In an effort to protect its decentralized crypto exchange (DEX) against potential security threats, the dYdX community has approved a proposal to stake 20 million DYDX tokens.
This decision comes amidst a surge in trading activity experienced by the platform.
dYdX Proposes Enhanced Security Measures
The proposal presented by dYdX emphasized the necessity of increasing the platform’s security measures in the face of increasing deposits and trading volumes.
dYdX stated that it has a total value locked (TVL) of approximately $140 million on the dYdX Chain, with over 114 million DYDX tokens staked, valued at approximately $456 million at the market price of $4.
The proposal stated that despite this staking activity, the rate at which DYDX was being staked to validators had reached a plateau. Additionally, dYdX mentioned that more than $140 million USDC is currently held in dYdX v4, with approximately $100 million of that amount arriving in the week leading up to the proposal.
The team also anticipated that this growth will continue, given the increased popularity of dYdX v4 and the recent volatility that has been increasing trading volumes.
“As deposits grow, the incentive for malicious activity increases with it. Ideally, this would be matched with increasing economic security to outweigh malicious incentives,” stated the proposal.
Staking native tokens is one way of protecting the network against potential 51% assault-style control attempts. This defensive strategy prevents the possibility of adversaries acquiring substantial hashing power, which could enable them to manipulate the network.
According to dYdX, their network architecture allows for scenarios where even a third of the voting power could potentially halt on-chain activities. Furthermore, if adversaries were to get two-thirds of the voting power, they could exploit the community’s and users’ funds.
By staking DYDX tokens, the dYdX community aims to decentralize voting power and increase the network’s resilience against security threats.
Token Staking Proposal Approved
On April 6, the proposal to stake tokens from dYdX’s community treasury, valued at over $61 million, was approved with an overwhelming 91.7% majority. This decision enables the use of Stride 6’s liquid staking protocol to stake the treasury more efficiently.
The dYdX community has voted to stake part of the treasury
The yield from fees generated will be continuously used via Stride to buy DYDX which will be returned back to the treasury
— Antonio | dYdX (@AntonioMJuliano) April 7, 2024
Under this arrangement, the community retains control of the funds while delegating responsibility for productive capital deployment to Stride. Staking rewards, accruing in USDC, are generated from trading fees on the dYdX protocol and automatically reinvested over time through Stride.
The community will pay a 7.5% fee for this service, while Stride has agreed to reduce its protocol fee on the staked position, resulting in substantial USDC inflows to the community treasury.
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