The dYdX blockchain or “dYdX Chain” is an open-source blockchain using the Tendermint Proof-of-Stake consensus protocol from Cosmos. After its initiation on Ethereum Layer 1, dYdX transitioned to a Starkware Layer 2 and is currently in the process of migrating to its independent Cosmos app-chain. This transition allows dYdX to achieve full decentralization and increased transaction throughput of up to 2,000 per second for the benefit of traders using dYdX decentralized exchange.
Proof-of-Stake protocols use staking to create consensus. By locking native tokens into a validator, you earn the right to secure a chain and get rewards on your stake. Due to its environmental efficiency, staking has overtaken mining and is used far more often in newer protocols.
By locking a protocol’s native tokens (ie DYDX) to give “validators” the right to secure a chain. Validators propose new blocks or attest other validators’ blocks, gaining rewards for doing so.
Staking is a great way to earn rewards while benefiting the protocol you choose to stake on. It derives its value from the natural inflation rate of the blockchain’s native currency and is therefore a built-in form of reward that is easily calculated in advance.
By staking DYDX you are earning rewards while helping to secure the network and keep it decentralized. Conversely, by not staking your DYDX you are suffering from network inflation without benefiting the system nor making returns on your holdings.
Note you will receive two kinds of tokens upon migrating:
On the dYdX chain, all transaction fees are distributed to dYdX Chain validators and stakers.
Kiln is the leading enterprise-grade staking platform, enabling institutional customers to stake DYDX, and to whitelabel dYdX staking functionality into their offering. Our platform is API-first and enables fully automated validators, rewards, data and commission management.
We are serving thousands of businesses worldwide so that everyone can securely and seamlessly. Our clients can stake their tokens from our dashboard, a hardware wallet, a browser wallet, a B2B custodian, a crypto exchange or just their favorite investment app. Kiln makes staking dYdX easy, secure, and accessible to everyone.
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Proof-of-Stake (PoS) is a type of consensus mechanism used to validate cryptocurrency transactions. Through PoS, validators can contribute to the block production of a chain while keeping environmental concerns to a minimum, which is becoming an increasingly large issue in Proof-of-Work.
By staking capital rather than energy, validators risk losing a portion of their value and future potential for staking by misbehaving while creating blocks. This incentives collaboration and fair practices while validating information in a similar way that PoW has with incentives and punishments to curtail malicious
Both are consensus algorithms, helping to democratize one participation to securing a blockchain. Delegated PoS or dPoS means that one validator can stake tokens from several clients. These clients can indeed delegate their tokens to an existing validator instead of running their own.
The risks associated with staking DYDX come from double signing and downtime. Double spending on the Cosmos protocol comes with a slashing penalty as well as downtime. If a validator breaks protocol rules it will be jailed and will be forced to exit the active set of validators.
Kiln’s technology helps mitigate these outcomes by providing the required maintenance. When delegating with Kiln, these issues are therefore taken care of so you don’t have to worry.
There is a minimum staking amount of 1 DYDX.
DYDX rewards do not automatically compound. Staking rewards need to be claimed and re-staked.
You can maintain custody of your DYDX through any wallet or custodian solution of your choosing. Kiln’s DYDX staking is non-custodial, only you can access your funds by controlling the underlying wallet which holds a claim to the funds.
On dYdX, there is a 30-day unbonding period after unstaking tokens, after which DYDX tokens become liquid again.
Rewards can be claimed from your Kepler wallet by clicking ‘Claim Reward’. Claimed tokens can be added to your existing staking balance with the same or a different validator. Penalties on DYDX will result in a burn of validators' bonded tokens.
In the context of Proof-of-Stake blockchains, the gross reward rate (GRR) refers to the total or gross amount of rewards earned from staking before deducting any fees or expenses. This is a reward rate that fluctuates with the operations of the protocol and the performance of validators, it is not set by Kiln. The net reward rate (NRR), on the other hand, takes into account the deductions or expenses, providing a measure of the actual rewards received after subtracting fees or costs.