Introducing xToken
DeFi’s rapid progression over the last couple months has validated the hard work of teams in the space and launched the community into a new phase of growth. But with so many compelling new models for governance, token economics and liquidity provision, it can be difficult to stay current with your portfolio, to say nothing of the space at large.
On a macro level, the breadth of new projects is overwhelming. And on a micro level, the requirements to fully participate in the upside of a project can be intimidating. One token investment may require staking and hedging, while another may require voting and claiming. One project may tweak liquidity incentives one day, while recalibrating a governance proposal the next. Managing this day-to-day for a diverse portfolio of assets is a herculean task.
The bittersweet truth is that DeFi is becoming too expansive and too complex for any one investor to handle.
As more investors flood into the space, the time commitment, technical expertise and management expense may prove to be too much. With that in mind, we’re excited to introduce xToken — a platform for simple, efficient staking and liquidity strategies.
Now, xToken isn’t just a frontend for plugging into other protocols. In fact, we’re writing smart contracts that wrap complicated staking and liquidity strategies into single set-and-forget ERC20 tokens. xTokens are free-floating ERC20s that can be sent from wallet to wallet, added to liquidity pools and pledged as collateral for loans. They save users time and money, and they distill intricate token mechanics into simple buy-and-hold strategies.
Our inaugural assets are xKNC — launching with Kyber’s Katalyst upgrade next week — and xSNX — a wrapper for the Synthetix staking process, launching in the coming weeks.
Kyber and Synthetix are linchpins of DeFi and two of the most prominent staking projects. In building xToken, we’re excited to make investing in KNC and SNX more accessible to DeFi experts and beginners alike.
But, if you follow the space, you may have noticed that every other day a different project announces a new token model. With staking models proliferating, xToken is looking to fill a dire need for simplicity and accessibility. We’re in touch with a number of other teams and look forward to announcing new xToken assets shortly.
We’ll be launching with xKNC and a live site in just a few days. In the meantime, check out the descriptions of our two launch assets below.
xKNC
We’re partnering with Kyber to launch our very first xToken. xKNC will be an efficient staking solution that allows investors to 1) participate fully in the upside of a KNC investment, 2) express a governance position in the KyberDAO and 3) free themselves from gas fees and active management.
We’ll be launching with two instances of xKNC, each with a clearly stated governance mandate. For those unfamiliar with KyberDAO, network participants will vote frequently on the proportion of trading fees to allocate to three channels: 1) staking rewards, 2) rebates to reserve managers and 3) token burns. Initially, the DAO will allocate 65% to stakers, 30% to reserve managers and 5% to token burns.
xKNCa will always vote to increase stakers’ fees. xKNCa is likely the best option for most investors seeking to maximize their staking returns and accrue KNC.
xKNCb will always vote to increase reserve rebates. This is likely the best option for reserve managers and investors who believe that incentives to liquidity providers are the best way to grow the network.
The value proposition of investing in this xToken is that the Kyber community can stake their KNC with a pool and express a clear governance position, all while holding a set-and-forget token. Additionally, xKNC claims ETH trading fees on behalf of stakers and reinvests them into KNC. Holders are spared from the expense of gas fees and the demands of active management, while compounding their KNC and participating in governance!
Finally, xKNC may protect investors in certain countries from the complicated tax liabilities that come with fee-generating tokens. You should always consult your accountant before making any decisions on this basis, but xKNC comes with the added benefit of simplifying your investment into a single buy at the beginning of your investment horizon and a single sell at the end. No laundry list of micro-transactions to send to your CPA.
Be sure to check in on July 7 for Katalyst and xKNC launch a few days later!
xSNX
Synthetix is one of the most complicated projects in DeFi. Naturally, SNX is one the most complicated token models. Mastering the subtleties of minting sUSD, hedging your debt and maintaining a collateralization ratio requires time, patience and consistent attention. In many cases, investors believe in the project and the investment narrative but are turned away by the complexity of staking.
xSNX wraps this entire process into one investable token. Investors who have done their research on Synthetix and believe in the story can avoid the minutiae and expense of staking. As gas fees on Ethereum have been high recently, many stakers have been spending $30–$40 weekly to maintain a position. xSNX delegates the entire process to a communal pool, allowing for a less time-intensive, more affordable investment experience.
xSNX is also a testament to the composability of DeFi. The smart contract 1) wraps Synthetix’s system of contracts, 2) it trades on Kyber Network to source SNX and 3) it invests in Set Protocol strategies to hedge sUSD debt.
Our first instance — xSNXa — will be using the ETH20SMACO TokenSet to hedge. But many Sets are compatible with the xSNX contract and, depending on community feedback, we could launch a new instance with a different hedging strategy. All in one set-and-forget token.
We’ll be out with a more detailed blog post on xSNX soon. Stay tuned.
