XFIT Staking — The Silence Before The Storm
XFIT Staking and Liquid NFTs
As discussed in previous AMAs and blog posts, the Xfai team has decided on community ownership of the Xfai DEX. Anyone will be able to stake XFIT to receive a share of the DEX. The way it works is straightforward:
- Anyone interested can stake their XFIT into the upcoming staking page (more on this in a moment).
- After staking, a liquid NFT gets generated. This NFT essentially represents the percentage share that a user will have in the upcoming DEX. Unlike conventional NFTs, liquid NFTs can be redeemed for their underlying value.
- The liquid NFTs get their value from the transactions performed on Xfai’s DEX. Each swap on the DEX burns large amounts of XFAI tokens, which get sent to the DEX’s slippage optimization contract.
- The slippage optimization contract, besides enabling zero slippage swaps between pools, will also serve as the fee-generating contract for the liquid NFTs. A small percentage of the XFAI tokens inside the slippage optimization contract will go to the users that own a liquid NFT. How much of the underlying XFAI tokens each liquid NFT holder gets, depends on the percentage share of the liquid NFT.
Why Stake At All?
The percentage share that a liquid NFT receives within the DEX, depends on the amount of XFIT staked, as well as on the time of staking. Earlier stakers will receive a higher percentage share than later stakers. When a portion of the underlying value of a liquid NFT gets redeemed, users receive the new XFAI token. This will be the only way one can get the XFAI token. As XFAI represents the bridge token of the DEX, it can be swapped with any other token on the DEX. The more burning takes place, the larger the value of the XFAI token becomes.
We are currently waiting for the final word from the auditors, which should hopefully happen by the 25th of January. The reason for this delay is due to some changes that had to be done on our side. At the last moment, we decided that some of the originally shared liquid NFT mechanics had to change. The previous NFT design had a ‘liquidity’ field, as well as a ‘share’ field in its code. The ‘liquidity’ field showed the amount of XFIT one has staked, whereas the ‘share’ field showed how much share one has in the DEX. After lots of internal testing and simulations, we have come to the conclusion that the ‘liquidity’ field needed to be dropped. Instead of users being able to convert X amount of XFIT into XFAI (through a continuous vesting period), plus have a share of the DEX rewards, the liquid NFT will now have only the share as a redeemable amount. The reason for this big change: After lots of internal testing and simulations, we’ve seen this as necessary. Due to the hyper deflationary nature of the burning mechanism, the dollar-denominated value of the shares would be simply too high. If the underlying stake were to be 100% redeemable for XFAI, and if users were to have on top of that shares of the DEX rewards, then the DEX would most likely never be able to accumulate enough liquidity, even with a continuous vesting period. Our new liquid NFT mechanism, therefore, will work identically to a share. That said, this new approach also has tremendous upsides as it allows the DEX to initially accumulate much more liquidity and therefore become faster competitive on a larger number of tokens against other DEXs. Furthermore, by allowing only the vesting “share” to be redeemed there cannot be a sell race by NFT holders, allowing the burn mechanism to be much more effective collectively. This effectively aligns the interest of all NFT holders for the longer term while mitigating short-term risks.
Next steps (relevant for legacy farmers)
The mechanisms for the legacy farmers have also changed. Because of some originally security-related restrictions from the old farming contract, we cannot enable a seamless transition. Legacy farmers will first have to redeem their rewards and their locked LP tokens, before being able to participate in the staking event. To stay loyal to the current legacy farmers, we have decided to initiate the XFIT redeeming and LP redeeming in the new UI, before the XFIT staking starts. After a week of the new UI, we will activate the XFIT staking tab of the site. This way everyone can have an equal opportunity to participate in the staking event. Due to these changes redemption of XFIT rewards will end when staking starts. Farmers will be able to redeem their underlying LP tokens together with their accumulated Uniswap rewards later as well, but not the accumulated XFIT rewards. This is also due to security considerations.
XFai develops tooling for the DeFi space, graphing it to build game-changing products. The XFai DEX is set to invite mid and small-cap tokens to start earning APY on their token holdings. We are aiming to become industry-first in providing a more efficient, transparent, and fair way for everyone to get involved at an early stage. The LGE for XFai’s native token, XFIT, was launched on 16th April 2021. We invite everyone to join the DeFi revolution, spearheaded by XFai.