Introducing xU3LP: Fungible Yield
The day has come. Our first wave of xU3LP launches are audited, deployed and live on xToken Market!
If this is the first you’ve heard about our offering, xU3LP is a set-and-forget solution for liquidity provision on select Uniswap V3 pairs. Investors can deposit either asset from a pair and passively earn income while benefitting from a fungible, yield-generating token (xU3LP) that can be used anywhere in the DeFi ecosystem.
Our first wave of xU3LP instances (live now!):
- xU3LPa: DAI<>USDC ○ 0.9994⇋1.0014
- xU3LPb: USDC<>USDT ○ 0.999⇋1.001
- xU3LPc: sUSD<>USDC ○ 0.9974⇋1.0054
The notation at the end of each line is the price range within which we will be providing liquidity. For reference, the DAI<>USDC price range suggests that we generally expect DAI to trade at a slight premium to USDC. We will periodically reassess these ranges as more data becomes available. For more details on how we arrived at these ranges, please see the full analysis we commissioned here.
How does it work?
- Deposit either asset in a pair to mint xU3LP on xToken Market
- That’s it! xU3LP is set-and-forget. We will deploy liquidity to Uniswap V3 on your behalf
Liquidity Incentives
As part of our Community Vesting program, we will be incentivizing each of the three initial instances with XTK. Over 10 weeks, we’ll be distributing 1% of total XTK supply to those who stake their xU3LP at xToken Cafe. The pools are now open for staking. Rewards will be initiated at noon EST on Tuesday (June 8) to give investors time to enter.
- xU3LPa: 350k XTK per week
- xU3LPb: 350k XTK per week
- xU3LPc: 300k XTK per week
Be sure to review our Guide to Community Vesting for more details on how exactly our liquidity programs work. There are a few small wrinkles that make it different from a conventional liquidity mining program.
xU3LP Wave 2
In the next few weeks, we will be launching a second wave of xU3LP instances. This time we’ll be exploring partnerships with other projects in the space on joint incentives to bolster liquidity on key pairs.
Some potential pairs:
- sBTC<>WBTC
- sETH<>WETH
- renBTC<>WBTC
- USDT<>UST
- FRAX<>USDC
- LUSD<>USDC
We’ll likely have a Wave 3 as well! Get in touch if you feel like your project might be a good fit.
Protections and Safeguards
Uniswap V3 is very new and the attack surface for solutions built on top of it is still uncharted. As such, we’ve implemented a number of safeguards designed to combat frontrunners, exploiters, flash-loaners and other antagonists of the dark forest.
The first is something we’re calling the “BlockLock.” When you mint or burn xU3LP, your address cannot mint, burn or transfer again for six blocks (~1min 20 seconds). While this may have some minor composability-related drawbacks, we’re comfortable with this compromise in the interests of security.
The second safeguard is something we can call a “TWAP circuit breaker.” While we are only offering “stable” liquidity pairs for xU3LP, we still must account for relative valuation differences between the two assets. For this calculation, we rely on Uniswap’s native time-weighted oracle. If the oracle reads a deviation of more than 0.15% from the previously recorded TWAP, mint or burn transactions will fail (we will update the deviation factor as we gather more data). In rare cases, this may “lock” the contract until we can confirm that the market is functioning normally.
The final safeguard we should discuss relates to our management of xU3LP funds. To cut off potential for frontrunning, all management functions on the contract are permissioned, meaning the addition and removal of liquidity, the rebalancing of the fund, and the refitting of price ranges are administered by xToken. We will seek out approaches that will allow us to make xU3LP management more permissionless, but we’re biased towards security at this stage.
As always, please remember that our products are highly risky and experimental. The xU3LP contract was reviewed by two separate auditing firms, however, we encourage you to be thoughtful about how much you choose to invest.
Other Notes
- We’re launching with 0.1% mint and burn fees, as well as a 2% charge on LP trading fees claimed
- To maximize yield while reducing gas costs to users, at a given time, we target 5% of capital in the contract as a “buffer” to be made available for withdrawals. This means that there may be a time where there is not immediate exit liquidity. Of course, we will regularly monitor the fund to restore the buffer balance as needed
Join our Community
If you have any questions or comments at all, please join us in the Discord or on Twitter. We look forward to hearing from you!
