WARNING: XTOKENS HAS EXPRESSED XSNX HAS FOUND A VULNERABILITY AND HAS TEMPORARILY DISABLED THIS CONTRACT. THIS WARNING WILL BE REMOVED WHEN THE CONTRACTS ARE SAFE TO INTERACT WITH.
— xToken (@xtokenmarket) August 18, 2020
Synthetix has earned a strong reputation for its token economics where users stake SNX to mint sUSD. Stakers receive SNX inflation plus trading fees. For anyone who’s tried claiming these rewards on Mintr in recent weeks, you’ve likely seen the cost to do so end up around $50-100 in gas. This has effectively boxed any small stakers out as the gas price to mint and claim is almost always larger than the amount of SNX earned (not to mention those tokens are vested for a year).
To address this, xTokens created xSNX – a managed fund where staking returns and trading fees accrue to the Net Asset Value of the token.
“(Users) buy once to get in and sell once to get out. That’s all that is required to participate fully in the Synthetix network.”
To seed liquidity for the pool, xTokens has deployed an xSNX/ETH/SNX 50/25/25 Balancer pool allowing holders to easily switch in and out of the wrapper back to either ETH or SNX.
How Does it Work?
Users can mint xSNX either with SNX or ETH here. At the current price, 1 SNX mints 10 xSNXa. just as with xTokens xKNC, xSNX has various wrappers tied to different trading strategies. Here’s an overview of xSNXa:
“xSNXa holders express a long term bullish view on the value of SNX staking rewards and sUSD trading fees. xSNXa is a set-and-forget token, requiring no active participation from holders. xSNXa holders hedge their sUSD debt exposure 75% in the ETHRSI6040 TokenSet and 25% in ETH. Fees are 0% to mint with SNX, 0.2% to mint with ETH, 0.2% to burn to ETH and 1% of sUSD fees claimed.”
As alluded to in the description, xSNXa will use the minted sUSD to target a 75% allocation in Set Protocol‘s top-performing Robo Set – ETHRSI6040, with the remaining 25% being used to purchase vanilla ETH. This essentially means that xSNXa stakers are long ETH on top of being long SNX, with the added security that should ETH take a downturn, the underlying Set *should* absorb most of the volatility by rebalancing back to USDC.
For more passive traders, all you need to know is that xSNX is a means to depositing SNX and allowing this token wrapper to do all the gas-intensive actions for you.
For everyone waiting for ySNX, I highly recommend looking into xSNX. I think it is a better, and more robust long term solution, whereas ySNX is much more short term focused. Highly recommended for long term users struggling with weekly gas costs. @xtokenmarket https://t.co/YF4u0roov0
— Andre Cronje (@AndreCronjeTech) August 18, 2020
Given SNX rewards are vested for a year, the idea is for the NAV of xSNXa to increase in value, rather than stakers receiving rewards directly to their wallet. This means xSNXa minters should be well aware this strategy is targetting a long-term hold and is not one which is supposed to increase NAV in the immediate short term.
xTokens has also hinted that they may look to incorporate other xSNX strategies including LINK Sets and inverse ETH sets for those who are long SNX but short ETH.
Easier Token Staking
With the advent of xSNX, xTokens is quickly solidifying itself as a strong contender for small DeFi users. As gas prices continue to rise, the cost of participating in core ecosystem interactions like governance and staking become more gas-intensive (and thus less profitable) by the day. Following in the footsteps of their KyberDAO voting wrapper – xKNC – xTokens is tackling key DeFi interactions and sharing their rewards using non-custodial pooling.
Hidden quietly on the site is an xBNT wrapper – one which is likely to allow users to pool BNT to earn trading fees across the newly launched, highly lucrative Bancor V2 pools.
If one thing is for certain, xTokens is one worth keeping an eye on if you’re a DeFi token bull looking to put your capital to work in a very passive (yet lucrative) manner.
Cooper is the Editor of DeFi Rate and an active contributor to leading DeFi media outlets like The Defiant, DeFi Pulse, and Bankless. He works with early-stage teams through Fire Eyes DAO to incubate governance models and grassroots community development. He is an ambassador to Set Protocol and an author of a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.