COSMOS NEWS: DYDX V4 TRADING REWARDS, ATOM & MORE!!

Hi Cosmonauts! ⚛️
Welcome to the Cosmos ecosystem news roundup, here are the top stories in Cosmos in the 2nd half of November:

DYDX V4 FULL TRADING: Trading rewards and the 6-month $20 million incentive program are live. First ever non-EVM implementation of Circle’s CCTP on Noble for seamless onboarding of v3 traders into dYdX v4. Onboarding of users into Cosmos unleashed and USDC deposits into the dYdX Chain exploding, all you need to know in this episode

UPCOMING STDYDX & AIRDROP: Stride is about to launch liquid staking for dYdX and an airdrop for early stDYDX holders, with a functionality to allow auto-compounding of staking rewards. Learn all the details about the stDYDX airdrop in this episode

ICF CYCLE 2 DELEGATIONS DEPLOYED: The ICF deployed the delegations for the cycle 2 of their delegation program which will last for 12 months. What will be the requirements to maintain the delegations for the next 12 months? Watch this episode to find out more

Focused sections about Osmosis, Secret Network, Persistence, Juno, Stride and Crypto regulations and compliance updates with MME

All this and much more in this episode, and now for today’s top stories

Tech

Let’s recap about the last month since the dYdX Chain genesis launch on the 26th October. Initially, the focus of the Alpha phase was to bridge and stake DYDX tokens to increase the security and stability of the dYdX chain. Then, the Beta phase started the trading in the new v4 perps exchange although still without trading rewards or incentives. During the Beta phase more tokens were bridged to the dYdX Chain and staked with validators. Then, the 28th November was a major milestone. Firstly, the Beta phase was successfully completed and the second governance proposal of the dYdX Chain was approved to start trading rewards and the $20 million 6-month launch incentive program to further encourage the migration of trading volume and users to the dYdX Chain. In particular, activating trading rewards means crediting the dYdX Chain Rewards Treasury Vester with over 54 million DYDX and setting the trading rewards constant “C” to 0.33, which will be subsequently increased to 0.66 and 0.90. The new trading rewards in v4, combined with the ongoing reduction of rewards in v3, will lead to the gradual trading volume migration from v3 to v4 over the following months. Important to note is that the next increases of trading rewards in v4 in December and January will be exactly around the same time as the next decreases in trading rewards in v3. Furthermore, this governance proposal credited the dYdX Chain Community Treasury Vester with over 172 million DYDX. The 28th November was also the launch of Circle’s CCTP on Noble, which is a major milestone given that it is the first non-EVM implementation of CCTP. Thanks to CCTP, transitioning from v3 to v4 will be a seamless process for dYdX traders.
Important also to mention is that if you were staking DYDX with FlashCat validator, which was in the top 5, you should redelegate to continue receiving staking rewards. This is because FlashCat validator doubled signed and was tombstoned meaning that this validator cannot go back to the active set, and hence you need to redelegate to continue receiving staking rewards. When choosing validators to stake your DYDX, you should look at metrics such as uptime on dYdX and other networks, community participation and contributions, since when they started validating and more.
There are also important updates about MEV mitigation on the dYdX Chain. There is already MEV social prevention via the Skip MEV dashboard and the committee for slashing validators performing MEV and dYdX is now working on a further MEV prevention method via Cosmos ABCI++. This is thanks to the vote extensions feature of ABCI++, which allows multiple validators to jointly decide a block’s contents and thus preventing MEV from censorship or arbitrary inclusion. In addition, Frequent Batch Auctions (FBA) will also be introduced to minimize transaction sequence impact. Thanks to ABCI++ and FBA, the following is prevented: no inclusion MEV and no reordering MEV. dYdX will be working on this and developing a prototype of this architecture to evaluate its impact on MEV and on trading beyond MEV, and then they will recommend it for the dYdX Chain.

Daily USD spent and daily new leases on Akash, amongst other metrics, had a great growth during November showing real utility and demand. Since around September 2023 daily USD spent on Akash has been rising and going much higher than the previous all time high value. It will be very interesting to keep monitoring these metrics clearly reflecting the growth of Akash. We have been validating in Akash since early 2021 because we realised early about the great potential of Akash as a decentralized cloud and we have been also hosting our website on Akash since 2021.

DeFi/Staking

The Interchain Foundation deployed the delegations for the cycle 2 of their delegation program. In this cycle 2, the delegation period will be 12 months instead of 6 months as in the first cycle. These delegations, thanks to the CAP system on points, contributed to improving the decentralization of the Cosmos Hub, Osmosis, Celestia and Irisnet and rewarded the validators adding the most value in terms of community, engineering, public goods or upcoming contributions. The selected validators will now be required to adhere to the criteria to maintain the delegations. They will need to vote on all the governance proposals that are not considered spam, with abstain votes permitted and a lower voting percentage requirement on Osmosis of 80%. Maintaining great uptime, not being slashed and remaining in the active set are other requirements. Moreover, the commission needs to be kept within the allowed range of 1% to 10%, and once the minimum commission in the Cosmos hub is increased to 5%, the range would be from 5% to 10%.

Native USDC on the Cosmos ecosystem has been growing and this growth will accelerate with Circle’s CCTP on Noble, facilitating the burning of USDC on other supported chains and the minting of native USDC on Noble. With the expected demand for USDC on dYdX v4, it seems likely that native USDC on the Cosmos ecosystem could soon reach over $200 million. A few weeks ago native USDC issued on Noble was below $5 million, and now it is over $20 million. It seems likely that in a few months Noble could be in the top 5 by amount of USDC issued, close to Solana or Arbitrum. Furthermore, with Namada mainnet approaching, shielded USDC will also be available as mentioned already by Namada. The next following months will be really exciting for the Cosmos ecosystem and we look forward to keep bringing you the best updates and educational content.

Project launches & network upgrades

Before the Cosmos Hub v14 upgrade proposal was submitted on-chain for voting, a new feature was included. Thanks to this new feature, the block height of new consumer chains at the time they enter the Cosmos Hub’s security will be recorded, and then equivocation evidence that occurred prior to that block height will be filtered.
For existing consumer chains, meaning Neutron and Stride, any equivocation evidence prior to a block height on the 17th November 2023 will be also filtered. Going forward, validators should remember to always use a new key for each new consumer chain, and to never reuse those keys anywhere. Validators who had done the key reassignment for both Neutron and Stride 21 days before the v14 upgrade have no risk. This new feature also prevents possible equivocation evidence for validators who didn’t do the key reassignment.

Governance

The Cosmos community wants a more decentralized grants program than the AADAO, which is currently requesting a renewal on the Cosmos Hub forum. One of the main concerns is about the opaque recruitment process, not about the new people suggested for the grants program, but about the selection process itself. The Cosmos community thinks that there should be an application period on the Cosmos Hub forum for any interested community members to submit publicly their applications on the forum. Then the selection process should be more decentralized and the suggested members approved by Cosmos Hub governance. The Cosmos community thinks that the salaries and bonuses for the members of the AADAO are very large, and hence the possibility to receive those salaries and bonuses should be open to all Cosmonauts to apply and be considered, rather than a private, highly centralized and opaque recruitment process. In the Cosmos Hub forum other community members highlighted several concerns about the financial statements of the AADAO. Also, some Cosmonauts wonder why the Osmosis grants program gave around $25k to Messari for four quarterly reports while the AADAO gave them four times more, $100k, also for four quarterly reports and with the conflict of interest of Youssef, the AADAO founder, being an ex-employee of Messari. Overall, the community sentiment seems to be negative about the AADAO and their renewal proposal, so it seems that creating an alternative decentralized grants program may be the preferred solution. Other Cosmonauts also suggested to wait one year before asking for a renewal, so that the community could better assess the impact and results of the projects funded so far.

A proposal to reduce the maximum inflation parameter from 20% to 10% was approved on the Cosmos Hub. However, there were concerns since several validators changed their votes from no to abstain, or even to yes, following strong pressure on twitter to change their votes. The consequences were not as expected by those voting yes. After the proposal was approved, the APR was greatly reduced and the ATOM price dropped. In addition, the bonded ratio also started to decrease. The expectation of those voting yes was that the lower inflation and APR would lead to an increase on the ATOM price that would offset the reduction in APR. Since this wasn’t the case, there could be consequences now especially for the smaller validators given that they will now receive significantly less revenues while new consumer chains are expected to join soon further increasing validators’ costs. Furthermore, Jae Kwon is now planning a hardfork following the passing of this proposal, since he was against reducing the max inflation parameter since the bonded ratio and security of the Cosmos Hub is the top priority. The proponents of this proposal are trying to justify themselves now saying the improved ATOM price will happen later over the long-term, however since there was no replacement until then regarding the major drop in APR for validators, now their situation will become even more challenging. Jehan mentioned that he is working on a proposal to use part of the NTRN tokens unclaimed from the airdrop and currently on the community pool, as revenues for validators. Also, the vote power tax proposal is expected to go on-chain soon, and if approved this could help as well with the current situation of consumer chain costs. Unless some of these solutions are implemented soon, it seems unlikely that the ATOM Economic Zone can scale, since validators won’t approve more consumer chains bringing additional costs and no revenues.

Events/conferences

The dYdX Foundation hosted a virtual community event on November 30th with speakers from dYdX trading, dYdX Operations subDAO, dYdX grants, Stride and more. This was a very interesting event since there was plenty to discuss including the activation of trading rewards and the 6-month incentive program, the successful completion of the alpha and beta phases and more. Stride previously mentioned that liquid staking for dYdX, Celestia or Namada was upcoming, and given the participation of Stride on this dYdX event it seems now very likely that Stride will be the first to launch dYdX liquid staking, with the advantage of enabling the swapping of the USDC rewards into DYDX and then auto-compounding DYDX.

Osmosis news

Around the same time as the Cosmos Hub proposal to decrease the maximum inflation parameter from 20% to 10% passed, the Osmosis chain was halted. The timing seems to indicate that the attack is likely related to the fact that Sunny, a co-founder of Osmosis, had a decisive impact on the proposal passing with the vote of the Sikka validator, which very rarely votes, but for this proposal voted yes. It seems that a lower APR on the Cosmos Hub benefits Osmosis since now ATOM holders are more likely to unstake and search for higher yields on Osmosis for example, thus benefiting Osmosis with a higher TVL.

Juno news

Juno announced a new improved website, with a lot of relevant information organised and available directly on the new website. Another good news about Juno is the recent integration with TrustWallet, for staking JUNO via desktop or mobile. TrustWallet has over 70 million users.

Persistence news

After Stride, pStake is the second largest liquid staking provider for ATOM. There was a signalling proposal that passed to add support for OSMO liquid staking on pStake. Moreover, pStake is also planning to add liquid staking support soon also for DYDX or TIA.

The Cosmos Hub proposal 853 titled ‘Allocate 600k ATOM for liquid staking growth to pSTAKE’ was well received and had the support of some of the largest validators including Everstake, other well-known validators also supported this proposal like Frens, SmartStake and others. In our previous episode we covered in detail this proposal, but to recap, the 600k ATOM will be used to boost stkATOM and to provide liquidity to stkATOM/ATOM pools on Astroport on Neutron and Dexter on Persistence.

Secret Network news

Serenity Shield’s StrongBox mainnet is live. Following this milestone, the next priorities are mobile platform integration, a decentralized, private and secure messenger service and much more. We covered in detail Serenity Shield’s StrongBox in a previous episode, explaining how they leverage Secret network’s private smart contracts, make sure to watch our previous episode if you would like to learn more.

During the Singapore Security Conference 2024, Secret network will present their work on Unstoppable wallets, which has already passed peer review and has been accepted by the Singapore Security Conference.

Stride news

Stride is about to launch the first liquid staking solution for DYDX in the coming weeks. To incentivize liquid staking for DYDX, Stride will airdrop 250k STRD to early stDYDX users in the first 2 months after the launch. To be eligible for the airdrop, the requirement will be to hold stDYDX either in your address or in a whitelisted app such as Osmosis for at least 31 consecutive days. If you are eligible, after the 60 days window, you will receive STRD pro-rata according to your stDYDX amount.
Remember that staked DYDX receive rewards in the form of USDC, but there is no solution to auto-compound staking reward into more staked DYDX. Thankfully, stDYDX will solve this. Basically, when you mint stDYDX, your DYDX are staked on the dYDX chain. Then, the accrued USDC staking rewards will be automatically swapped for DYDX and staked for auto-compounding. This is actually a very relevant functionality. Imagine that you are doing simple DYDX staking, you will receive rewards in USDC, but if you want to auto-compound the staking rewards you will need to claim the rewards, transfer and swap the USDC for DYDX, and then send back to the dYdX chain and stake. This is a time consuming and complex process. In contrast, with stDYDX, the auto-compounding process will be done seamlessly and automatically.

Do you know which is the most popular collateral token for the three biggest Cosmos stablecoins, SILK, USK and IST? Correct, that’s stATOM from Stride. Actually, stATOM is the most popular collateral token in Cosmos. The demand is so high that frequently projects need to increase the cap to allow for more stATOM collateral, such as in the case of Kujira’s USK currently.

Osmosis previously voted in October to deploy 20M OSMO to the stOSMO pool and this liquidity is finally now in place. This is very significant since now this is the deepest pool on Osmosis, and this is important for stOSMO to be a strong collateral since deep liquidity is critical to provide confidence to users and hence to further increase its adoption as DeFi collateral.

Crypto regulations & compliance news with MME

SEC filed a complaint against Kraken
The U.S. Securities and Exchange Commission (SEC), has filed a complaint in the U.S. District Court in San Francisco against the U.S.-based crypto exchange Kraken, alleging that the crypto exchange operates as an unregistered securities exchange, broker, dealer, and clearing agency in violation of the U.S. Securities Exchange Act of 1934.

According to the SEC’s press statement, Kraken:
•“provides a marketplace that brings together the orders for securities of multiple buyers and sellers using established, non-discretionary methods under which such orders interact, and thus operates as an exchange”;
•“engages in the business of effecting securities transactions for the accounts of Kraken customers, and thus operates as a broker”;
•“engages in the business of buying and selling securities for its own account without an applicable exception, and thus operates as a dealer”; and
•“serves as an intermediary in settling transactions in crypto asset securities by Kraken customers, and acts as a securities depository, and thus operates as a clearing agency”.
The SEC further alleges that “Kraken’s business practices, deficient internal controls, and poor recordkeeping practices present a range of risks for its customers”. In addition, Kraken is alleged to have commingled customer money and crypto assets with its own. This includes paying operating expenses directly from accounts that hold customer funds.
Kraken disagrees with the SEC’s allegations and will defend its position in court, according to the statement. The crypto exchange argues that the SEC has already tried this theory in the case against, inter alia, Ripple Labs, Inc (Ripple), and then the Federal Court for the Southern District of New York disagreed that the SEC’s ruling succeeds under the relevant legal test, because the relevant legal test should be considered with regard to the “economic reality”.

Consultation on AML/CFT regime for self-hosted wallet transactions
According to the European Union’s banking regulator, the European Banking Authority (EBA), the current anti-money laundering and combating the financing of terrorism (AML/CFT) requirements for crypto providers under the “travel rule” are no longer sufficient to govern international AML/CFT standards and best practices. The “travel rule” requires for virtual asset service providers (VASPs), which include inter alia payment service providers (PSPs) and crypto asset service providers (CASPs), to collect, verify, and share information about crypto asset transfers and their payers/originators and payee/beneficiaries.
Due to the lack of information in crypto asset transfers related to technological movements, the EBA launched a public consultation on new guidelines for the prevention, detection or investigation of money laundering and terrorism financing. The guidelines detail the procedures that should be implemented by VASPs to manage a transfer of funds or crypto assets that lack the required information.

Newly, the CASP should obtain and hold the information on the self-hosted address, ensure that the transfer of crypto assets can be individually identified, and assess whether that address is owned or controlled by the CASP customer if the transfer amount exceeds 1000 Euro. In addition, the EBA proposes to require CASP to enable the transmission of information in a seamless and interoperable manner by improving the interoperability of the protocols they use and to merging the AML/CFT criteria for PSPs and CASPs. The consultation of the proposed guidelines runs until February 26, 2024.

Conclusion

And that is all for today’s Cosmos ecosystem bi-weekly review so if you enjoyed it Cosmonauts remember to click that like button, subscribe button and bell icon too. Thank you so much for reading and I’ll see you Cosmonauts very soon in the next episode!

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