dYdX Enters a New Era of Cosmos AppChain: Analysis of Trading Migration Strategies and Market Performance

On November 13th, dYdX v4, built on Cosmos SDK and Tendermint, officially entered the Beta phase, opening up trading functionality. This new version, referred to as dYdX Chain, runs in parallel with the v3 version on StarkEx, retaining existing features and user base, while paving the way for innovative development on the new platform.

The current market is highly volatile, and on-chain perpetual contract platforms are experiencing considerable trading volumes, with platform tokens performing remarkably. As of November 16, the price of DYDX tokens reached $4.02, up 54.45% in the past 7 days. Data shows that the recent average daily trading volume of dYdX is approximately $1.7 billion, surpassing the peak values of the previous two months. As the largest project by market capitalization in the field, dYdX's market performance reflects strong investor interest.

DYDX Profitability Assessment

The most noteworthy update from dYdX is that all trading fees will be distributed to DYDX token stakers and validators in the form of USDC, which were previously collected by dYdX Trading Inc. Compared to other perpetual contract solutions and spot DEXs, dYdX adopts an order book trading model without passive liquidity providers, allowing market makers to earn unallocated DYDX token rewards, thus enabling all fees to be distributed to stakers and significantly enhancing profitability.

According to current data, the circulating market value of DYDX is $720 million, with an annualized fee expected to be $105 million, and the P/F (Price to Fee ratio) is 6.6, with an estimated staking yield of 14.6%. However, this estimation method has limitations, as it assumes that the trading volume remains constant and is fully transferred to v4, that all DYDX is used for staking, and it overlooks the current issue of insufficient circulating supply being less than 20% of the total.

Taking multiple approaches to promote the transfer of trading volume from v3 to v4

dYdX v4 operates in the form of dYdX Chain, with DYDX serving as the trading gas fee. Stakers receive rewards and governance rights while also bearing network security responsibilities. Currently, only the transaction fees generated by v4 are allocated to v4 stakers. To facilitate the transition of trading from v3 to v4, dYdX has implemented several measures:

1. Allocate 20 million USD for DYDX incentives, v4 launch led by Chaos Labs to study reward distribution and anti-cheating mechanisms.

2. Launch the trading reward module and fee discounts, distributing rewards based on blockchain transaction fees, with Maker fees set at 1 bps or less for the first 120 days.

3. Gradually eliminate v3 trading fee discounts, trading rewards, and LP rewards; it is expected that most trading volume will shift to v4.

4. Open the v4 staking module to allow DYDX to migrate from Ethereum to the dYdX Chain and stake through the Keplr wallet.

Comprehensive Support for Cosmos Ecosystem Projects

DYDX's fully diluted market cap reaches $4 billion, surpassing ATOM, and gaining wide support from projects within the Cosmos ecosystem:

• Circle launched native USDC on Noble, and CCTP will support Noble, facilitating USDC cross-chain to dYdX Chain.

• Stride has decided to develop the stDYDX liquidity staking token, which automatically uses USDC rewards to purchase DYDX and reinvest.

• DYDX can be used in Cosmos DeFi applications such as Levana and Shade Protocol, for providing liquidity or participating in perpetual contract trading.

Summary

dYdX launched in the Cosmos as an AppChain, and DYDX token holders will receive all trading fees (in USDC), enjoy governance rights, and bear network security responsibilities. Although the trading volume on v4 is currently low, dYdX has taken several measures to encourage the transition of trading from v3, and it is expected that after the v3 rewards stop at the beginning of next year, the trading volume will mainly focus on the v4 platform.