The dYdX Foundation, a Swiss non-profit organization, recently issued a new governance token for its Layer 2 protocol on the blockchain.
The purpose of the token is to allow the community to control the protocol. and to align incentives among traders, liquidity providers and partners. DYDX also builds an ecosystem around token governance, rewards and staking designed to drive the development and decentralization of the Layer 2 protocol.
1 billion DYDX tokens to operate the protocol
A total of 1 billion DYDX tokens have been minted and are programmed to become accessible over five years, starting at 15:00:00 UTC on August 3, 2021. Part of the initial allocation was reserved for past investors of dYdX Trading Inc. (27.7%), founders, employees, consultants and advisors of dYdX Trading Inc. and the dYdX Foundation (15.3%), and future employees and advisors of dYdX Trading Inc. and dYdX Foundation (7.0%).
Transfer restrictions on tokens have been implemented off-chain contractual agreements with the dYdX Foundation and dYdX Trading Inc. The dYdX Foundation tracks wallet addresses to determine whether any transfers have been made in violation of the ban. If so, the Foundation may wish to take legal action against non-compliant investors.
dYdX Trading Inc. and previous investors, founders, employees, advisors and consultants of the dYdX Foundation are subject to the Transfer Restrictions Schedule set forth in the Investor Warrant, as amended recently. About 99.5% of locked tokens remain locked under the new transfer restriction schedule.
The recent amendment to the investor warrants did not alter the staggered unlock schedule. Tokens will be released from transfer restrictions as follows:
- 30% on December 1, 2023 (new initial unlock date)
- 40% in Equated Monthly Installments from 1st January 2024 to 1st June 2024
- 20% in equal monthly installments from July 1, 2024 to June 1, 2025
- 10% in equal monthly installments from July 1, 2025 to June 1, 2026
potential price impact
The possible impact of the newly created token on the market and the price action of this cryptocurrency may vary. This may depend on a number of factors such as the overall supply and demand for governance tokens, the purpose of issuing the token, market sentiment and regulatory environment, etc.
In some cases, a large influx of newly created tokens can lead to an increase in supply and a decrease in demand. Such dynamics could potentially lead to a decrease in the price of the cryptocurrency. On the other hand, if the newly created token is used to incentivize certain behaviors or promote the development of the underlying platform, this may increase demand for the token. This could potentially increase the price.
Ultimately, the effect of newly minted tokens on a crypto’s price action is complex and subject to market forces.
The governance token is a unique and innovative way for the community to govern the dYdX Layer 2 protocol, and it will be interesting to see how the token distribution and unlock period play out in the years to come.
disclaimer
BeInCrypto has reached out to the company or the person involved in the story for an official statement regarding the recent development, but has yet to hear back.