dYdX Community Approves 20M Token Stake as Network Activity Surges

In response to a significant uptick in activity on the decentralised crypto exchange (DEX), dYdX, the community has voted to stake 20 million DYDX tokens to enhance security measures.

The proposal, passed on April 6 with an overwhelming 91.7% majority, greenlights the staking of tokens from the community treasury, amounting to over $61 million based on current prices. These tokens will be staked using the liquid staking protocol Stride. According to dYdX, this decision comes as a proactive measure to address the escalating trading activity on the protocol:

“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.”

Staking involves locking cryptocurrency to support the operations of a blockchain network, such as processing transactions or validating new blocks. Participants, known as “stakers,” commit their tokens to the network and receive rewards in return, often in the form of additional tokens, for their service and associated risks.

Staking proposal result. Source: Mintscan

By staking its native tokens, dYdX aims to fortify its network against potential control attacks, similar to 51% attacks, where a malicious entity gains control over a significant portion of a blockchain’s hashing power, enabling manipulation of the network. Decentralising voting power helps mitigate such risks.

dYdX highlights the vulnerability of its network architecture to control attacks, emphasising the importance of preventing malicious actors from pausing on-chain operations or misusing community assets.

“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.”

Staking rewards on dYdX accrue in the stablecoin USD Coin and are generated from user trading fees on the protocol. Stride’s mechanism allows for automatic compounding of DYDX stakes over time. However, the staking service incurs a 7.5% fee on the staked position, which will be paid by the dYdX community.

As per data from DefiLlama, dYdX’s total value locked on-chain currently stands at $504.48 million, with the network generating over $48.59 million in fees over the past twelve months.