xToken
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xToken

xLetter #1

This is the first edition of the “xLetter”, a semi-frequent update about xToken and the greater DeFi & DeGov ecosystem. The purpose of this letter is to give a periodic update on the project and to offer some insight into how developments in the larger ecosystem factor into our outlook.

The reader should use the xLetter as a quick summation of what’s going on in our world and a portal to go deeper into whatever topic or event we’re highlighting. We’ll be sure to provide links for the intrepid reader.

Our first xAssetCLR pools are live! We launched with pools for the xAAVEa-AAVE and XTK-WETH pairs on Uniswap V3. If you’re interested in providing liquidity and earning rewards, check out our how-to blog post outlining the steps needed to participate.

xAssetCLR (“concentrated liquidity range”) is our audited smart contract framework that we’ll be using going forward for all xToken-related Uniswap V3 pools. CLR allows us to incentivize pools which are much more capital-efficient and customizable than typical incentivized pools on DEXes.

In summary, our xAssetCLR framework allows us to:

  1. Set a liquidity price range on a pair for all LPs
  2. Target a certain asset allocation between each asset in a pool
  3. Rebalance to a new price range as price or information changes
  4. Generate an ERC20 for a dynamic Uni V3 LP position

If you’re interested in learning more about the mechanics of xAssetCLR, see our introduction blog post here.

For now, we’ll be using CLR as a mechanism for incentivizing xAsset pools. However, over time, CLR may serve as the foundation for an exchange framework that pulls value back to the XTK token as a module in our Multi-Staking complex.

This tweet, in particular, grabbed our attention:

@AnalyserOver makes light of the fact they received voting representation on their AAVE by two different DeFi collectives (xToken via $xAAVE and Index Coop via $DPI) that are both committed to being upstanding DeFi citizens.

The ability to both participate and delegate is extremely important to healthy governance. We think token holders should be able to participate in governance if they want to do so but they also need dependable and robust choices for delegation. As the number of protocols and the nuance of protocols expand, the need for competent, delegated governance expands at the same pace. We’re happy to continue building up our reputation as a good citizen within the DeFi/Web3 polis.

For the past several months, Kyber has given Ethereum users another DEX and liquidity source to choose from with the launch of the KyberDMM. To bootstrap adoption of the DMM on Ethereum, Kyber launched its ‘Rainmaker’ liquidity mining campaign, with ~$20M in rewards to incentivize strategic pools that are “foundational to both trading and Dapp usage on Ethereum.”

From September 20 until November 15, liquidity providers can add any amount of liquidity to the XTK-ETH pool on KyberDMM on Ethereum to unlock their share of the ~$200,000 in $XTK and $KNC liquidity mining rewards.

XTK rewards can be added into the XTK-ETH pool and staked to earn even more rewards or can be staked in the xToken Management staking module at xtoken.cafe. KNC rewards can be staked to xKNC for KNC rewards or staked on alternative KNC liquidity pools on DMM.

After a few periods where Kyber was re-architecting their KyberDAO contracts and xKNC was inactive, we’d like to highlight that governance rewards are once again being distributed to xKNC holders. Mint xKNCa or xKNCb on xtoken.market!

Vitalik Buterin published an interesting blog post on coin-based governance that caught our attention. In the post, Vitalik recognizes that governance is becoming increasingly important in crypto. He emphasizes that governance should be limited and coin voting/on-chain mechanisms, while very useful in some contexts, are not the only governance tools available and impose their own costs/risks to governance.

Vitalik also proposed an interesting set of solutions that could mitigate some of the issues of coin-voting based on this question he posed in the blog post:

“Coin voting fails because while voters are collectively accountable for their decisions (if everyone votes for a terrible decision, everyone’s coins drop to zero), each voter is not individually accountable (if a terrible decision happens, those who supported it suffer no more than those who opposed it). Can we make a voting system that changes this dynamic, and makes voters individually, and not just collectively, responsible for their decisions?”

If collectives can create procedures like the one described above, ignorant and/or malicious voters will have to think twice before advancing proposals that damage the performance of these budding digital collectives. We’ll keep this in mind when designing and iterating on our own governance architecture.

We’ve been energized to see the success of our xU3LP product line, with some instances earning an unincentivized 8–15% on stablecoin holdings with extremely limited IL risk. For a little more context on the product and why we chose to only offer liquidity pairs with like-for-like assets (e.g., USDC/USDT or sETH/WETH), see the thread from xToken founder @mjayceee below.

Two applications that leverage Synthetix based assets and infrastructure, Thales and Kwenta, have asserted their independence from the mothership!

We were excited to see that historical xSNX holders received allocations on the Thales retroactive distribution and we are excited to be discussing a similar arrangement with Kwenta. We’ve approached the Aelin (another Synthetix offshoot) team about including xSNX holders as well

On August 29th, a vulnerability in our xSNX contract was exploited. We estimate the loss to holders at $4.5 million. We are incredibly disappointed in ourselves and deeply sorry to our community.

We wrote snapshot scripts a few days after the exploit and deployed our rXTK compensation contract outlined in XP-6 shortly thereafter. The first periodic distribution was made to the rXTK contracts on September 27th. The next round will be disbursed on January 27th, 2022.

We believed it best to sunset our xSNX product offering. The xSNX implementation was by far our most complicated product, with complex dependencies and significant surface area for vulnerabilities. See this blog post for more information on the exploit and our plans moving forward.

Stay tuned for our upcoming launches, xALPHA, and xToken Lending.

xALPHA adds another xAsset to xToken Management which provides another fee-generating opportunity for XTK stakers to be happy about. xALPHA is a set and forget ERC-20 token that auto-compounds ALPHA staking rewards on behalf of depositors. xALPHA holders will benefit from a passive, yield-generating, liquid staking token that they can use in the broader ecosystem, including xAssetCLR and soon xToken Lending.

xToken Lending — or “xLend” — is an entirely new product line in the xToken ecosystem. xLend will enable xToken users to borrow against their yield-generating xAssets and soon against their external yield-generating assets as well. xLend will also serve as the basis for our own internal leveraged products, providing us with the tools to offer an efficient, compelling and competitive offering. See this tweet thread for more information on why we decided to roll our own internal lending solution.

Post launch, we’ll also be starting work on the Lending staking module for XTK holders, another facet of our vision for the Multi-Staking token model.

The frontend and infrastructure work for xLend is progressing nicely and we’re making contract remediations necessary for our second audit.

Stay up to date with xToken by following us on twitter and joining our discord.

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