Following the trade volume on the network spikes, the dYdX community authorised staking 20 million DYDX tokens as a security precaution. Staking 20 million DYDX tokens was allowed by the dYdX community in order to bolster security during a spike in activity on the decentralised crypto market (DEX).
With 91.7% of the vote in favour, the proposal was approved on April 6th, enabling the use of the liquid staking protocol Stride to stake community treasury tokens valued at approximately $61 million at the current pricing. The change, according to dYdX, is a reaction to the protocol’s increasing trading activity:
“Deposits to the exchange are increasing at a very rapid rate, while the rate at which DYDX is being staked to validators has stabilised.” Around $100M of the over $140M USDC held in dYdX v4 was added in the last week.
To enable a blockchain network’s functions, such as handling transactions and validating fresh blocks, staking is the act of locking bitcoin. By committing their tokens as stakes in the network, participants, or “stakers,” Stakeholders receive benefits, frequently in the form of extra tokens, in exchange for their services and the risks they assume (such as possible fluctuations in the token’s value).
The DEX is trying to protect its network from a potential control attempt, equivalent to a 51% attack, by staking its native tokens. This kind of attack occurs when a malevolent party takes control of a sizable portion of a blockchain’s hashing capacity, making it possible to manipulate the network. By decentralising voting power, attacks like this are avoided.
A situation where an attacker might halt on-chain operations with just one-third of the voting power is made possible by dYdX’s network architecture. Furthermore, holding two-thirds of the vote power would enable these individuals to misappropriate user and community monies on the dYdX Chain.
“A hostile player needs contribute at least $912M in staked DYDX to gain control of the protocol, which would allow them to exploit user deposits and community assets, given that the voting power now in place is $456M. Even though this seems like a lot in the modern day, considering that just 11.5% of the DYDX supply is staked, it isn’t such a steep barrier.
The fees users pay to trade on the system fund the staking rewards on dYdX, which are then accumulated in the stablecoin USD Coin. Due to Stride’s process, DYDX stakes can automatically rise when incentives are recompounded over time. The dYdX community will pay a 7.5% charge on the staked position for the staking service.
DefiLlama data indicates that as of this writing, the total value of dYdX was locked on-chain at $504.48. approximately the previous 12 months, fees collected by the network totaled approximately $48.59 million.