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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 value accrual mechanisms:

  1. Burn: DYM tokens are systematically burned as part of validating bridging 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 Bridge Fee​

Processing withdrawals from RollApps (i.e. settling) is a critical function validated by Dymension. This process incurs a Validating Bridge 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.

Protocol Swap Fees​

Dymension's embedded AMM facilitates asset routing, swapping, and pricing. Dymension charges a Protocol Swap Fee on all swaps. This fee follows the same path as the Validating Bridge Fees — being converted into DYM and burned.

Fee Structure​

  • LP Swap Fees: Set as a global parameter for all liquidity pools at 0.20%, providing a source of revenue for liquidity providers (LPs).
  • Protocol Swap Fees: Set as a global parameter for all liquidity pools at 0.10%, reducing the supply of DYM.

RollApp Bonds​

RollApp Sequencers are required to stake DYM (or the RollApp/DYM LP token) as a bond for proposing state updates. Minimum bond requirements for sequencers are dynamically determined onchain by the Total Value Bridged (i.e. IBC bridge on Dymension) to the RollApp.

In a multi-sequencer RollApp the size of the bond a sequencer posts determines their allocated block production time relative to other sequencers.