Crypto News- The dYdX community has given the green light to stake 20 million DYDX tokens in a move to fortify security amid a surge in activity on the decentralized crypto exchange (DEX).
dYdX Community Greenlights 20M Token Stake Amidst Surging Network Activity
With an overwhelming 91.7% of votes in favor, the proposal passed on April 6th. This decision unlocks tokens from the community treasury, valued over $61 million, to be staked with the liquid staking protocol Stride. dYdX attributed this initiative to the escalating trading activity on its platform.
According to dYdX, the surge in deposits to the exchange has been remarkable, with over $140 million USDC held in dYdX v4, $100 million of which flooded in just the past week.
Understanding Staking: Securing Blockchain Networks for Token Rewards
Staking, the process of locking cryptocurrency to support blockchain network operations, is pivotal. It involves participants, or “stakers,” committing their tokens to validate transactions or produce new blocks. In exchange for their services and associated risks, stakers receive rewards, often in the form of additional tokens.
By staking its native tokens, dYdX aims to bolster its network against potential control attacks, such as a 51% attack, where a malicious entity seizes significant hashing power to manipulate the network.
Network Architecture Vulnerabilities: dYdX’s Warning Against Malicious Control
dYdX highlighted its network architecture, indicating that with just one-third of the voting power, an attacker could halt on-chain operations. Possession of two-thirds of the voting power could grant malicious actors access to user and community assets within the dYdX Chain.
To prevent such threats, dYdX noted the necessity of a substantial stake, estimating that a malicious actor would need to contribute at least $912 million in staked DYDX to take control of the protocol.
Staking rewards on dYdX are denominated in USD Coin (USDC) stablecoin and are sourced from trading fees users pay on the platform. Stride’s mechanism ensures DYDX stakes grow automatically over time as rewards are recompounded. However, for this staking service, the dYdX community will incur a 7.5% fee on the staked position.
At present, data from DefiLlama indicates dYdX’s total value locked on-chain at $504.48 million, with the network generating over $48.59 million in fees over the past year.
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