Hi all,
Guess the news is already out a bit, some catched it here and there on twitter spaces. Would like to take the opportunity and expand with the community on our XCM Protocol proposal, a liquidity and capital market structured upon DXN Protocol.
We have been conceptualizing the system for a while and its currently with the DBXEN Team, as they are providing feedback on v3 of the litepaper. Please note that, the current litepaper and presented model are still in its preliminary form and information shared is non-binding. In addition, the main concepts presented are derived from already existing, heavily audited and battle-tested smart contracts.
AJP Digital is a private investment firm focused on cryptocurrency specifically. The fund has been actively accumulating a position into DXN over the past months as we see a lot of potential in the DXN "real yield" model executed by the DBXEN Team accompanied by their excellence in operations and character. We believe that, the “real yield” narrative will catch on going further into the upcoming bull-cycle and it allows for vertical integration onto the DBXEN Protocol.
Additionaly, we think we can add value to the current model by adding the XCM Protocol to the DBXEN Protocol, and allow for synergetic fly-wheels with respect to token speculation, distribution and value creation. The XCM Protocol aims to use the DBXEN Protocol and DXN as an engine to which XCM is its fuel.
Past performance DXN
During the strong up- and downtrend of the DXN token, the protocol saw continued burn and trading volumes, sustained ETH yield, accompanied with >90% staked DXN. What also became evident, is the strong positive correlation between the price of DXN and the propensity to burn XEN, which resulted in APY coming down together with the price of DXN and vice versa. In simpler terms, we can see that when the DXN price appreciates, APY follows for DXN Stakers, which fuels further participation, speculation and token distribution.
Liquidity has been an important factor in its downtrend, as the Uni V3 pool allows for price manipulation, accompanied by inflationary sell pressure already known from inflationary DeFi Yield Farming in the previous bull-cycle. This in itself is not necessarily an issue, however, due to the infrastructure of the LP’s the volume generated in the LP is subtracting, instead of adding value to the DXN token and DBXEN Protocol, which is unnecessary in the current landscape of DeFi technology.
DBXEN Protocol as a Liquidity Launchpad
The XCM system revolves around using the DBXEN Protocol as a launchpad to facilitate the launch of locked liquidity pools for DXN and a new token XCM. This can be done through an FPOC Fundraise of 14 Days (TBD) where participants can deposit DXN into a contract which will generate them locked LP tokens after the raise. The mint price of these LP tokens will increase over time, ensuring that participants generate the most value from their participation in the FPOC Fundraise.
See below an outline of the current concept:
These locked liquidity pools will facilitate buy & burning strategies, an ever increasing price floor in ETH for DXN and XCM, and non-manipulative price discovery. Furthermore, XCM Protocol cements DBXEN Protocol inside its revenue generation component by buying and staking DXN for the XCM Protocol.
It is important to understand that, this model can also be used by other developers looking to raise capital and generate a revenue stream for their protocol from the start. Future liquidity pairs can be locked with DXN, as the oracle risk we currently have in the existing Community Uni V3 LP is mitigated once XCM Protocol has launched its own locked DXN/ETH LP and XCM/ETH LP. This means that future tokens can launch as locked DXN/[Token] LP's of which the settlement is facilitated into the locked DXN/ETH LP of which all volume add to its Price Floor.
XCM Liquidity Design
One of XCM's defining features is its liquidity infrastructure. It incorporates locked liquidity pools for XCM and DXN, which not only mitigate oracle risks but also create a foundation for innovative yield farming and liquidity support. These locked liquidity pools are complemented by a rebasing mechanism, ensuring early liquidity providers benefit from scarcity, preventing dilution.
XCM Protocol places a strong emphasis on liquidity by combining various liquidity-related features and mechanisms to ensure deep liquidity within the ecosystem. Here's an overview of how XCM manages liquidity:
- Locked Liquidity Pools: XCM utilizes locked liquidity pools, which are inspired by proven and battle-tested DeFi protocols. These pools serve as the foundation of the protocol's liquidity infrastructure. The locked nature of these pools helps establish a price floor for XCM and DXN tokens relative to ETH as its locked asset.
- Price Floor: The locked liquidity pools play a crucial role in creating and maintaining a price floor for XCM and DXN tokens. This price floor is relative to the value of ETH. The locked liquidity ensures that there is always a minimum value for XCM and DXN tokens, which enhances portfolio risk management. Since the liquidity pool is locked, all pool XCM sell volume contributes to the further increase of this Price Floor, thanks to the 0.3% LP Swap that remains within the pool . Additionally, each sale of XCM incurs a 1% tax as a Dev Fee.
- Rebasing Liquidity: XCM introduces a rebasing mechanism for liquidity. This means that the mint price for new LP tokens increases with each rebase. This design choice creates scarcity and benefits early liquidity providers. It also prevents dilution of initial contributors over time.
- XCM and DXN Liquidity Pools: XCM maintains two types of liquidity pools: one for XCM tokens and one for DXN tokens. The existence of both pools helps mitigate oracle risk and ensures liquidity for both tokens.
- Open Vested Liquidity (OVL): XCM's vesting mechanism, triggered upon transfer, creates partially locked liquidity known as Open Vested Liquidity (OVL). This OVL can be utilized by future protocols and dApps looking to develop new applications that require constant liquidity and serves as a tool for expanding the size of the liquidity pool.
- Stability During Stressful Market Conditions: The liquidity provided by XCM's locked pools helps stabilize the system during times of market stress, collateral shortfalls, or increased liquidity requirements.
XCM Protocol employs a combination of locked liquidity pools, rebasing mechanisms, and careful tokenomics to create and maintain liquidity for its tokens. These liquidity features enhance the stability and resilience of the protocol, making it attractive to liquidity providers, users and developers in the DeFi space.
Short introduction of the XCM Protocol: Introducing Deflationary Tokenomics to DXN
The XCM Protocol is essentially a combination of proven DeFi protocols, each with unique functions and incentive structures. Within the XCM Protocol, three distinct tokens will be introduced: XCM, XLP (XCM LP), and DLP (DXN LP). Their detailed explanations can be found in the complete litepaper that will be released after careful consideration with the DBXEN Team.
The primary objective of the protocol is to combine deep liquidity with deflationary tokenomics, allow for risk management and enable yield optimization strategies for future vaults, similar to YFI. This will be achieved by establishing an ever-increasing Price Floor for the XCM token and DXN token due to the sophisticated design of locked liquidity tokens.
The foundation of the protocol is built upon the fusion of a lending and borrowing platform, inspired by AAVE Protocol, together with an Open Vested / Locked Liquidity pool, derived from other proven DeFi Protocols. Additionally, an XCM Staking Vault will be established to function as a Lender of Last Resort for the Lending and Borrowing Platform during times of liquidity or collateral shortfalls.
The XCM Protocol aims to be a completely trustless and decentralized protocol consisting of the following segments:
- XCM Liquidity Market: DXN & XCM Locked Uni V2 LP's establishing a price floor in ETH
- XCM Revenue System: DXN “Buy and Stake” integrated into DBXEN to generate revenue for the XCM Protocol
- XCM Staking Vault: Lendor of Last Resort similar to the AAVE Safety Module that allows for staking and compounding XCM Rewards to generate multiplied rewards
- XCM Capital Market: Lending and Borrowing of Decentralized Assets, such as BTC, ETH, DAI, XCM, DXN, XEN and DBXENFT's - to be outlined in more detail in future iterations of the Litepaper
- XCM Yield Vaults: Third party dev's can utilize DBXEN and the XCM Protocol to structure Vault Strategies similar to YFI Protocol
XCM Protocol Token Incentives
The XCM token is a hyper deflationary reward token that is distributed through a Fixed and Variable Reward Schedule. The Fixed Reward schedule, is disinflationary similar to DXN, but not requiring a XEN burn.
The XCM distributed through Variable Rewards are derived from Contract Interruptions related to Vesting Schedules within the XCM token triggered upon a Purchase (7d), Transfer (7d) and Reward Claim (365d), which will be touched upon in the Litepaper. This technology is coined as Vested Liquidity which introduces deflationary tokenomics to the XCM token and constant liquidity for future dApps.
- XCM Fixed Rewards: Disinflationary drip similar to DBXEN without requiring a burn to the XCM Liquidity Market, XCM Staking Vault and the XCM Capital Market
- XCM Variable Rewards: Reward stream derived from Contract Interruption from Vesting Schedules associated with claiming the XCM Fixed Rewards by participants
Vesting Schedules and Contract Interruptions will be further outlined into the litepaper and are pretty novel concepts that allow for advanced token incentive schemes and establish hyper-deflationary tokenomics.
Generally speaking the Variable Rewards are focused on Buy & Burn of DXN, Buy & Stake of DXN, XCM Yield %'s to different Segments of the Protocol and an LP addition to further increase liquidity. These %’s are currently preliminary and non-binding, but give an idea of the direction of the several reward streams:
- 25% XCM Burn
- 25% XCM Liquidity Market (12.5% DXN LP and 12.5% XCM LP)
- 12.5% DXN Market-Buy-and-Burn
- 12.5% DXN Market-Buy-and-Stake
- 10% XCM Staking Vault
- 10% XCM Capital Market (Exclusively to Lending Assets)
- 2.5% XLP (XCM/ETH LP) and 2.5% DLP (DXN/ETH LP) Liquidity Addition
See below an outline of the current concept:
A Foundational Role for the DXN Token
The DXN token plays a foundational role within the XCM Protocol, contributing to its functionality and dynamics in several key ways:
- Liquidity Pool: DXN is a crucial component of the liquidity pools within the XCM Protocol. These pools, particularly the DXN LP (Locked Liquidity Pool), are essential for maintaining liquidity and price stability in the ecosystem through an established price floor in ETH. DXN LP helps ensure that there is always a reliable source of DXN tokens available, which can be vital during times of high demand or market stress.
- Liquidity Window: DXN is exclusively deposited into the Liquidity Window during the fundraising phase of the XCM Protocol. This DXN is staked and used to generate ETH, which forms the initial liquidity for both XCM and DXN locked liquidity pools. This fundraising mechanism helps bootstrap the liquidity required for the protocol's launch. Essentially utilizing the DBXEN Protocol as liquidity launchpad infrastructure.
- Market Buy-and-Burn: The Locked DXN LP mechanism is designed to prevent market manipulation in the DXN token with regards to buying and burning/staking of DXN tokens when Contract Interruptions occur.
- Revenue Generation System: The DBXEN Protocol and the DXN token will be utilized by the XCM Protocol to generate revenue from launch. It will do this by Buying and Staking DXN from the DXN LP through Contract Interruptions related to XCM Reward Claims or Buys.
- Collateral: DXN is also listed as one of the assets that can be used as collateral in the XCM Capital Market, alongside other assets like XCM, BTC, ETH, and DAI. Collateral plays a significant role in DeFi lending platforms. Understanding the function of a Price Floor introduced for DXN and XCM allows risk managers to take full advantage of the added benefits of these tokenomics.
DXN serves as a foundational asset within the XCM Protocol, contributing to liquidity, stability, and community engagement. Its integration into various aspects of the protocol's mechanics highlights its significance in supporting the overall functionality of XCM.
In short
In simpler terms, the XCM Protocol aims to use the DBXEN Protocol and DXN as an engine to which XCM is its fuel. The goal of the protocol is to establish liquidity, risk management solutions and yield optimization strategies for on-chain DeFi participants. We're aiming to achieve that by combining real yield tokenomics, locked liquidity, and a price floor with deflationary incentives being DXN and XCM. This will establish further utility, distribution and speculation among these tokens and cements DXN as a store of value for DeFi beyond the XEN Ecosystem.
We're looking forward to understand the community's response on the proposal and introduce the completed litepaper over the coming period, in collaboration and transparency with the DBXEN Team.
