and our commitment to contributing to the security and resiliency of the dYdX Chain network. As the protocol evolves, it is crucial to ensure that our delegation strategy adapts with the protocol.
Addressing Profitability Concerns
We acknowledge that the recent change to the protocol revenue distribution has made it challenging for some dYdX validators to remain profitable, especially when accounting for infrastructure costs. Our updated delegation criteria aim to support a more robust validator set while helping validators remain financially sustainable.
New Selection Criteria
The following are the refined criteria for future dYdX Foundation stake delegations:
- Active Set Validators: Only dYdX Chain validators in the active set at the time of the delegation will be considered.
- Position in the Active Set: To promote decentralization and help address the profitability challenges mentioned above, we may exclude validators in top positions of the active set (i.e. the top 10 validators based on stake weight) because validators in these positions already have a high concentration of network stake weight. Also, we may exclude validators at the bottom of the active set (i.e. the bottom 10 validators based on stake weight) because validators in these positions are frequently at risk of falling out of the active set due to fluctuating network stake weight. Our approach aims to achieve a more even distribution of stake weight across dYdX’s validator set.
- Validator Performance: Performance is a key factor in selecting Foundation Delegation recipients, including block production, uptime, sign rate, and adherence to network rules, following the MEV Committee - Validator Guidelines. Validators with a poor performance record may not receive a Foundation Delegation.
- Validator Node Location: The MEV Committee published Validator Guidelines, which recommended, among other things, that dYdX Chain validator nodes should be based in Japan. Since node location significantly affects overall network performance, only validators operating in Japan will be considered for Foundation Delegation.
- Orderbook Discrepancy/MEV: Although orderbook discrepancy is not necessarily indicative that a validator is engaging in MEV, any validators with high orderbook discrepancy can negatively impact the user experience on the dYdX Chain. Therefore, validators with unusual orderbook discrepancies at the time of delegation may not receive a Foundation Delegation or may risk having their Foundation Delegation removed in the future.
- Commission Rate: Only validators with a competitive commission rate will be considered for a Foundation Delegation.
- Governance Participation: Validators should use their best efforts to participate in dYdX Chain governance. Validators with low governance participation, i.e. voting on on-chain proposals and contributing to the community decision-making process on dYdX Chain, may not receive a Foundation Delegation.
Timeline for Rebalancing
We plan to rebalance our staking delegations by the second week of March to give all validators sufficient time to align with these updated criteria. Validators who don’t currently meet any of the criteria outlined above are encouraged to make the necessary adjustments to remain eligible for a Foundation Delegation.
About the dYdX Foundation
Legitimacy and Disclaimer
Crypto-assets can be highly volatile and trading crypto-assets involves risk of loss, particularly when using leverage. Investment into crypto-assets may not be regulated and may not be adequate for retail investors. Do your own research and due diligence before engaging in any activity involving crypto-assets.
dYdX is a decentralised, disintermediated and permissionless protocol, and is not available in the U.S. or to U.S. persons as well as in other restricted jurisdictions. The dYdX Foundation does not operate or participate in the operation of any component of the dYdX Chain's infrastructure.
The dYdX Foundation’s purpose is to support the current implementation and any future implementations of the dYdX protocol and to foster community-driven growth in the dYdX ecosystem.
The dYdX Chain software (including dYdX Unlimited) is open-source software to be used or implemented by any party in accordance with the applicable license. At no time should the dYdX Chain and/or its software or related components (including dYdX Unlimited) be deemed to be a product or service provided or made available in any way by the dYdX Foundation. Interactions with the dYdX Chain software (including dYdX Unlimited) or any implementation thereof are permissionless and disintermediated, subject to the terms of the applicable licenses and code. Users who interact with the dYdX Chain software, i ncluding dYdX Unlimited (or any implementations thereof) will not be interacting with the dYdX Foundation in any way whatsoever. The dYdX Foundation does not make any representations, warranties or covenants in connection with the dYdX Chain software (or any implementations and/or components thereof, including dYdX Unlimited), including (without limitation) with regard to their technical properties or performance, as well as their actual or potential usefulness or suitability for any particular purpose, and users agree to rely on the dYdX Chain software (or any implementations and/or components thereof, including dYdX Unlimited) “AS IS, WHERE IS”.
Nothing in this post should be used or considered as legal, financial, tax, or any other advice, nor as an instruction or invitation to act by anyone. Users should conduct their own research and due diligence before making any decisions. The dYdX Foundation may alter or update any information in this post in the future at its sole discretion and assumes no obligation to publicly disclose any such change. This post is solely based on the information available to the dYdX Foundation at the time it was published and should only be read and taken into consideration at the time it was published and on the basis of the circumstances that surrounded it. The dYdX Foundation makes no guarantees of future performance and is under no obligation to undertake any of the activities contemplated herein.
Depositing into the MegaVault carries risks. Do your own research and make sure to understand the risks before depositing funds. MegaVault returns are not guaranteed and may fluctuate over time depending on multiple factors. MegaVault returns may be negative and you may lose your entire investment.The dYdX Foundation does not operate or has control over the MegaVault and has not been involved in the development, deployment and operation of any component of the dYdX Unlimited software (including the MegaVault).
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