Monetary Policy

DYM Demand

Dymension aims to achieve a long-term sustainable equilibrium between supply (i.e token circulation and issuance) and demand (i.e utility and value accrual). The demand side of Dymension is driven by three primary value accrual mechanisms:

1. Burn: DYM tokens are systematically burned as part of validating transfer fee and protocol swap fees.
2. Transaction Fees: All fees generated from blockspace demand are distributed amongst DYM validators and their stakers.
3. Supply Lockup: RollApp bonds reduce the circulating supply of DYM, enhancing the network's security and stability.

Validating Transfer Fee

Processing withdrawals from RollApps (i.e. settling) is a critical function validated by Dymension. This process incurs a Validating Transfer Fee which is a parameter adjustable through onchain governance. Fees collected through this process are converted into DYM tokens and subsequently burned.

Example

Consider a scenario in which the fee parameter is set at 0.1%. A user withdrawing 1000 USDC from a RollApp would incur a fee of 1 USDC. This amount is then converted into DYM using the embedded Dymension AMM and burned.

Parameter	Current value
Validating Transfer Fee	0.00%

RollApp Bonds

RollApp Sequencers must stake DYM tokens as a bond to propose state updates. The minimum bond requirement for sequencers is an on-chain parameter. In future iterations, this minimum bond amount will be dynamically adjusted based on the Total Value Locked (TVL) of assets (i.e., IBC value on Dymension) within the RollApp.

Currently, if a positive fraud proof is confirmed or if a Sequencer is jailed, the next highest-bonded, non-active Sequencer automatically becomes the active Sequencer. In the future, bond size will play a key role in determining the active Sequencer in a continuously rotating, multi-sequencer RollApp setup (i.e., a round-robin mechanism).

Parameter	Current value
Minimum RollApp bond	100 DYM

Protocol Swap Fees

Dymension's embedded AMM facilitates liquidity bootstrapping, swapping, and pricing. Dymension charges a Protocol Swap Fee on all swaps.

Fee Structure

• LP Swap Fees: Set as a global parameter for all liquidity pools at 0.20%, providing revenue for liquidity providers (LPs).
• Protocol Swap Fees: A global parameterized fee of 2.00% for IROs and 0.10% for standard liquidity pools is charged. Of this, 50% is split between the RollApp creator and the protocol for DYM burn.

Parameter	Current value
Initial RollApp Offerings
- Royalties	1.00%
- Protocol swap fees*	1.00%
Standard Pool
- LP swap fees	0.20%
- Royalties	0.05%
- Protocol swap fees*	0.05%

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*Note: Protocol swap fees are swapped to DYM and subsequently burned.