DYDX Token: Determining the Future of dYdX DEX

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The DYDX governance token has been launched by the dYdX Foundation, a not-for-profit organization based in Switzerland. Per the entity’s announcement, DYDX token holders will have voting rights on governance proposals.

The robust and innovative ecosystem of the dYdX protocol allows traders, partners and liquidity providers to come together and make the system more effective. The DYDX token will be a great option for crypto investors, considering ongoing developments widely anticipated to lead to future price appreciation.

What Is the DYDX Token?

DYDX is a governance token issued to allow the dYdX community to govern its Layer 2 protocol. The shared control will allow participants, including partners, traders and liquidity providers, to work together and control the enhanced protocol. 

The dYdX Foundation has opened a robust ecosystem with the primary focus on driving future growth and improving the scheme of reward, staking and governance. As a result, users will have a better experience throughout the ecosystem. The staking pool will ensure safety and liquidity, while the reward program will help to drive growth and adopt more traders and liquidity providers. 

Per the dYdX official website, its foundation has achieved a strong community in the crypto world, with 64,000 unique traders and a cumulative trading volume of more than $11 billion. The platform has joined with StarkWare Industries Ltd. to initiate an improved Layer 2 scalability engine on the dYdX platform. The main aim of the collaboration is to lower trading fees and gas costs, allowing DYDX token holders to receive priority in discounts, voting rights, and trading & mining rewards.

Who Created DYDX? 

Software engineer Antonio Juliano founded the dYdX foundation, headquartered in Zug, Switzerland, in 2017. The dYdX Foundation aims to foster decentralized governance and empower traders through transparent and open crypto products. Therefore, the foundation will help push the dYdX Layer 2 protocol toward development, community growth and sustainability.

Council members at the dYdX Foundation include Arthur Cheong, Rebecca Rettig and Markus Spillman. The token’s launch marks the first step in the dYdX Layer 2 protocol’s journey toward decentralization.

What Are Governance Tokens?

DYDX token holders can participate in the governance process through the Aave governance contract, and propose changes to the Layer 2 protocol. Here are some of the voting rights of DYDX holders:

  • Set Layer 2 protocol’s risk parameters.
  • Define the safety staking pool payout in case of a loss.
  • Vote on adding a new token listing in the Layer 2 protocol.
  • Govern contracts.
  • Vote on market makers to add to the liquidity staking pool

DYDX Tokenomics

A maximum supply of 1 billion DYDX tokens will be handed over in the next five years in different stages, as shown below:

  • The dYdX community will receive 50% of the total DXDY supply, particularly traders, stakeholders, liquidity providers and users, based on their completed milestones.
  • Previously active users will receive 27.72% of DYDX tokens.
  • 15.27% of tokens will be given to dYdX official members, founders, employees and others, proportionate to their involvement.
  • The final 7% of the DYDX tokens are reserved for future employees who join the platform.

Benefits of Holding DYDX

DYDX token holders will receive three benefits, as follows:

Retroactive Mining Reward

The mining reward is for users who trade on the Layer 2 protocol of the dYdX platform, and investors who use this platform for the long run. The reward amount will depend on users’ activity, which is based on several tiers. The retroactive mining reward is now available to claim, as the restriction on initial transfer is over.

Trading Rewards

The trading reward will encourage cryptocurrency traders to become involved in the dYdX Layer 2 protocol. Any trader under the dYdX Layer 2 protocol is eligible to receive the reward. However, the amount of reward depends on trading activity, volume and other factors. Active traders with more than 10,000 tokens will receive a 15% discount on all trading fees.

Liquidity Provider Rewards

The liquidity provider reward is available to active Ethereum address holders maintaining a minimum 5% maker volume in their previous epoch. Users will receive the reward after 25 days, and this process will remain valid for the next five years. The aim in offering this reward is to boost DYDX liquidity in the long run.

DYDX Price Analysis

As of September 22, 2021, dYdX (DYDX) is currently trading at $13.21 with a market volume of 725.53 million, with the possibility of moving up, depending on several factors.

Since its launch, the DYDX token has decreased to its low of $9.07 with major cryptocurrencies facing price fluctuations from market volatility, including Bitcoin facing bearish pressure recently when El Salvador adopted it as a legal currency, as well as Litecoin’s 30% price scare — the result of a fake tweet.

In the meantime, DYDX is holding steady and trading between its $18.77 high and $9.07 low since its inception. It’s common for a token to show a sell-off after listing, due to profit-taking, but for DYDX the situation is slightly different. Despite launching at around $13–$14, DYDX is still trading close to its opening price. Taking this into account, the possibility of surpassing its ATH of $18.77 is a reasonable possibility. 

One thing which might attract investors to hold their positions is the stacking mechanism offered by the dYdX platform, which permits major investors to buy back and lock their tokens to earn rewards. As a result, success from HODLing is highly likely for this token with future price appreciation. Despite market volatility, the DYDX token would be a good option for investment right now, as it’s influenced 36,000 historical users to focus on the decentralized derivatives industry. Overall, its value and volume are among the top few in the DeFi industry.

Is DYDX a Good Investment?

The cryptocurrency market continues to gain mainstream popularity, and global crypto adoption has risen exponentially in the last year. Most of the stability of the DeFi sector has come with the supply of stablecoins on the Ethereum blockchain. 

The value of dYdX looks promising, as its decentralized engagement model is competitive. There are very few exchanges that allow perpetual contracts, and dYdX is one of them. Moreover, users can avoid potential risks of centralized exchanges, such as the possible misappropriation of clients’ funds. On the other hand, any transaction through the dYdX platform doesn’t require KYC. Only an Ethereum wallet is required to initiate a transaction, without any authentication steps. 

Another beneficial factor for dYdX is its data lending service, which is impressive. The order book model for this platform is more sophisticated than traditional centralized exchanges. Users can find spot trading, margin trading and contract trading with several order types.

dYdX has five core products: margin trading, perpetual contract, spot trading, leveraged trading and lending. Among these, the novel perpetual contract is built on the Layer 2 network. 

Overall, investing in DYDX tokens is an opportunity to benefit from an industry leader in decentralized exchange. Moreover, user adoption and trading volume are increasing as more people engage in this sector. In 2021, dYdX experienced a record trading volume, with cumulative trading volume peaking at $2.5 billion, up from $63 million a year ago. Therefore, dYdX has a strong possibility of gaining market share from centralized exchanges, with the potential to reach $19.00 by the end of 2021.

The Bottom Line

Investment in decentralized finance is a great option for building a fruitful portfolio, but there are some risks that an investor can’t ignore. There are fewer tradable cryptos in the dYdX platform right now with a small centralized risk. Although dYdX focuses on the DeFi industry, some of its operations are still centralized.

Overall, the DYDX token looks promising for now. However, investors should consider the market’s volatility before investing money. Following any trading method using technical or fundamental indicators would be a smart option for making trading decisions.

Disclaimer

This article is intended for and only to be used for reference purposes only. No such information provided through Bybit constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific person. These forecasts are based on industry trends, circumstances involving clients, and other factors, and they involve risks, variables, and uncertainties. There is no guarantee presented or implied as to the accuracy of specific forecasts, projections, or predictive statements contained herein. Users of this article agree that Bybit does not take responsibility for any of your investment decisions. Please seek professional advice before trading.

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