dYdX exchange introduces fees with the hopes of building a sustainable business model

dydx, a decentralized margin trading platform, has announced they will be introducing trading fees for their exchange. Beginning on March 10, there will be separate maker and taker fees for each trading pair denominated as a percentage of trade volume. The decision was made so that the team building the protocol and product can begin earning revenue as a company to then find ways to incentivize the provision of more liquidity.

Why it matters

• There have typically been two means of capturing value in decentralized networks, at the protocol or product layer. The former necessitates the introduction of a token while the latter requires a centralized business to be built atop the protocol. The token model has worked up to this point sustaining projects such as Maker and was more recently introduced by Compound. However, the long-term viability remains unknown which is why the team opted to build a business using the protocol they created.
  
• While the product will no longer be free for users, the protocol itself will not incur trading fees. Since anyone can build on top of the protocol, this opens up the possibility of building a competing margin exchange undercutting the existing exchange’s transaction fees. In the long term, this competition will help keep fees lower preventing any business from extracting unnecessary excessive value from the users.