The dYdX community has approved a proposal to allocate 75% of its revenue to token buybacks, based on a report that revealed the inefficiency of its current incentives.
The dYdX Foundation announced a significant change: it will now dedicate considerably more funds to repurchasing its own DYDX tokens, increasing that investment from 25% to 75% of the revenue generated by its platform. This decision was approved by the platform's governing community and is effective immediately.
This reform, which was voted on by the protocol's DAO last Thursday, is based on a thorough study that analyzed how the revenue was being used until now. The community discussed the results for weeks, which showed that the previous methodology wasn't working as well as they had hoped.
Therefore, the platform will now use a large portion of its funds to buy back its DYDX tokens, aiming to benefit current holders and strengthen the ecosystem. Additionally, 5% of the proceeds will go into a reserve called the Treasury SubDAO, and another 5% will be allocated to a special program called MegaVault.
dYdX is betting on real value: buy its token hereThe report that redefined rewards in dYdX
The dYdX community recently concluded a crucial debate on how rewards are distributed within the protocol. A report by Nethermind aimed to assess whether participants receive fair compensation for their contributions. To do this, they focused in two main programs that absorb most of the funds: the "MegaVault" program, designed to incentivize the provision of assets and facilitate operations, and the reward system for "stakeholders," who secure the network.
The analysis revealed that MegaVault, which accounted for approximately 25% of the protocol's revenue, is not operating efficiently. Since September, the amount of assets locked in this program has plummeted by 72%, from $32 million to $9 million. Furthermore, its maintenance is costly, as the incentives paid far exceed the profits generated. This has resulted in the program operating at a loss, leading experts to recommend a significant reduction in the resources allocated to MegaVault.
In contrast, rewards for stakers, who are responsible for safeguarding the protocol's security, saw a significant reduction in November 2024, falling to less than half. However, the number of participants not only didn't decrease, but the total volume of staked assets showed slight growth. Only a small percentage of stakers decided to withdraw their funds, reflecting a strong commitment to the network. For this reason, experts suggest a moderate adjustment to staker rewards, as they believe the network can remain secure with lower spending in this area.
Access Bit2Me and trade with DYDXdYdX's strategy to revitalize its token
With the data from the Nethermind report on the table, the dYdX community decided to make a major change. They increased the amount of money they use to buy back their own DYDX token, going from 25% to 75%.
The goal of this token buyback strategy is to control the available supply in the market to prevent the price from continuing to plummet. Furthermore, with an annual buyback plan that could reach up to 5% of the total tokens, the protocol aims to reduce the excessive circulation of DYDX, generating upward pressure on the price.
On the other hand, dYdX wants to send a strong message to the investment community: investing in its own token is the best investment. This type of strategy, also implemented in other crypto projects, has proven effective in recovering and increasing the asset's value, reinforcing market confidence.
Following the vote, user reaction has been mostly positive, with many viewing the decision as a logical step to stabilize and increase the token's value, as well as strengthen the protocol. However, some critics have expressed concern about DYDX's high volatility, even comparing it to a memecoin due to its abrupt and rapid price fluctuations.
Log in to Bit2Me and access the DYDX tokenSustainability and real value at the heart of dYdX
By approving this proposal, dYdX's governance made a key decision that redefines its operating model. Until now, the protocol allocated large sums of money to attract users and maintain liquidity through various incentives. However, the community opted for a more sustainable approach, prioritizing strengthening the value of its own cryptocurrency.
This new strategy reflects a more strategic and responsible approach to resource management, betting that these adjustments will contribute to increasing the long-term demand and value of the token.
It will be interesting to observe in the coming months how this new policy impacts the development and stability of dYdX, and whether it manages to lay the foundations for solid and sustained growth within the competitive ecosystem of decentralized finance.
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