DXN Hyperstructure Initiative
Phase I: NXD Protocol — Deflationary Store of Value
Introduction
The DBXEN team has given birth to the DXN cryptocurrency through a novel auction-based distribution mechanism that has proven to be robust in both bull and bear market environments. Besides distribution, this mechanism holds great value in the ability to function as an income layer for dApp integrations by leveraging the Return on Investment (ROI) of the DXN token into the economic model.
In the current days of decentralized finance (defi), it is rare to encounter an undervalued cryptocurrency that is immutable, decentralized in its token distribution, pays sustainable passive income derived from its tokenomics and has a thriving community supporting it. We’re happy to be a part of that and congratulate the DBXEN team in achieving this successfully through a challenging market environment.
Engineering a Hyperstructure
The concept of a hyperstructure is best outlined as followed; “hyperstructures can take form of crypto protocols that can run for free and forever, without maintenance, interruption or intermediaries. The nature of crypto protocols opens up radically expansive new models to create invaluable public infrastructure[1]”.
Something can be considered a hyperstructure if it is[2]:
- Unstoppable: the protocol cannot be stopped by anyone. It runs for as long as the underlying blockchain exists.
- Free: there is a 0% protocol wide fee and runs exactly at gas cost.
- Valuable: accrues value which is accessible and exitable by the owners.
- Expansive: there are built-in incentives for participants in the protocol.
- Permissionless: universally accessible and censorship resistant. Builders and users cannot be deplatformed.
- Positive sum: it creates a win-win environment for participants to utilize the same infrastrastructure.
- Credibly neutral: the protocol is user-agnostic.
Looking at the core of DXN Protocol’s income layer being underpinned by XEN’s immutable infrastructure and Ethereum’s decentralized system economics there exists a clear opportunity in engineering a sustainable defi Hyperstructure.
DXN Hyperstructure Initiative
As a result of that, the DXN Hyperstructure Initiative took charge from the desire to build and expand a passive income generating system that is sustainably underpinned by the merits of defi. This initiative is a community-lead partnership with the DBXEN Team focused on creating value for the DXN cryptocurrency. The strategy revolves around introducing several layers of deflationary tokenomics to the DXN network while preserving and utilizing the income-layer functionality of the DXN token.
- Phase I: Vertical Integration of NXD Protocol — deflationary store of value
- Phase II: Vertical Integration of ICX Protocol — deflationary yield farming
- Phase III: Horizontal Integration with external DeFi Protocols
- Phase IV: Community Lead Development Proposals
Please review the following graph to understand the difference between horizontal and vertical integration.
In the following days, more detailed information will be released on the launch of the NXD Protocol and a complete overview of the system tokenomics. We’ve provided a short analysis of DXN Protocol for newcomers, DXN veterans are able to skip this part and move to the next paragraph.
A short analysis of DXN Economics
The DXN Protocol rewards participants with DXN tokens through daily auction cycles, which started a year ago with a 10,000 token reward pool that decreases by 0.2% each cycle, aimed at depleting the ~5.01 million total supply over roughly 62 years[3]. Rewards are contingent on daily XEN burns, with potential interruptions in distribution if no burns occur, while users pay a Native Protocol Fee (in ETH) for burning XEN, structured to decrease with larger burns to encourage efficiency and replenish the reward pool.
DXN rewards and the fees collected are proportionally distributed based on each user’s contribution to XEN burns, incentivizing active participation. Claiming these rewards allows users to collect DXN tokens, which can be restaked to earn further fees from daily auctions in ETH, thus aligning long-term engagement incentives within the protocol.
DXN Price Performance and ROI measures
The DXN token has experienced both strong up- and downward price trends in terms of token price, while maintaining a 80–90% stake-rate of DXN tokens inside the DXN Protocol. The Native Protocol Fee APY for DXN stakers is dependent on the activity in the daily auctions cycles which became far more competitive due to the usage of the access list, which we applaud participants for.
The activity in the daily auction has reached a strong equilibrium of burners resulting in an ROI of ~0.15–0.20% daily interest per DXN staked, according to wapmat[4]. Another element that became evident is that, the propensity to burn directly correlates with the price performance of the DXN token. This demonstrates a positive correlation between the DXN price, XEN burn rates, and Annual Percentage Yield (APY) for stakers[5].
Challenges to DXN’s Long-Term Value Proposition
A direct effect of the token’s distribution model is akin to challenges already known from DeFi yield farming during the previous bull- and bear-cycle. Constant sell pressure from profit-taking competitors in the daily auctions, has contributed to DXN’s downtrend, highlighting an underlying challenge within the protocol’s economic design. Over the past months, the DBXEN team has signaled this dynamic as well and has started to add utility dApps aiming to burn DXN to improve its scarcity.
The protocol’s liquidity pool (LP) structure and DXN’s inflationary mechanism have inadvertently encouraged value extraction by XEN burners, rather than reinvestment into the DXN token and overall protocol health. This cycle of extraction over contribution creates a challenge in maintaining a sustainable economic model for the DXN Protocol. Addressing this imbalance is critical for ensuring the long-term viability and value proposition of the DXN ecosystem in preventing a race to the bottom.
Introducing NXD Protocol — Empowering DXN
The NXD Protocol has been developed over the past months and is currently undergoing final audits by Arcadia[6]. The NXD cryptocurrency is designed to be an inverse function to DXN providing a deflationary force to DXN’s disinflationary system tokenomics.
A hyper-deflationary Store of Value derivative for DXN
The NXD Protocol introduces the NXD cryptocurrency as a hyper-deflationary asset functioning as a derivative of DXN Protocol’s return on investment (ROI). It operates as an automated vault which compounds its daily profits through several strategies to perpetually burn NXD in order to reduce its supply and increase its floor price. The operating profits are supported by similarly re-buying & staking DXN tokens, effectively compounding DXN, to increase ETH rewards required for the Protocol’s deflationary mechanisms.
This approach allows for the continuous removal of DXN from the open market while effectuating that NXD serves as a hyper-deflationary store of value by burning the NXD supply and compounding its price floor, thereby enhancing the overall DXN ecosystem’s value retention and sustainability.
There’s no dev fee incurred inside the system’s revenue streams, as the team aims to have all value creation retained inside the NXD Protocol flowing back to its participants by compounding strategies, yield sharing and deflationary LP technology.
To guarantee market-efficient execution of these strategies, the team has employed several technical adaptations ensuring timely and efficient allocation of ETH into designated liquidity pools (LPs) in a decentralized manner. More information regarding this will be outlined in a following article.
The NXD token will be perpetually burned by the DXN Staking Vault and has a capped total supply of 750,000 NXD tokens. The actual total supply of NXD depends on the minting activity during the Limited Mint Phase. The NXD Protocol aims to further establish the profitability of the DXN Protocol for all its participants and allows for future protocol engineering by providing additional value levers for expansionary development. Below a short overview of the different system components:
DXN Staking Vault (DSV) distributes ETH to:
- Buy & Burn NXD 50%
- Buy & Stake DXN 30%
- NXD Staking Vault 15%
- Buy & Burn DXN 5%
NXD Staking Vault (NSV)
- Stake NXD to earn ETH from daily DXN auctions
- Triggers ETH distribution smart contract from the DXN Staking Vault
NXD LP Technology
- NXD/DXN Univ2 LP Locked Liquidity (5k NXD/5k DXN LP Liquidity Provided by the team)
- NXD Fee on Transfer of 5% (non-whitelisted transfers) — 2% NXD burn, 1.5% DXN compound, 1% NXD/DXN LP add, 0.5% Dev Fee
- NXD Price Floor in DXN
NXD LP Protection Measures
- The team has introduced several protection measures to prevent the NXD/DXN LP from being gamed by malicious actors trying to circumvent DXN liquidity
Fair Launch of NXD — Limited Mint Phase
To bootstrap the NXD Protocol, there will be a 14-day Limited Mint Phase (LMP) initiated by staking and locking DXN to mint the NXD token. Participants effectively are able to swap their DXN for NXD at the most beneficial ratio while locking their DXN into the DXN Staking Vault. The minting ratio initiates at 1:1, progressively adjusting downward in a linear fashion to 1:0.5 over a span of 14 days. The LMP includes a beneficial Referral System to support active community members and increase the game theory during its launch. This will be outlined in the following articles.
Looking Ahead
Over the following period, we’re looking forward to introduce more details regarding the Limited Minting Phase, NXD Vault System, the LP Technology and its Protection Measures. We welcome everybody to join this community effort and to join the Initiative.
Open Source
All NXD code is published on GitHub and is audited by Arcadia.
Find Us Here
- X (Twitter): https://twitter.com/NXD_Protocol
- Telegram: https://t.me/NXD_Protocol
- GitHub: https://github.com/DXNhyperstructure/NXD-Protocol/ (private repo currently in audit)
DISCLAIMER: The content and materials featured related to the DXN Hyperstructure Initiative are for your information and education only. The information does not constitute financial advice or recommendation and should not be considered as such. Always do your own research and seek independent financial advice when required. The value of your investments and any income derived from them can fall as well as rise and you may not get back the original amount you invested.
[1] https://jacob.energy/hyperstructures.html
[2] https://jacob.energy/hyperstructures.html
[3] https://dbxen.gitbook.io/dbxen-litepaper/
[4] https://www.wapmat.com/RoiCalculator
