This proposal requests a bootstrapping incentive spend for the launch of dYdX token liquidity on Osmosis.
dYdX voted to migrate to a new, IBC-enabled appchain running the v4 dYdX software earlier this year. This includes the launch of a staking token to govern voting power on the dYdX chain.
The current dYdX token on Ethereum, now known as ethDYDX, can be locked in a smart contract in return for both a corresponding DYDX token on the new chain governing v4 of the software as well a wethDYDX token on Ethereum, which will continue to govern v3 of the software.
This proposal requests a community pool spend to incentivize liquidity on Osmosis for the DYDX token from the dYdX chain.
The pool will be 0.05% spread factor Supercharged pool paired with USDC.
As of Proposal 638, Osmosis no longer allocates ongoing internal incentives to most pools.
By spending specific quantities of incentives with a fixed end date, initial liquidity can be crowdsourced for a pool to launch new markets on Osmosis. After the market has been established, these external incentives will end, and the market will reach a sustained level of liquidity through trading fees alone.
As an established project on Ethereum, dYdX currently has around 4,000 active traders despite current market conditions. Osmosis becoming the main place to trade the governance token may attract new users who were typically Ethereum natives but have recently installed Cosmos-compatible wallets to interact with the new version of dYdX.
As the liquidity hub for the Cosmos, Osmosis will form the primary spot market for dYdX’s perpetual markets. Increased activity and adoption of dYdX v4 over v3, therefore, will attract further volume to Osmosis, and so it is in Osmosis’ interests to incentivize migration by enabling an active dYdX market.
dYdX is also the first prominent app to choose to migrate to a dedicated appchain, demonstrating Cosmos’ vision of a multi-chain future connected by IBC. Supporting established apps to move to an appchain grows the usage of the Cosmos as a whole. Osmosis can assist here by increasing liquidity depth outside the original monolithic chain during launches.
This proposal requests 200,050 OSMO to be spent as follows:
- 200,000 OSMO to the DYDX / USDC pool over 50 days to source liquidity for DYDX in the Cosmos. (Approx $1000 per day)
- 50 OSMO for the gauge creation fee.
Fifty days should give sufficient time for the liquidity market to establish. The recent USDT launch took around 30 days for incentives to develop reliable volume, so incentives should be around longer than this to ensure the market is well established.
The quantity of OSMO has been chosen as a spend equivalent to ten days of the redirected incentives removed in Proposal 638. This aims to ensure that the incentives are substantial to attract liquidity primarily to Osmosis while not raising inflation significantly compared to that proposal’s reduction.
This proposal spends the requested OSMO into a multisig on DAODAO to be loaded to the specified pool by the members.
All incentives will be loaded to the relevant gauge as soon as the pool is freely available for trading on Osmosis.
Members of the multisig are:
- To be established
Target on-chain date: 19th October 2023