Trading Rewards

Trading rewards contemplated in the initial software are subject to adjustments by the applicable governance community.

As part of the default settings of the v4 open source software (”dYdX Chain”), traders have the option to participate in trading rewards after each successful trade on the protocol.

As an example use case of this v4 software functionality, these trading rewards have been activated by the dYdX governance community. See this blog post for full details and this blog post for more details on a launch incentives program managed by Chaos Labs.

Immediately after each fill, trading rewards are sent directly to the trader’s dYdX Chain address, based on the amount of fees paid by the trader. Prior to each trade, the UI also shows the expected amount of rewards a trade of that size will receive. Traders can earn trading rewards up to, but not exceeding, 90%* of a fill’s net-trading-fees, paid in the native token of the chain.

*This percentage is adjustable by the applicable governance community.

For example, a use case of this v4 software functionality by the dYdX governance community makes ~50,000 native tokens per day available to be earned by traders. The amount available to earn could increase since native tokens that are not earned are rolled over. For example, if on day 0, 10,000 tokens are earned by traders and there are 40,000 tokens in the pool, then on the next day, 50,000 are added to the pool and thus, 90,000 tokens are now available.

As part of the default settings of the v4 open source software, traders also have the option to view their estimated rewards before placing a trade.

The software reflects a Rewards Treasury of tokens that are available to be distributed to traders. Call the size of this Rewards Treasury T. Each block, new tokens are transferred into this T from the vesting contract and rewards are then distributed. Each block, T can grow or shrink based on protocol activity.

Let A represent the amount of rewards that are distributed from this T to traders in a given block.

dYdX Chain defines a trader X’s “rewards score” in a given block as:

Let S be the sum of all the rewards scores across all traders for a given block. S is given by:

Every block, the amount A of the native token that is distributed to traders is defined as:

Where C is a constant configurable by the applicable governance community. The open source software is configured for the constant to be initially set at 0.

The amount remaining (T - A) is retained in the Rewards Treasury and new tokens are emitted into the Rewards Treasury the following block.

A is calculated and distributed to all the takers who traded in the block and T - A is rolled over and retained in the Rewards Treasury for the next block.

The rewards distributed, A, are allocated proportional to each trader’s score.

Once the Vesting Contract is funded, trading rewards will continue to run and settle automatically, every block.

This document may provide information with respect to the default settings of dYdX Trading Inc. (”dYdX”) v4 software, or non-mandatory guidelines and suggestions that may help with using v4 software. Chaos Labs is independent from and unaffiliated with dYdX, and dYdX is not responsible for any action taken by Chaos Labs or any other third parties, including content set forth on any third-party websites, such as any links to such content in this document. dYdX does not, and will not operate, run or deploy any v4 software, and is not responsible for any actions taken by other third parties who use v4 software. dYdX services and products are not available to persons or entities who reside in, are located in, are incorporated in, or have registered offices in the United States or Canada, or Restricted Persons (as defined in the dYdX Terms of Use). The content provided herein does not constitute, and should not be considered, or relied upon as, financial advice, legal advice, tax advice, investment advice or advice of any other nature, and you agree that you are responsible to conduct independent research, perform due diligence and engage a professional advisor prior to taking any financial, tax, legal or investment action related to the foregoing content. The information contained herein, and any use of v4 software, are subject to the v4 Terms of Use.