dYdX tokenomics scrutinized as staking goes live

Decentralized exchange dYdX entered beta mainnet for its layer-1 on Tuesday, enabling USDC staking rewards for the proof-of-stake blockchain.

The move drew criticism from Crypto Twitter personalities who painted dYdX staking as too friendly to insiders. Staking rewards are being paid out two weeks before a large set of tokens will be unlocked for dYdX founders, investors, employees and consultants. And the supply of locked tokens vested for dYdX insiders can still be staked and earn rewards.

The project’s founder maintains that dYdX is a long-term actor and is not seeking short-term gains.

Once a layer-2 decentralized exchange (DEX) for perpetual swaps, dYdX is shifting to its own chain built with the Cosmos SDK. The move was motivated by the need for greater throughput to support the platform’s order book, Blockworks previously reported.

The dYdX Operations subDAO announced Monday that the chain was entering its beta stage, and trading fees would accumulate to the validators and stakers securing the platform.

dYdX founder Antonio Juliano wrote on X that staking rewards would be paid out in “cold, hard, $USDC.”

When it was a layer-2, dYdX charged maker-taker fees which were not shared with users. Trading fees will be shared with stakers on the dYdX chain.

One X user took issue with the timing of the fee sharing activation. They argued it wasn’t a coincidence that fees were finally channeled to dYdX users as a Dec. 1 token unlock looms.

Dennis Liu, a crypto venture investor and YouTuber, noted that dYdX’s vesting schedule has been public for some time.

“The cliff has always been there, it’s their choice to choose to release this upgrade whenever, and the tokenomics has been the same since day one, it’s not like they changed it,” Liu said.

But while dYdX widely marketed the fact that all trading fees would go to stakers, it was less forthcoming about investors being able to stake their tranche of locked tokens, Liu said.

In three recent dYdX Operations blog posts on the dYdX chain launch, the staking of locked tokens isn’t mentioned. DYdX’s docs say the locked tokens are subject to transfer restrictions but can be used for staking.

“​​I wish they could have come up with this all together with the news so that people know what they’re getting into,” Liu said.

Responding to criticism of dYdX’s staking activation on X, Juliano noted that the team has been around for “6.5 years now.”

“We are not exiting, we’re building something larger. And we will work to earn your trust over time,” Juliano wrote.

dYdX’s price is up 35% on the week of dYdX’s beta mainnet launch. But token unlocks inflate supply and often cause sell pressure and price declines. dYdX’s Dec. 1 unlock will raise its circulating supply by almost 80%, from 190 million to 340 million, according to TokenUnlock.

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