We mentioned how gaining access to advanced financial operations can be a powerful tool for the people with the know-how to wield them in our “Depositing USDC to dYdX” guide. But did you know you can also play a role in stabilizing and securing these tools as you contribute to our ecosystem?
Today, we'll be learning how to use the dYdX token to secure the protocol through their Safety Pool module.
In this article, you’ll learn:
What is dYdX?
How to Swap ETH for dYdX tokens.
How you can earn dYdX tokens through their platform.
How to Stake dYdX tokens on the Safety Pool.
In order to complete this task, you’ll need the following:
An Ethereum wallet, such as MetaMask.
ETH in your wallet to swap for dYdX tokens and gas fees.
It’s important to note that dYdX isn't available to US citizens, so this quest will be exclusively available to our quest rabbits overseas.
If you want to delve deeper into how Staking can be used as a DeFi tool, and other financial topics in web3. There's no better resource at your disposal than our RabbitHole Learn Hub
Derivatives can be a touchy subject. Heavy regulation, over-leveraged traders, and an aura of risk surrounding it all. Yet, there's no denying they can be an amazing tool to compound your investment when leveraged properly.
That's where dYdX comes in, as the decentralized provider of derivatives for the DeFi audience. dYdX ensures user protection from institutional manipulation and smart-contract backed access to advanced financial operations. They believe in your right to invest your funds in what you believe in.
What's more, they even implemented some security features to somewhat de-risk this volatile investment mechanic. Their “Safety Pool” module aims to hedge the platform from the ups and downs of the market, as well as the potential security risks that most DeFi platforms face, through the funds provided by anyone staking the dYdX token.
In the unlikely case of a platform exploit or severe drain liquidity, these staked funds would come in as the saving grace to protect you from losing your investment. In return, stakers can earn yield for securing the protocol, as well as the governance power that comes with holding their tokens normally.
We've gone over swapping tokens in some of our previous guides (like our How to Swap Tokens on Uniswap guide).
But to give you a quick refresher on how to do it, here's a step-by-step:
1. Go to app.uniswap.org (make sure you're on the ETH network)
2. Pick the amount of ETH you want to swap
3. Type in “DYDX” into the output field.
Alternatively, you can paste the following contract into the search bar: 0x92D6C1e31e14520e676a687F0a93788B716BEff5
4. Submit the transaction
Just like that you'll have some dYdX tokens to stake on the platform.
Another option to get some dYdX is to stake USDC on their Liquidity Pool, you can do so through their community dashboard, the same one you'll be using to stake DYDX in the Safety Pool module.
You can claim your earned dYdX tokens at any point, the same way you would with any DeFi yield. But keep in mind you'll have to wait a few days for the rewards to accrue before claiming them, so this method isn't advised for this quest.
Now, go to dydx.community and connect your wallet. Remember, dYdX isn't available to US users, and the platform will prompt you to confirm that you're not a US citizen.
Now, just click the “Stake” button in the Safety Pool module on dYdX, and approve the token for trading.
After verifying the token, you’ll be able to deposit your dYdX in the Safety Module. One of the advantages of doing so is that you will still keep the token's governance power, while earning yield over time.
You'll be able to request the withdrawal of your funds and claim them at the end of each epoch, about once a month. You can request the withdrawal of your staked funds any time you like, except the last 14 days before the end of an epoch, which is known as a blackout window. You can see the countdown to the next epoch’s start, as well as the next blackout window, at the bottom of the Safety Pool’s dashboard.
dYdX uses a system known as a Merkle Tree to ensure their platform's security. In a nutshell, transactions are verified in batches over a specific period of time, instead of one-by-one as they come. This usually means you'll have to wait a while before being able to withdraw funds from their platform, but rest assured they'll still be there when the epoch ends.
You're now playing your part in securing this protocol from potential exploits and vulnerabilities. Owning your stake in DeFi protocols offers you an unprecedented amount of agency when defining their growth and web3's ability to enable true ownership of your financial assets.
For more quests on DAOs, DeFi and NFTs, we recommend you claim our RabbitHole credentials and stay posted on future experiments!
Until next time Quest Rabbit.