The dYdX community has given its approval to stake 20 million DYDX tokens in order to enhance security as the decentralized crypto exchange (DEX) experiences a surge in activity. The proposal was successfully passed on April 6 with an overwhelming 91.7% of votes in favor. This approval allows tokens from the community treasury, which are currently valued at over $61 million, to be staked using the liquid staking protocol Stride.
dYdX has taken this action in response to the growing trading activity on the protocol. Staking involves locking cryptocurrency to provide support for a blockchain network’s operations, such as transaction processing and validation of new blocks. Participants, known as “stakers,” commit their tokens as stakes in the network. In return for their service and the risks involved, such as potential fluctuations in token value, stakers receive rewards, often in the form of additional tokens.
By staking its native tokens, the DEX aims to protect its network from potential control attacks, similar to a 51% attack. This type of attack occurs when a malicious entity gains control over a significant portion of a blockchain’s hashing power, allowing them to manipulate the network. Decentralizing voting power prevents such attacks from happening.
dYdX has highlighted that its network architecture creates a scenario where an attacker, with just one-third of the voting power, could halt on-chain operations. Furthermore, possessing two-thirds of the voting power could potentially enable these actors to misuse the funds of users and the community within the dYdX Chain.
Staking rewards on dYdX are accrued in the stablecoin USD Coin (USDC) and are generated from the fees paid by users for trading on the protocol. Through Stride’s mechanism, DYDX stakes increase automatically over time as rewards are compounded. The dYdX community will pay a 7.5% fee on the staked position for the staking service.
Data from DefiLlama reveals that at the time of writing, dYdX has a total value locked on-chain amounting to $504.48. Over the past twelve months, the network has generated fees totaling over $48.59 million.
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