In response to a significant uptick in trading activity, the dYdX community has approved the staking of 20 million DYDX tokens, valued at over $61 million, to enhance security measures on the decentralized crypto exchange (DEX).
With 91.7% of votes in favor, the proposal passed on April 6, allowing for the staked tokens to be entrusted to the liquid staking protocol Stride.
The DEX highlighted the rapid growth in trading activity on the protocol, noting that over $140 million USDC is currently held in dYdX v4, with approximately $100 million arriving in the past week alone.
dYdX Seeks to Strengthen the Platform
The decision to stake the tokens aims to fortify the network against potential control attacks, such as a 51% attack, wherein a malicious entity gains control over a significant portion of a blockchain’s hashing power, thereby manipulating the network.
“The rate of DYDX being staked to validators has plateaued and deposits to the exchange are growing at a tremendous pace. Over $140M USDC is held in dYdX v4, of which roughly $100M arrived in the past week.”
Importance of Decentralizing Voting Power
The DEX’s network architecture necessitates safeguarding against scenarios where an attacker could potentially pause on-chain operations with just one-third of the voting power.
Moreover, with two-thirds of the voting power, malicious actors could potentially misuse user deposits and community assets within the dYdX chain. To counter such threats, the community recognized the importance of decentralizing voting power to prevent exploitation.
“Since the voting power today is $456M, a malicious actor must contribute at least $912M in staked DYDX to take control of the protocol, which would allow them to exploit user deposits and community assets. This sounds like a lot today, but it isn’t such a high barrier when we factor in that only 11.5% of the total supply of DYDX are staked.”
Staking Rewards on dYdX
The staking rewards on the DEX, founded by Antonio Juliano, are denominated in the stablecoin USD Coin (USDC) and are generated from the fees users pay to trade on the protocol.
Leveraging Stride’s mechanism, DYDX stakes will automatically increase over time as rewards are recompounded. However, the staking service incurs a 7.5% fee on the staked position.
Adoption of the DEX
As of the latest data from DefiLlama, dYdX’s total value locked on-chain stands at $504.48 million. Notably, the network has generated over $48.59 million in fees over the past twelve months, underscoring its significant presence within the decentralized finance (DeFi) landscape.
The decision to stake the tokens underscores the community’s commitment to reinforcing the security and resilience of the DEX amidst its growing prominence and trading activity.
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