What is Dymension (DYM)? Exploring the modular blockchain

Dymension is a modular Layer-1 blockchain platform that supports the creation and deployment of new application-specific blockchain networks called RollApps.

Blockchains like Ethereum and Solana are effective general-purpose networks that can support decentralized applications (DApps). However, due to the constraints of the Proof of Stake consensus mechanism they’ve adopted, neither network can be modified to serve the specific requirements DApp developers may have, such as instant settlement or off-chain storage. Dymension helps to address this challenge by allowing developers ‌to spin off new blockchain platforms with custom features to support their applications.

Here, we’ll explore Dymension in detail, explaining how the technology works, the tokenomics of the project’s native token, DYM, the tool’s benefits and limitations, and more.

What is Dymension (DYM)?

Dymension offers a number of solutions for developers to build DApps, but the core of it all is the project’s “RollApp” concept. RollApps are modular blockchains built for specific applications. Dymension brings together a number of creative solutions to make this possible.

With open blockchains (public networks open to all) such as Ethereum, developers aren't only limited by their features, but also by ‌availability. These networks have shared bandwidth that DApps compete for. When the gas fee on Ethereum is expensive, individuals only use it for necessary transactions and refrain from using it for non-essential activities, such as gaming and NFTs. With Dymension, developers can deploy a modular blockchain that hosts only their applications. This way, project owners won’t have to compete with other DApps, and can also implement the specific features they want at the same time.

Dymension refers to itself as the hub and factory for such applications. That’s because developers have all the tools needed to develop, deploy, and distribute applications as RollApps with their own chains.

History of Dymension

Yishay Harel founded Dymension in 2022. Before that, he worked on projects like Celestia and Cosmos, both of which served as the basis for Dymension. Despite launching in a bear market, Dymension raised $6.7 million in its seed round in February 2023. This investment was led by major crypto funds such as Big Brain Holdings, Matchbox DAO, and Stratos.

Soon after, Dymension's testnet was launched for developers and users to test the functionality and features of RollApps. After extensive testing, the Dymension mainnet was finally launched in February 2024, along with the DYM token. 10% of DYM’s total supply was airdropped to early adopters and developers on the Dymension testnet.

How does Dymension work?

Dymension is made up of three main layers:

Front-end (RollApps)

The front end is the execution layer that runs RollApps and connects with ‌users. RollApps are customizable blockchains that are easy to deploy. The modules included are pre-configured for quick deployment by developers.

However, developers can also develop modules from the ground up with the exact features they want, or they can tweak ‌existing modules. By default, the RollApp modules come with three features that almost every blockchain needs:

• Tokens: Developers can mint tokens and set the precise tokenomics they want. It’s possible to set the initial mint, the reward rates for node operators and stakers, and to automate the decentralized autonomous organization (DAO) pool.

• Governance: Most early blockchain systems need a governance mechanism to remain decentralized and gain the trust of users. RollApp developers can do just that by giving token holders control over certain on-chain functions. RollApps have governors who users can delegate their voting power to. Governors vote on DAO proposals, distribution of yield, and the adjustment of on-chain parameters.

• Bridging: Since RollApps are their own blockchains, they need to be interoperable with other chains. Users can bridge their assets such as USDT, USDC, and more, to RollApps. However, this action benefits from the added security of Dymension. The project uses the Inter-Blockchain Communication (IBC) technique, where the bridge assets are secured on the Dymension blockchain instead of being left in the hands of RollApps. Bridging into and out of RollApps is also handled instantly without a waiting period.

With access to these three core features, RollApp developers can focus their energy on elevating their applications’ features, rather than getting sidetracked by the basic infrastructure. That means they can easily bootstrap and spin up new DApps with app-specific blockchains they’ve custom-built.

About Dymension Hub, the project’s back-end infrastructure

The back end of RollApps is the Dymension blockchain, which is supported by other tools securing the network, known as the Dymension Hub. It's a Proof of Stake Layer-1 chain that provides three main functions:

• Security: Validators on RollApps can validate the transactions on their chain as defined by the developers. However, tokens on RollApps are secured on the Dymension chain. Tokens can only be issued under pre-defined standards to make sure that ‌transactions on RollApps are secure and resilient to fraud.

• Bridging: The Dymension Hub also offers a bridge that can link together Dymension, RollApps, and other compatible blockchains.

• Liquidity: The Dymension Hub also provides liquidity for RollApps through its automated market maker (AMM). The AMM enables token swaps across the entire RollApp ecosystem, bringing convenience to users through efficient price discovery and routing.

Database

Dymension also offers a database, known as the data availability layer. While Dymension’s chain processes transactions, the data is stored on separate data availability (DA) networks. DA networks are a decentralized layer that only saves the data verified by Dymension’s validators. Unlike traditional blockchain validators, DA validators require a high-throughput network but low hardware. One example of a data availability layer is Celestia, which Dymension already uses.

It's these three pillars — RollApps, Dymension Hub, and Database — that come together to make up the Dymension ecosystem. RollApps are custom blockchains built to host DApps such as games and DeFi exchanges. They’re ‌built using Dymension’s RollApp Development Kit (RDK), which is an extension of Cosmos Software Development Kit (SDK). The RDK maintains several core features of Cosmos SDK, while introducing new features. The biggest difference is the requirement of validators. Cosmos uses a consensus engine that requires each app-chain to run its own validator set. RollApps, on the other hand, don’t have such requirements, and they can inherit Dymension’s security. Another major difference is that Dymension supports Ethereum Virtual Machine (EVM), enabling the creation of EVM-based RollApps. This makes it easy for Ethereum developers to migrate their apps from Ethereum and other EVM chains.

Developers can focus on creating the core functionalities of their RollApp, and Dymension takes care of the rest. This includes security and providing core functionalities such as bridging and liquidity. Finally, the database adds an extra layer of security by outsourcing blockchain data to various data availability networks.

Tokenomics and distribution of Dymension

DYM as the native token of the Dymension ecosystem. Here, DYM provides three main functions:

• Staking: Validators can stake DYM to secure the network and earn DYM tokens for doing so.

• Governance: DYM holders can participate in the governance and future operations of Dymension. Token holders can also give their votes to governors who actively participate in‌ governance.

• Fees: DYM is used to cover transaction fees for on-chain interactions.

DYM tokenomics

DYM has a capped total supply of 1 billion tokens. However, only 167 million of this total supply in circulation at the time of writing. The remaining tokens are locked with a pre-defined emission rate based on supply and demand:

• Minimum annual issuance: 2%

• Max annual issuance: 8%

• Target DYM staked: 50%

DYM’s issuance depends on how much of the circulating supply is staked by its users. The project aims for 50% of all circulating DYM to be staked. Let’s look at some examples of how this target is maintained.

If only 45% of DYM is staked, the issuance of new tokens is increased with an upper limit of 8% per annum. If the total DYM staked reaches 50%, the issuance rate won’t change. If the total staked DYM surpasses 50%, the issuance rate will decrease to a minimum of 2% until the staking goal is reached.

Distribution of DYM

DYM’s total capped supply of 1 billion tokens will be distributed in the following way:

• 80 million DYM, which is 8% of the token supply, was airdropped to early testnet users.

• 50 million DYM was allocated and given to the community pool, which was unlocked at the genesis.

• 200 million DYM is set aside for R&D and to fund the long-term growth of Dymension's ecosystem.

• 333 million DYM will go towards incentives managers, who can distribute the funds to RollApp credit streams, airdrops, and AMM incentives to increase adoption.

• 140 million DYM was reserved for early backers with a 12-month lockup, followed by a 24-month linear vesting period.

• 200 million DYM were reserved for the team and for future contributors.

Dymension started with 125 million tokens and a preset annual inflation rate of 2-8%. Its algorithmic issuance rate makes sure that the inflation rate is closely tied to the staked DYM tokens.

Benefits of Dymension

• DApp developers can now more easily deploy custom blockchains that meet their exact requirements.

• It's simple for developers to establish tokenomics, governance, and other fundamental features.

• Dymension goes beyond just tools for deployment. It also offers a suite of essential tools new blockchains need, such as security, bridging, and liquidity.

• Dymension’s AMM enables cross-RollApp swaps for better price discovery and convenience.

• Outsources data to DA layers, further increasing security and scalability.

Limitations of Dymension

• The success of Dymension depends on developers creating RollApps, which can attract new users. As a relatively new platform, attracting new developers and users could be challenging.

• Dymension has multiple layers to it, which could confuse new users and create a barrier to adoption.

• Dymension’s multiple layers also create a need for extensive testing and governance. Failure at any level could have an impact on the overall Dymension ecosystem.

• The DYM token has huge supply, which could dampen its price in the future. Dymension needs a thriving community for its price to ‌stay stable or increase in value.

The final word

Dymension is an ambitious project that equips developers with the tools they need to build and deploy application-specific blockchain networks known as RollApps. RollApps then allow for the creation of sophisticated, secure, and highly functional DApps, bringing new possibilities to the blockchain.

Dymension has already achieved plenty in the relatively short period since its launch. The project successfully supports the creation of multiple blockchains without compromising on ‌security. Meanwhile, Dymension also brings welcome convenience to developers and users by giving simple access to bridging.

With a strong, future-proof tokenomics structure for DYM, Dymension could help to kick-start a new wave of DApp development, free from the limitations of existing chains.