The dYdX community has given its approval to stake 20 million DYDX tokens in order to enhance security for the decentralized crypto exchange (DEX), which has seen a significant increase in activity. The proposal, which was passed on April 6 with 91.7% of votes in favor, allows tokens worth over $61 million from the community treasury to be staked using the liquid staking protocol Stride.
According to dYdX, this decision is a response to the growing trading activity on the protocol. Staking involves locking cryptocurrency to support the operations of a blockchain network, such as transaction processing or validating new blocks. Participants, known as “stakers,” commit their tokens as stakes in the network. In return for their services and the associated risks, such as token value fluctuations, 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 amount 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 allows for a scenario where an attacker with just one-third of the voting power could pause 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 users pay to trade on the protocol. Stride’s mechanism enables DYDX stakes to automatically increase over time as rewards are recompounded. For the staking service, the dYdX community will pay a 7.5% fee on the staked position.
At the time of writing, data from DefiLlama shows that dYdX has a total value locked on-chain of $504.48. Over the past twelve months, the network has generated more than $48.59 million in fees.
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