Dymension (DYM): Analysis of the new modular blockchain

The Big Whale's opinion 🐳

The Dymension project is positioned at the heart of modular blockchains, a trend highlighted by Celestia and the Cosmos ecosystem as a whole.

It has specialised in one of the main functions assigned to blockchains, in this case transaction settlement, allowing projects to focus on other essential aspects.

The initiative has generated notable interest, thanks in particular to the airdrop of its DYM token targeting a broad user base.

Despite a relatively rapid development phase, it remains to be seen whether Dymension will be able to deliver on its technical commitments and meet expectations effectively.

No major project has so far declared an interest in Dymension, which makes us doubt its long-term potential.

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Overview 🧬

In late 2021, the team behind Dymension was inspired by an emerging technology known as layer 2. These second-layer structures, often based on Ethereum, aim to offload the main network by taking over the execution of transactions. The aim is to improve network scalability while reducing transaction costs. Notable examples include Arbitrum, Optimism, and Starknet (read our analysis).

Faced with the interoperability challenges of Ethereum's layer 2s, the founders turned to the Cosmos ecosystem, characterised by applications running on independent blockchains, communicating via the IBC protocol. This pivot towards a more compatible framework led to the creation of Dymension, a network optimised for layers 2, enhanced by IBC support for increased interconnectivity.

The key innovation of Dymension lies in the creation of "RollApps", layers 2 designed specifically for an application. This model aims to accommodate a variety of dedicated Layer 2s, enriching the ecosystem with a multitude of targeted uses.

So far, Dymension is showing promising signs, with more than 1,164 RollApps listed on its test network. These applications cover a wide range of fields, including gambling, video games, and NFTs, illustrating the flexibility and appeal of the Dymension platform. Nevertheless, no known projects are among them.

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Financing 💰

On February 9, 2023, Dymension successfully raised $6.7 million in an initial funding round.

This fundraising was led by Big Brain Holdings and Stratos, with participation from Cogitent Ventures, Builder Capital, Matchbox DAO, and Shalom Meckenzie.

It should be noted that these entities are not considered major or benchmark investors within the crypto ecosystem.

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Team and community 👾

The Dymension project is primarily developed by Yolo Labs, also known as Dymension Labs, a company located in Tel Aviv, Israel.

The company maintains a low-key profile, with little information available to the public. Although it has a website (Yololabs[.]tech), it contains only a blank page, which raises questions.

On its LinkedIn page, Yolo Labs claims to employ around ten people, but specific details about these employees are limited.

Yishay Harel, who holds the position of CEO and co-founder, mentions working for Kraken in Israel for two years, although this claim is not verified, as Kraken reports no activity in Israel.

Michael Tsitrin, the lead developer of Dymension, comes from NSO Group, an Israeli cybersecurity company known for its Pegasus spyware. This software has been used by various governments to monitor the communications of journalists, activists and political opponents. Since 2021, NSO Group has been blacklisted by the US Department of Commerce for these activities.

Globally, there is little information available about the team behind Dymension, and the information that is accessible does not provide a high level of confidence.

The project has 213,000 followers on X (formerly Twitter) and 130,000 members on Discord.

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Social analysis  👥

According to analysis by Kaito, a company specialising in the analysis of data from social networks, Dymension ranked 18th among the most popular cryptocurrency projects over the past 30 days, a popularity attributed to the interest generated by its token following the airdrop carried out the previous month.

However, over the past 7 days, the project has slipped to 48th position, due to a lack of recent significant announcements.

Functioning ⚙

The large traditional blockchains are known as "monolithic" because they manage three main functions: Execution (transaction processing), Settlement (dispute resolution) and Data Availability (accessibility of data recorded on the blockchain).

Dymension offers to manage the settlement function on behalf of RollApps.

The project complements the Celestia (read our analysis), Avail or EigenDA projects, which offer to manage data availability for projects on their behalf.

While delegating data management may be seen as more advantageous due to significant storage costs, offering an interesting proposition for project optimisation, Dymension's delegation of settlement is not seen as being as crucial.

In fact, settlement does not necessarily incur high costs, and it would seem that choosing Dymension over Ethereum for this task offers few notable advantages.

However, one of Dymension's clear benefits lies in its ability to facilitate the communication and transfer of liquidity between different RollApps developed on its platform, aiming to solve the problem of liquidity fragmentation between blockchains. This feature promises greater fluidity in the exchange of tokens from one Rollapp to another.

However, the absence of major projects currently using Dymension limits the impact of this feature, and the effectiveness of this solution remains to be demonstrated, with RollApps still in the testing phase on the Dymension network.

Dymension is closely integrated with the Cosmos ecosystem, having adapted its SDK to create the "RDK" (RollApp Development Kit), making it easier to develop RollApps on its platform. This approach seeks to simplify the creation of Layers 2, promising seamless integration and interaction within the wider blockchain ecosystem.

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The DYM token 🪙

DYM token holders can participate in securing the Dymension blockchain by staking their tokens, allowing them to benefit from an annual return of 18%. Transaction fees generated during exchanges between RollApps or when tokens are withdrawn to the Dymension blockchain are converted into DYM and then destroyed, thus contributing to the increase in DYM scarcity as network use intensifies.

To interface with Dymension, RollApps must tie up a certain amount of DYM tokens, depending on their volume of activity. As a result, increased activity on RollApps leads to fewer DYMs available in circulation.

Some DYM stakers also anticipate becoming eligible for airdrops from RollApps deployed on Dymension. It is conceivable that projects such as Avail, which are planning airdrops in the near future, will reward users who have staked DYMs, especially as many projects choose Dymension for settlement and Avail for managing their data.

The inflation rate for the DYM token is variable, fluctuating between 1% and 10%. This rate adjusts progressively according to the percentage of DYM tokens staked: increased inflation is expected if less than 67% of total tokens are staked, while a proportion greater than 67% of DYM staked will lead to a reduction in the inflation rate.

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Distribution of DYM token 💵

On 6 February, 8% of DYM tokens were distributed to users via an airdrop, notably targeting those participating in the staking of TIA (Celestia) and ATOM (Cosmos) tokens.

With regard to the allocation of tokens, 20% allocated to the team and private investors will remain locked up until February 2025, after which they will be released gradually over two years.

In addition, 33% of tokens are allocated as bonus rewards for ecosystem participants.

A 5% reserve fund is earmarked for the project's cash flow, with participatory governance allowing stakers to vote on its use.

Finally, 20% of the tokens are reserved for ecosystem support and research and development, although the details of how this allocation is distinguished from that reserved for the development team are not fully specified.

Market analysis by Chadi El Adnani, Head of Content & Research at SUN ZU Lab 📈

The DYM token experienced classic volatility following its listing on the main centralised exchanges in early February. Its price rose 75%, from $5 to $8.7, before dropping 30% to $6.3 in just a few days.

Trading volumes on Binance have also been divided by 10 since the start of the month. It is therefore important to take the unstable and volatile state of the token into consideration before deciding to trade DYM.

DYM ends the month with a performance of +8%, underperforming BTC (+16%) and ETH (+30%).

Regulation ⚖

The Dymension project, being at an early stage of development, is not yet subject to specific regulation.

However, during its airdrop, US citizens were intentionally excluded.

This decision was taken because the DYM token could be interpreted as an unregistered financial security in the eyes of US regulators.

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Competition ⚔

Initia offers a service quite similar to that of Dymension, but is at an earlier stage of development.

Neutron may, to some extent, represent a competitor to Dymension, but that is not its main purpose.

The majority of layer 2s are currently opting for Ethereum as the basis for transaction settlement, benefiting from its robust security without incurring prohibitive costs.

Although Dymension does not offer the same level of security as Ethereum, its architecture aims for greater interoperability between layer 2s, thanks in particular to the integration of the IBC protocol. This feature should theoretically reduce the fragmentation of liquidity, although this claim has yet to be confirmed.

Dymension specifically targets projects that prioritise simplicity and speed of deployment over maximum security, offering a platform that promotes effective interoperability between different blockchain ecosystems.

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Roadmap 📝

The 1164 projects currently being developed on Dymension are not yet launched on the project's main network. The first application, named RollApp X, will be the first to go live, although details about it have yet to be specified.

In later phases, DYM token holders will play a crucial role in selecting which RollApps will be allowed to deploy on Dymension.

This participatory approach will evolve into an open platform, where eventually it will be possible for anyone to launch their own RollApp without requiring prior authorisation.

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Where can you buy the DYM token? 🛒

The DYM token is not yet available on many platforms, but you can find it on Binance, a crypto-asset exchange regulated in France by the AMF.

It is also listed on Kraken, another reference company, but this is not registered in France.

More experienced users will be able to acquire some via Osmosis, the decentralised exchange of the Cosmos ecosystem. To do this, they will need to use a digital wallet that supports its technology. We can advise you to use Keplr or Leap.

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Conclusion 🧭

Dymension has the advantage of positioning itself as the first modular blockchain specialising in settlement.

The project has been developed very quickly and we cannot yet measure its technical promises.

There are a lot of grey areas around its team.

With a total capitalisation of $6.5 billion, DYM appears to be valued beyond its actual business, a situation that can be attributed to DYM holders' anticipation of receiving airdrops from projects associated with Dymension.

Nonetheless, it appears that few promising projects are currently considering deployment on Dymension, which could call into question expectations around this valuation.
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Our other analyses 🔍

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⭐ Starknet's analysis (STRK)

⭐ EigenLayer's analysis

⭐ The analysis of Celestia (TIA)

⭐ The analysis of Lido (LDO)

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