Decentralized finance （DeFi） relies on community governance, and dYdX exemplifies this principle. This article explores how dYdX’s community governance works, its impact on the exchange, and the challenges it faces.
Points
- Community governance allows dYdX users to have a say in platform decisions.
- The governance structure includes a proposal and voting process.
- Community input has shaped significant decisions and initiatives on dYdX.
- Challenges include complexity, voter apathy, and ensuring broad participation.
Understanding Community Governance
Community governance in DeFi means that platform users can participate in decision-making. Instead of a central authority making all decisions, token holders propose changes, discuss them, and vote on them. This approach ensures transparency, accountability, and inclusivity.
Why is community governance important? It brings diverse ideas and solutions from users with different backgrounds and expertise. It also ensures that the platform evolves based on user needs and preferences, maintaining trust and engagement. Lastly, it promotes accountability, as decisions are made openly, and the community can hold decision-makers responsible.
The Governance Structure of dYdX
dYdX, a decentralized exchange, allows DYDX token holders to participate in governance. The model uses the x/gov module of the Cosmos SDK. DYDX holders staking their tokens to a dYdX Chain validator can propose and vote on changes to the platform.
Proposal and Voting Process
The process is straightforward: DYDX token holders propose changes by depositing unstaked DYDX tokens. They must meet a minimum initial deposit ratio, currently set at 20% or 400 unstaked DYDX. A proposal enters the voting period once it meets the minimum deposit of 2000 unstaked DYDX. Other token holders can support proposals by pledging additional unstaked DYDX tokens if they don’t meet the minimum deposit.
Proposals can cover various topics, including changing a parameter on the dYdX Chain, spending treasury funds, or updating the software for validators and full nodes. Once the minimum deposit for a proposal is satisfied, it enters the voting period. DYDX stakers can cast their votes during this time. If a staker does not vote, their vote weight is inherited by their validator, allowing passive holders to have their stakes represented in the decision-making process.
The weight of each vote depends on the amount of DYDX staked, with 1 staked DYDX token equaling 1 vote. This system gives those with a larger stake more influence on decisions. Tokens that are not staked or are in the unbonding period do not count towards a holder’s voting weight, ensuring that those most invested have a significant say in its direction.
Impact on Exchange Development
Community input has significantly shaped dYdX. This influence is clear in several major decisions and initiatives driven by community votes.
Migration to DYDX as Layer-1 Token
Following a vote by the dYdX community, DYDX was adopted as the Layer-1 token of the dYdX Chain. On dYdX Chain, the utility of the DYDX token includes:
– Security: Approximately 228 million DYDX, or 22.8% of the total supply, are staked to 60 validators in the active set to secure the dYdX Chain.
– Staking: The protocol has distributed over 30 million USDC to 23,000 dYdX Chain stakers as a result of staking to validators in the active set.
– Governance: dYdX community members have initiated 126 governance proposals to date, demonstrating active participation in the network’s decision-making process.
Addition of New Markets
In January 2024, a New Market Listing Widget was included on the dYdX Chain front-end to streamline proposals for market listings. The widget enables users to create a governance proposal to add a new market to the protocol in three simple steps:
1. Select a market.
2. Confirm the transaction details.
3. Sign the transaction to deposit 2000 DYDX and launch the governance proposal.
Since its launch, the widget has empowered the dYdX community to list 95 new markets on dYdX Chain in a decentralized and permissionless fashion.
Emission Reductions and Treasury Management
The community has voted on several proposals resulting in emission reductions, increasing the amount of DYDX in the Community Treasury by 211,133,225 DYDX. Effective treasury management ensures the platform’s long-term sustainability and financial health.
Launch Incentives Program
On November 28, 2023, the community approved Chaos Labs’s 6-month Launch Incentives Program, allocating $20 million in DYDX to incentivize early adopters of the dYdX Chain. The program has been successful in driving user adoption, TVL, and trading volume on the dYdX Chain, with trading fees collected by the protocol exceeding program costs by $4.7 million.
Ecosystem Development Program
In February 2024, the community funded the dYdX Ecosystem Development Program with 3,858,500 DYDX tokens from the community treasury. This program supports infrastructure, chain services, protocol development, and growth.
Liquid Staking with Stride Protocol
The community voted to liquid stake 20 million DYDX tokens with Stride Protocol to increase the security of dYdX Chain, earn yield on DYDX in the community treasury, and distribute stake weight among validators.
Challenges in Decentralized Governance
- Complexity: Governance proposals can often be technical and complex, making them hard for the average user to understand. Ensuring proposals are clear and easy to understand is crucial for broader engagement.
- Voter Apathy: Over time, users may become disengaged, feeling their votes have little impact or the process is too time-consuming. Addressing these issues requires continuous efforts to make governance more accessible and meaningful.
- Ensuring Broad Participation: dYdX has implemented strategies like the x/authz module to delegate voting power to trusted representatives and using forums for open dialogue to ensure broader community participation.
Community Engagement Strategies
To keep the community engaged and informed about governance matters, dYdX employs several strategies:
– Transparency and Inclusivity: The governance process is transparent and inclusive, allowing any user to submit proposals on-chain and on the dYdX Forum.
– Communication: Open communication helps build confidence in the governance process, encouraging active participation.
Future of Governance on dYdX
Looking ahead, dYdX’s governance model is expected to evolve further with planned improvements to streamline decision-making processes. One significant development is the introduction of permissionless markets, allowing any party to create and launch a new market without a governance vote. This approach will make creating new trading markets more efficient, empowering users to scale assets tradable on the dYdX Chain.
解説
- Community Governance: dYdX’s community governance model empowers users to shape the platform’s future. This approach ensures transparency, accountability, and inclusivity, fostering trust and engagement among users.
- Proposal and Voting Process: The structured proposal and voting process allows DYDX token holders to participate in decision-making. This system ensures that those most invested in the platform have significant influence over its direction.
- Impact on Development: Community governance has driven major decisions and initiatives on dYdX, including the adoption of DYDX as the Layer-1 token, the addition of new markets, and effective treasury management.
- Challenges and Strategies: Addressing the complexity of proposals, voter apathy, and ensuring broad participation are ongoing challenges. dYdX’s strategies for transparency and open communication help mitigate these issues.
- Future Prospects: The introduction of permissionless markets and other planned improvements will enhance the governance model, making decision-making more efficient and user-driven. This evolution will support dYdX’s growth and innovation in the DeFi space.