DerivaDEX Token Economics
A close look at the economics and token emissions of the DerivaDEX protocol
What is DerivaDEX?
DerivaDEX is a next-generation decentralized exchange for derivatives contracts. DerivaDEX uniquely combines the autonomy of decentralized exchanges with the performance of centralized exchanges. This article describes the token supply, distribution, and economics of DDX, the native token of the DerivaDEX protocol.
DDX enables users to participate in the governance and operations of the exchange. It is not a fundraising device nor an investment opportunity. U.S. residents are not permitted to trade on the exchange or participate in some programs.
DDX emissions and allocations have been carefully engineered to provide a sane, sustainable governance ecosystem for the DerivaDEX community. This document addresses three components behind DDX economics: DDX genesis emission, DDX liquidity mining emissions, and the insurance fund (initially capitalized via a stablecoin staking program and governed by DDX holders).
All aspects of DerivaDEX are subject to change by the DerivaDAO, including the capitalization and management of the DerivaDEX insurance fund. This flexible approach to system parameters ensures that the community can respond quickly to new opportunities and contexts.
All DDX is non-transferable until the “governance cliff” is lifted, and DerivaDEX enters our mainnet phase.
What is the governance cliff?
DerivaDEX is a DAO from day one. This means that support from stakeholders who control DDX tokens is required to pass all updates and modifications to the system. To develop early participation from the DerivaDAO, the insurance mining program, and our genesis supply, are initialized with a “governance cliff” period where earned DDX can be used to participate in governance decisions, but are non-transferable. The lifting of the governance cliff will be among the first decisions the DerivaDAO implements, and will lift all transferability restrictions. All DDX tokens are subject to this schedule.
This governance cliff ensures that the DerivaDEX community is able to fully understand the governance mechanisms, conduct ample discussion around initial governance topics and proposals, and ensure that DerivaDEX enters a mainnet period with the highest quality of governance participation.
DDX Emissions
- 100,000,000 DDX are emitted over a 10-year period. There is no additional supply or inflation planned for DDX
- 50 million DDX are emitted initially as part of the genesis supply. This is referred to as “genesis token emission” throughout.
- 50 million DDX are emitted over a 10-year period as part of the liquidity mining supply.
Genesis Supply Allocation and Emission
- 34,005,404 DDX from the genesis supply are allocated to the DerivaDAO foundation, but only 21,263,737 are unlocked upon network launch. This allocation bucket includes: funding for community initiatives, business development and partnerships, marketing, future fundraising rounds, and continued engineering development of the DerivaDEX protocol. Unlocked tokens can be utilized for these purposes at any time, and will be done so transparently to the community. All engineering and other team tokens are subject to industry-standard vesting and unlock schedules, varying based on start dates.
- 15,334,596 DDX from the genesis supply are allocated to partners, on a 1-year linear schedule. The vast majority of this (15,094,596 DDX) is on a 1-year linear schedule, with a small portion (240,000 DDX) on a 2-year linear schedule.
- 660,000 DDX from the genesis supply are allocated to advisors. The majority of this (460,000 DDX) is on a 2-year linear schedule, and the remaining 200,000 consists of shorter schedules of 3 months or less.
The goal of this allocation design is to ensure a diverse range of governance participants with a variety of expertise.
What is a linear schedule?
- Stakeholders on a 1-year linear unlock schedule receive 8.33% of their total allocation immediately upon genesis token emission, and another 8.33% monthly until their full allocation is received.
- Stakeholders on a 2-year linear unlock schedule receive 4.17% of their total allocation immediately when genesis tokens are emitted, and another 4.17% monthly until their full allocation is received.
- All tokens on a linear schedule are non-transferable until the DDX governance cliff is reached.
Liquidity Mining Supply Allocation and Emission
- 50 million DDX will be emitted to the liquidity mining supply
- 2,500,000 DDX from the liquidity mining supply will be emitted linearly over 1 year as part of the insurance mining program (1.189117199391172 DDX per block, for 2,102,400 blocks).
- 47,500,000 DDX will be minted via liquidity mining programs including trade mining over a 10-year period.
These are the initial parameters. The rate of liquidity mining supply, and the duration and selection of liquidity mining programs, are all parameters that are subject to change via DerivaDAO governance.
Insurance Fund
The DerivaDAO manages more than the supply of DDX tokens. The DerivaDAO is also responsible for managing all parameters of the exchange: listing products, determining the capitalization of the insurance fund, setting trading fees. A unique feature of DerivaDEX is the requirement for the exchange to build and maintain a healthy insurance fund. Unlike centralized exchanges, this DAO-managed fund will have transparent parameters set via governance.
The management of this fund’s size and implementation is the responsibility of DerivaDAO participants. This resource will be initially capitalized by the insurance mining program, and later capitalized via trading fees and liquidations. The collateral types that are accepted to the insurance fund, and the balancing of various collateral types, is subject to DerivaDAO governance.
Changelog
01/12/2021: An allocation error was corrected. Previously, the post read that 34,245,404 DDX from the genesis supply are allocated to the DerivaDAO foundation, but only 21,503,737 are unlocked upon network launch. The correct numbers are that 34,005,404 DDX from the genesis supply are allocated to the DerivaDAO foundation, but only 21,263,737 are unlocked upon network launch.
12/28/2020: The numbers and additional details for the genesis emission tokens have been updated and clarified. This reflects minor accounting changes, updated advisor allocations, as well as provides more granularity on distribution within genesis emission.
Specifically:
- 34,020,405 DDX allocated to the foundation is now 34,245,404 DDX. This is due to a correction in our accounting method for partners.
- 15,719,595 DDX allocated to partners is now 15,334,596, reflective of the same accounting change referenced above.
- 260,000 DDX for an advisor allocation is now 660,000 DDX, reflecting the inclusion of recently added advisors.
- None of these changes affect the total genesis emission (50 mm).
- The change also provides more granularity on the unlocking schedules, in addition to token emission schedules.
Also, graphs have been updated (and are now interactive).
DDX is an ERC-20 token.
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