Expand pSTAKE's liquid staking support to the dYdX network with stkDYDX

Important announcement

Following the recent dYdX v3 testnet chain upgrade, which introduced Interchain Accounts on the dYdX testnet chain, pSTAKE wasted no time and swiftly unveiled its DYDX Liquid staking solution on the testnet. You can now test and experience what it feels like to liquid stake your DYDX for the first time on pSTAKE.

Next stop: dYdX Mainnet. The launch is expected within the next few weeks.

Recently, a discussion also went live on the dYdX forum to gather DYDX community feedback on pSTAKE’s implementation and approach: https://dydx.forum/t/dydx-liquid-staking-stkdydx-with-pstake/1958

The Case for Liquid Staking dYdX

With the shift to a PoS network, DYDX token holders can now stake their tokens to secure the dYdX Chain, earning staking rewards in USDC tokens. However, it’s important to note that staking DYDX tokens involves a tradeoff, as the funds become locked for an unbonding period of 30 days, rendering them illiquid and unavailable for use in DeFi.

Enter pSTAKE, which addresses this challenge and offers users the best of both worlds—Staking and DeFi—while setting itself apart from other Liquid Staking Providers.

stkDYDX has distinctive features:

  • Prioritizing dYdX Chain decentralization with support for pSTAKE’s new Automated Stake Delegation Model as opposed to the selected few. Parameters include Voting Power – 0.05% to 5%, Commission – 5% to 10%, Uptime – 95% to 100%, Governance Participation – 60% to 100%, Part of the active set without any slashing instance (similar to that of Osmosis)

  • dYdX aligned liquid staking with potential PSTAKE and stkDYDX dual governance. Primary governance continues to be driven by PSTAKE token holders, and stkDYDX holders gain additional Veto power.

  • Best-in-class DYDX staking experience with auto-compounded staking rewards (USDC staking rewards converted back to DYDX using Dexter’s DYDX/USDC pool liquidity, and then compounded with pSTAKE)

  • Improved user experience with unique features such as 'Flash Unstake’

  • Zero fees for the first 2 months (since the launch)

  • stkDYDX is set to become a fundamental part of the liquidity base for major DEXs such as Dexter and Astroport on Neutron, paving the way for various additional use cases. Plans to integrate stkDYDX into Ethereum LSTfi protocols will also be considered

Find a comprehensive overview of these features in this blog.

Aligning with DYDX Governance

Achieving a higher level of alignment with the underlying token ecosystem is crucial for pSTAKE. The DYDX token has been in circulation for many years, cultivating a dedicated community of holders. The transition to a Proof-of-Stake (PoS) model represents a substantial shift in tokenomics. Under this new model, 100% of the protocol revenue generated on dYdX will be directed back to the stakers. This change, coupled with the introduction of liquid staking, presents a novel landscape for DYDX holders.

Recognizing the significance of these changes, establishing a dual governance model for stkDYDX will be actively considered. The objective is to ensure that some governance and guidance over the liquid staking functionality remain within the purview of dYdX governance, allowing pSTAKE to seamlessly provide Liquid Staking-as-a-Service (LSaaS) for the DYDX community.

As a suggestion, here’s an elaborate overview of what this dual governance model could potentially look like:

Dual Governance Mechanism

Primary Governance by PSTAKE Token Holders:

The primary governance continues to be driven by PSTAKE token holders, as they are responsible for proposing and voting on general protocol decisions, upgrades, and changes. This maintains the integrity and overarching governance framework of the pSTAKE protocol.

Veto Power by stkDYDX holders:

stkDYDX holders will have veto power over certain decisions, particularly for proposals that directly affect the DYDX ecosystem. If a proposal passes through the primary governance process but is potentially detrimental or not in the best interest of the DYDX stakeholders/stkDYDX holders, there would be a certain wait period for the stkDYDX token holders to challenge or suggest changes to the decision before it is implemented.

If the PSTAKE and DYDX communities are receptive to this idea, more details regarding the mechanics and implementation of the dual governance model can be shared in the coming days.

pSTAKE Community Temperature Check

First of all, we invite the pSTAKE community to test the DYDX liquid staking on pSTAKE’s testnet and share your feedback. We also encourage everyone to participate in the ongoing discussion on the DYDX forum (linked above) and show your support.

Additionally, we seek pSTAKE community’s feedback and request everyone to share their thoughts by answering the following questions:

  1. What do you think of expanding support to the dYdX network with stkDYDX?
  2. How was your experience with liquid staking DYDX for the first time (on pSTAKE’s testnet)?
  3. Does pSTAKE bring strong differentiators in a commoditized liquid staking market?
  4. Are you open to the idea of sharing PSTAKE governance power with the stkDYDX holders?

Following the discussion, a signaling proposal to expand pSTAKE on Cosmos by onboarding dYdX will be put up on the pSTAKE Snapshot, considering relevant inputs from community members.

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  1. What do you think of expanding support to the dYdX network with stkDYDX?
    Expanding pSTAKE’s support to the dYdX network with stkDYDX seems like a progressive step. It not only broadens the scope of pSTAKE but also offers dYdX token holders new opportunities in liquid staking, aligning with the broader vision of decentralized finance.

  2. How was your experience with liquid staking DYDX for the first time (on pSTAKE’s testnet)?
    My experience with liquid staking DYDX on pSTAKE’s testnet was quite insightful. It was interesting to see how the staking process is simplified and made more efficient, especially with features like ‘Flash Unstake’ and auto-compounded rewards. It’s definitely a step forward in improving user experience in liquid staking.

  3. Does pSTAKE bring strong differentiators in a commoditized liquid staking market?
    pSTAKE brings some strong differentiators to the table in the liquid staking market. Features like the Automated Stake Delegation Model and the potential dual governance with stkDYDX and PSTAKE tokens set it apart. These innovations not only enhance user experience but also contribute to the decentralization and governance of the network.

  4. Are you open to the idea of sharing PSTAKE governance power with the stkDYDX holders?
    I am open to the idea of sharing PSTAKE governance power with stkDYDX holders. This dual governance model could foster a more collaborative and inclusive ecosystem, ensuring that decisions benefit both PSTAKE and DYDX communities. It’s a balanced approach to governance that could enhance the protocol’s effectiveness and appeal

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