xToken in 2023
We at xToken have been building in DeFi for a long time. We’ve had the privilege of serving thousands of users and working with some of our favorite protocols. We’ve had our fair share of both successes and setbacks. But, most of all, we’re excited to keep building.
Since we started working on our first smart contracts in February 2020, the space has grown and changed monumentally. Even since we pivoted to a new vision in early 2022, the grounds have shifted and the space has entered a new phase.
While we’ve messaged our change in strategy over the past year, we thought it would be a good idea to restate the thesis and vision behind xToken Terminal clearly in a single blog post. We hope this post will serve as both a thesis statement and a roadmap.
Beyond the core Terminal product, we’re excited to officially announce the project we’re working on with the Uniswap Foundation. We’re well on our way toward building a public good for Uniswap V3 LPs of all stripes to simply and easily rebalance and reposition their liquidity in one atomic transaction.
The Terminal Thesis
Without drawing too much of a parallel to traditional finance, we’re building xToken Terminal to be the investment bank for web3. We want to be the focal point for capital markets on Ethereum (Optimism, Arbitrum & Polygon too) and the go-to platform for projects pursuing capital formation.
What is capital formation? It’s just a fancy phrase to describe the combination of two key ingredients: financing and liquidity. The ability to form capital (e.g. launch a token and make a market for it, or mint an NFT and list it for sale) quickly and easily is the zero-to-one innovation of the blockchain. If you believe that everything will be tokenized, financing and liquidity are, broadly speaking, the two core financial primitives of our on-chain future.
The two key apps on Terminal — Mining, which is live, and Origination, which is going live imminently— are designed with the express purpose of making capital formation seamless. Anyone anywhere should have these tools at their fingertips. When a group of people with an idea can use a token to collect resources from aligned contributors, facilitate liquidity in order to make a market and then wield that token as a decentralized coordination mechanism, innovation happens. Deep into the bear market, many of us have become too jaded and cynical to realize or remember how incredible this technology is.
Of course, financing and liquidity primitives are everywhere. And they come in a variety of different flavors. The goal for Terminal is to provide seamless and permissionless access to these primitives, with a rich, configurable architecture and a deep emphasis on UX. Over time, we want to establish standards for capital origination and liquidity management, in order to set the foundation for an ecosystem of applications built on top of our permissionless infrastructure.
The Current State of Terminal
We’re happy to say that Origination is launching on January 10! At launch, we’ll have shipped the two foundational apps on Terminal and we’ll have completed the first stage of our vision for the investment bank for web3.
With Mining and Origination live, anyone anywhere in the world has the basic tools to bring a protocol to life in just a few minutes. This capital markets creativity can come in many forms and combinations. We’ve developed the Terminal platform and its constituent apps in such a way that allows projects to mix and match features. Take our Origination launch partner, GalleonDAO, as a prime example.
Galleon has previously run a long and successful Uni V3 liquidity mining campaign on Terminal’s Mining app, but now they’ve decided they want to generate a bit of protocol owned liquidity for their native token, DBL. As popularized by OlympusDAO, this primitive is commonly called “bonding.”
Originally, our Mining app was not compatible with this use case. It was opinionated in that we assumed a project wanted to incentivize Uniswap V3 liquidity using our platform, not own it. In the basic, core end-to-end Mining use case, a user contributes liquidity to an LM program and receives LP tokens representing their share which, in turn, are staked for rewards within the same atomic transaction. This is a streamlined liquidity mining experience for LPs, abstracting several of the transactions usually required to participate in an LM program.
That said, we heard feedback from some projects that they wanted access to the fungible Uni V3 LP position that Mining generates, without being required to use the LP token for rewards on Terminal. Given that we had this LP token minting infrastructure already built, all we had to do was add a deployment option that didn’t automatically bind the LP token to our staking rewards contracts. The LP Token Minter feature went live shortly thereafter.
With the launch of Origination, which allows projects to deploy token programs with any offer token, contribution token, allowlist settings, pricing formula and vesting conditions, among other configurable options, the second component of the DBL bonding program came into view. After creating a fungible, permissionless DBL-WETH LP token/position on Mining that anyone will be able to deposit to, they’ll also be deploying a token program on Origination, which will allow community members to contribute DBL-WETH tokens in exchange for vested, discounted DBL. Bonding.
When we set out to build Origination, we didn’t explicitly intend to support bonding. However, by virtue of designing seamless, flexible, and composable DeFi primitives, the use case presented itself naturally. Our vision is for Terminal to become an ecosystem of permissionless capital markets use cases just like Galleon’s. Take a look at our recent Origination launch post for another example of composable, permissionless potential on Terminal: our vesting NFTs.
Going Forward
With the imminent launch of Origination, we believe Terminal will begin to resemble a complete product. But that doesn’t mean we’re anywhere near done developing the platform. Over the next few weeks to months, we’ll be making improvements to Origination UX to ensure it meets our standards. Once we’re confident in the new app’s UX, we’ll set our intention on other goals.
Turning Mining from a Liquidity Mining Platform into a Comprehensive Liquidity Management Platform
The initial version of Mining was designed as simply an end-to-end liquidity mining service. With the addition of the LP Token Minter feature, Mining became infrastructure for composable Uniswap V3 liquidity. And as time passes, we envision Mining becoming a full service liquidity management and analytics platform.
We’ve teased the community on our Rebalance CLI, which is under development. The CLI will make Uniswap V3 liquidity management exceptionally easy (one command in the command line) for both projects and individual LPs. And as we broaden the scope of Mining, we want to flesh out our analytics around liquidity management in order to best serve projects and managers.
Making Terminal More Social
We see opportunities to add compelling social features to both Origination and Mining.
For Origination, we’re researching ways to incorporate a referral network into our contracts. Say some friends form a group to raise funds to buy The Constitution, for example. As the fundraising progresses, they can easily attribute each member’s contribution to the fundraise by querying each respective member’s referral code. As extra motivation for members to engage their networks, the group could program a small revenue share to individual members based on funds raised. As you can imagine, there are many different ways that projects, DAOs or individuals can potentially leverage this feature.
For Mining, we’re slowly cobbling together the pieces necessary to support social Uniswap V3 liquidity management. It’s well understood at this point that it’s really tough to be a passive LP on Uniswap V3, for a variety of reasons. When the Rebalance CLI goes live, we’ll have most of the infrastructure for trustless delegated liquidity pools, where retail LPs could pass management responsibility to a permissionless network of sophisticated managers, without concern that their assets will be stolen or churned.
Making XTK Integral to the Network
The XTK token currently earns all fees generated by Terminal. XTK stakers (xXTKa holders) are currently earning around 2% in fees APR and 13% in incentives APR. This is not bad, but we think the network would be strengthened by a token that is additive to the network and not simply rent-seeking. As the year develops, we’ll be researching new token model and protocol designs that could achieve this goal.
Future Apps
Now that we’ve shipped Mining and Origination, we could start thinking about some of the future Terminal apps we’ve teased in the past. We don’t have anything to share on this front as we’re focused right now on improving and building out our two core apps, but we may have some updates on this in the future.
Join Us
We’re excited for a new year for DeFi and xToken! Follow us on Twitter and join us in Discord to stay up to date on the latest developments.
