Migration & Bridge Overview
Potential migration of DYDX from Ethereum to the dYdX Chain.
The DYDX token is entirely controlled by the dYdX community, and it is ultimately up to the dYdX community to decide, through dYdX governance, whether DYDX should be the L1 protocol token of the dYdX Chain or not and, if so, how to effect any required token migration and/or any other necessary actions, as well as any other matters that affect or relate to the ethDYDX token or dYdX v3 Governance.
The dYdX Foundation urges the dYdX ecosystem, community members, and the general public to remain vigilant as we anticipate an increase in potential scams and phishing attacks via social media, messaging apps, and websites. Phishing is a common way for scammers to target internet users. Scammers may reach out to you on social media platforms pretending to be representing dYdX or affiliated with dYdX.
On August 3, 2021, dYdX Foundation launched DYDX (hereinafter "
ethDYDX"), a governance token that allows the dYdX community to govern certain aspects of the dYdX Layer 2 protocol on Ethereum (“dYdX v3”) to align incentives between traders, liquidity providers, and partners. The
ethDYDXtoken enables a robust ecosystem around governance, rewards, and staking - each of which is designed to drive future growth and decentralization of dYdX v3.
The dYdX ecosystem is rapidly approaching the potential mainnet release of the dYdX v4 open-source software – the "dYdX Chain". The dYdX Chain will be a proof-of-stake blockchain network and, as such, if and when deployed on mainnet, it will require a Layer 1 (“L1”) protocol token for staking to validators in order to secure the chain and for stakers of the L1 token to govern the network. Holders of the L1 token could use their tokens to run a validator or stake their tokens to a validator in order to participate in securing and governing the network.
The dYdX community could elect to use ethDYDX, the governance token of the dYdX Layer 2 protocol on Ethereum (“dYdX v3”), as the L1 token of the dYdX Chain (if and when deployed after mainnet release). Given that
ethDYDXis an Ethereum-based ERC-20 token, should the dYdX community decide to use DYDX as the L1 protocol token on the dYdX Chain, the
ethDYDXtoken would need to be migrated from Ethereum to the dYdX Chain.
In furtherance of its mission to support and promote the dYdX ecosystem by enabling communities, developers, and decentralized governance, the dYdX Foundation has commissioned the following in connection with the potential migration of ethDYDX from Ethereum to the dYdX Chain (if and when deployed on mainnet):
- 1.The development of an Ethereum smart contract (the “
wethDYDX Smart Contract”) that enables a permissionless and autonomous one-way bridge for the ethDYDX token to be migrated from Ethereum to the dYdX Chain,
- 2.The development of a GovernanceStrategyV2 smart contract (the “
GovernanceStrategyV2 Smart Contract”) that, if deployed and if the dYdX community decided through dYdX governance, could enable the wrapped version of the Ethereum-based DYDX token (“wethDYDX”) to have the same governance and utility function as ethDYDX in dYdX v3.
- 3.The development of a TreasuryBridge smart contract (the “
TreasuryBridge Smart Contract”) that, if deployed and if the dYdX community decided through dYdX governance, could (i) burn newly vested DYDX from the community treasury vester and the rewards treasury vester and (ii) enable DYDX vested in the community treasury and rewards treasury to be bridged to the dYdX Chain.
- 4.The development of source code that will be open-sourced such that others may use it to implement a user interface (also sometimes referred to as a “front-end”) to interact with such
wethDYDX Smart Contract(the “
User Interface Code”).
When interacted with, the one-way bridge smart contract, the
wethDYDX Smart Contract,would carry out the following functions in a fully permissionless and automated manner:
- 1.Receive and permanently lock the
ethDYDXtokens sent by the user to the
wethDYDX Smart Contract,
wethDYDXto the user on a 1-1 proportion basis on Ethereum, and
- 3.dYdX Chain validators can also read and ingest the information in the
wethDYDX Smart Contractsuch that corresponding DYDX can be distributed to users by validators on the dYdX Chain (if and when deployed) once there is confirmation that Step 1 above is complete and the respective
ethDYDXis permanently locked in the
wethDYDX Smart Contract.
It is important to note that the
ethDYDXtoken and dYdX v3 Governance are entirely controlled by the dYdX community and it is ultimately up to the dYdX community alone to discuss and decide, through dYdX governance, (1) whether DYDX should be the L1 protocol token of the dYdX Chain, (2) whether
wethDYDXshould have the same governance and utility functions as
ethDYDXon dYdX v3, and, (3) if the dYdX community decides that DYDX should be the L1 protocol token of the dYdX Chain, how to organize and carry out any required token migration and/or any other necessary actions, as well as any other matters that affect or relate to the
ethDYDXtoken or dYdX v3 Governance.
Should the dYdX community decide to use DYDX as the L1 protocol token of the dYdX Chain (if and when deployed), the potential mainnet launch of the dYdX Chain would be dependent on some
ethDYDXholders, who intend to be validators on the dYdX Chain, migrating their tokens from Ethereum to the dYdX Chain before a given cut-off time prior to Genesis, because dYdX Chain validators would require a certain amount of staked L1 tokens to start and secure the network.