dYdX to Stake 20M Tokens from Community Treasury to Strengthen the Network Security

Reported by Cointelegraph, the dYdX community approved staking 20 million DYDX tokens to strengthen security as the decentralized crypto exchange (DEX) experiences a surge in activity.

The proposal passed on April 6 with 91.7% of votes in favor, allowing tokens from the community treasury worth over $61 million at current prices to be staked with liquid staking protocol Stride. According to dYdX, the move is a response to the growing trading activity on the protocol:

“The rate of DYDX being staked to validators has plateaued and deposits to the exchange are growing at a tremendous pace. Over $140M USDC is held in dYdX v4, of which roughly $100M arrived in the past week.”

By staking its native tokens, the DEX is seeking to shield its network from a possible control attack, similar to a 51% attack. This type of attack happens when a malicious entity gains control over a significant amount of a blockchain’s hashing power, enabling the network to be manipulated. Decentralizing voting power prevents such attacks from occurring.

dYdX noted that its network architecture enables a scenario where an attacker, with just one-third of the voting power, could pause on-chain operations. Additionally, possessing two-thirds of the voting power could allow such actors to potentially misuse the funds of users and the community within the dYdX Chain.

“Since the voting power today is $456M, a malicious actor must contribute at least $912M in staked DYDX to take control of the protocol, which would allow them to exploit user deposits and community assets. This sounds like a lot today, but it isn’t such a high barrier when we factor in that only 11.5% of the total supply of DYDX are staked.”