Proposed by the XBE team
Special thanks to Michael and the Curve.fi team for their leading design and assistance.
Summary:
The XBE team’s first submission to the community is a substantial XBE Improvement Proposal to create sustainable self-sufficiency for the protocol in terms of revenues, yield, and deep liquidity for both the protocol stablecoin and governance token, in answering the challenges raised in this recent post.
Abstract:
The recently announced xbEURO stablecoin allows the protocol to focus efforts on developing deep liquidity for a single stablecoin, irrespective of the number of different types of registered securities or off-chain value and assets that are tokenised as reserves (ESAT, EBND) from which various inflationary stablecoins with different rates and terms [EURx(n)] can be issued.
This allows the protocol to treat liquidity against the xbEURO as a strategic asset, which attracts more off-chain opportunities – and then profit from each issuance as the respective inflationary stablecoins are bridged for xbEURO to access DeFi liquidity.
This proposal expands the protocol substantially by including some of the most important cutting edge DeFi developments and integrating these concepts (and open-sourced code) into the core of the protocol where relevant. Such include elements from MakerDAO to introduce a protocol revenue stream similar to the DAI savings rate (DSR), the brilliant Alchemix concept that capitalizes future interests on tokens, and the DAO model from CRV – including boost, voting tokens, gauges, and rewards.
These join the concepts and code already borrowed from Aave (inflationary tokens) and Yearn Vaults). With this update the protocol evolves dramatically with the view to provide institutional off-chain assets an opportunity to integrate and collaborate with the leading protocols in DeFi.
A summary of what this proposal envisions the updated protocol would comprise of is as follows:
- Off-chain Assets & Income Tokenisation as NFT721s [ESAT, EBND].
- Inflationary ERC20 Stablecoin backed by NFT721 Reserves (EURxb, and future EURx(n) tokens].
- Lock-up Capitalisation of Inflationary Stablecoin Future Term Interests (xbEURO).
- Minting xbEURO less XBE Protocol Fee (XPF).
- XIV deploys XBE Institutional Vault xbEURO to Liquidity Pools for Vault returns.
- Exchange xbEUROs earned from issuance fee with the 5% APY in XBE’s earned from XBE Institutional Vault so Institutional Depositors earn xbEURO and XBE Stakers earn XBE.
- Sustainable incentivization of LPs with Rewards & Boost (Gauge) Multipliers.
- Aggregation of all Protocol Income in XBE for XBE stakers.
- Governance Staking Rewards (with Boost Multipliers) and voting tokens (veXBE).
- XBE Bonus Lock-up Contract providing XBE inflation compensation to Current Holders.
Now that we’ve covered the overview, let’s dive into the details of each major section.
In terms of income, the proposal aims to introduce various income models for the XBE protocol:
- Base issuance fee of xbEURO which serves as the primary protocol revenue. (Income 1)
- Institutional Vault Returns (Income 2)
- Surplus yield enhancement through the vaults. (Income 3)
- Additional yield in the form of newly minted XBE. The proposed emission schedule can be found below. (Income 4)
1. xbEURO Issuance Fee – Income 1
We introduced a base minting fee for xbEURO contracts that functions as rewards and incentives for community designated pools on an annual basis.
This xbEURO protocol fee (XPF) will start at 5%, however the rate is changeable through governance. The fee is applied to all newly minted xbEURO (keeping in mind this is 5% of the total issuance, inclusive of principal and interest of the underlying token) accruing in a protocol fund. The fund will distribute such income daily (over the course of 1 year starting from the day the respective xbEURO mint occurred) to all XBE governance participants (Stakers).
Eg. Deposit 100 EURxb (@7% pa over 4 years) to mint ~131.08 xbEURO (principal and full interest compounded up front for the entire token term). The 5% fee will apply to the ~131.08 newly minted xbEURO. This token will be minted directly into the vault.
This is our first protocol fee model, returning 95% of the total issued xbEURO to the depositor (locking interest in the vault) and keeping the balance as a once-off protocol fee irrespective of the interest term.
The XBE Institutional Vault will utilize the following strategy to create returns from XPF fees in the vault:
Purchase XBE on the open market with the daily xbEURO return amount and pay the purchased XBE to the Stakers of XBE. This provides long term sustainable continuous buying pressure on the xbEURO/XBE pool (to be setup and incentivized subject to governance). More on this later.
2. Institutional Vault Returns – Income 2
The XBE Institutional Vault (XIV) has been mandated with 53 Million EURxb to deploy into DeFi to provide additional yields, and any returns over the institutional depositor’s 5% APY is distributed to Staked XBE holders. The vault is configured via governance to ensure it maintains a minimum of 50% of the pool quantum up to a maximum of the vault’s liquidity (±66m xbEURO after the 5% XPF of ±3.47m xbEURO).
By locking up 53m EURxb and minting both the principal and interest of the EURxb in the form of xbEURO we can mint ~69.4m xbEURO assuming it’s for the full 4-year term of EURxb. The formula is as follows:
53,000,000 EURxb * 1. 1.310796 (principal and interest of full term) = 69,472,188.53 xbEURO*
(Assuming mint occurs at initiation of the 4-year interest term)
3. Surplus yield from Strategies – Income 3
Surplus Strategies will also be included by liquidating additional yield tokens on specific partner liquidity pools (CRV as example) to purchase XBE and in turn provide that as rewards to staked XBE as Income 3.
4. Current XBE Holder Inflation Compensation and Additional Yield through minting new XBE – Income 4
Before considering an inflationary governance token model, we took great care to ensure a mechanism that would protect existing XBE holders from being diluted. We also ensured that there is further economic incentive for the current XBE holders to participate in the proposed dilution compensation program.
Based on the clear revenue models for the protocol above, the proposal to mint additional XBE is a temporary structure to initiate a positive reinforcement process that locks up the majority of circulating XBE supply to stabilize and attempt to counteract the sell pressure created from issuing new tokens, while using the income from the xbEURO minting fees to purchase XBE on the open market and further attempt to reduce sell pressure and counterbalance XBE value dilution.
The proposal for additional XBE provides the protocol the ability to create much needed self-sufficiency when generating yield for LP Rewards, ensuring deep counter asset liquidity both for xbEURO pools to bridge into other DeFi instruments, and for XBE pools that establish the XBE token value in the market.
This proposal would see the max supply of XBE increase from 15,000 to 40,000 tokens (an increase of 25,000 XBE) over 2 years. The emissions would be scheduled at a rate of approximately 27.4 XBE per day for 730 days (2 years) totaling 10,000 XBE per year as LP rewards, with a further 5,000 mint event to reward current XBE holders participating in the XBE Dilution Compensation Program at the end of year 2.
While we wish to clone some parts of the CRV DAO mechanism, it is important to understand the objectives and the changes we have in mind for it.
The newly minted tokens are split into 3 groups:
- 5,000 XBE as Long-Term XBE Lockup Rewards (for locking up your XBE for 23 months),
- 10,000 XBE as Year 1 LP rewards.
- 10,000 XBE as Year 2 LP rewards.
By taking advantage of some the CRV DAO mechanisms, we can consistently incentivize users to lockup newly minted LP reward XBE tokens, and in doing so continue to prevent the free circulating supply of XBE from rapidly increasing and causing value deflation.
We have further proposed an additional lockup (Dilution Compensation Program) for current XBE holders to ensure their total percentage (%) of the protocol is maintained through the inflationary period, and this mechanism is likely to also lock-up a large share of the current circulating supply of XBE. This additional mint combined with the other 3 incomes is designed to provide substantial compensation and economic incentive to current XBE holders that participate considering the proposed XBE minting. The contracts are designed to ensure sufficient time (4 weeks) is allowed for the current community to take up the long-term lockup offer.
We will also introduce an additional governance contract to allow for users to receive veXBE tokens when they stake their XBE to vote with. Voting will determine to which liquidity pools the LP rewards are allocated, and also at what ratio each pool would be incentivized with.
Locked veXBE will also contribute to the rewards you earn for providing liquidity to each incentivized pool through boost. The higher a user’s boost, the higher their rewards will be. This functions in the same way CRV and veCRV does, simply over 2 years.
Boost from locked up XBE will also affect the rate at which your staked assets earn rewards from protocol fees – therefore locking XBE will be an important strategy to ensure you earn maximum yield.
PLEASE NOTE the following lockup terms:
- 23 Month lockup for XBE stakers (maximum possible yield)
- User chosen lockup terms – An XBE staker is freely able to lockup their tokens for a duration of their choosing to increase their boost on rewards. The lockup terms available are:
a. 1 Week
b. 1 Month
c. 3 Months
d. 6 Months
e. 1 Year
f. 2 Years
Unpacking the 3 categories of newly minted XBE:
a. Lockup Rewards - 5000 XBE MINT
On contract deployment (day 1) the XBE locker contract will allow holders of XBE to begin to lockup their tokens until the end of day 30. The lockup for the tokens is 23 Months. By locking their tokens for 23 months, users will be eligible for their proportional share of 5,000 new XBE,
AS WELL AS all protocol fees earned by the protocol and XIV during this time.Any XBE holder is eligible for lockup. The lockup period will start on day 1 ending on day 30 (no lockup can occur after day 30 – bonus payouts start on day 31), any XBE who fails to lockup their tokens for 23 months during this 30-day phase will be unable to claim the lockup rewards – allocated (or per block) only claimable [minted] at the end of the 2-year lockup. This minting process will function like the CRV DAO minter contracts. Users who lockup their tokens from Day 1 for the full term will also receive maximum veXBE so they can start with maximum possible boost.
b. Year 1 Rewards – 10 000 XBE MINT
These rewards will be proportionally allocated to incentivise liquidity pools via governance (by voting with veXBE), however the starting proposal is to incentivize both the Curve Pool (expanded on further below) and the Uniswap/Sushiswap XBE pool. Capability to allow for other chains/pools (BSC as an example) is included.
This proposal will mint 10 000 XBE for year 1, paid daily to Liquidity providers of their respective pools. The XBE Institutional Vault will also allocate a portion of its xbEURO funds to this strategy, creating immediate additional yield to staked XBE holders as the rewards would exceed 5% APY.
Current proposed pool
By working with Curve.fi, we are implementing a xbEURO[EURS] pool on curve through their EURO pool factory (to be deployed soon – please note conversations finalising the details are still ongoing).
This pool will support xbEURO, and in turn EURxb (by minting xbEURO). The institutional vault will deploy xbEURO into this pool to earn incentives for XBE stakers. The initial proposed rewards ratio favours this Curve pool to incentivize xbEURO and EURs liquidity providers, and in turn the XBE Institutional Vault (XIV).
The second proposed incentive pool is a Uniswap/Sushiswap XBE/ETH pool (it’s high time we moved to an ETH based pool to set XBE price value
) and this will take over from the trial pairs created on certain smaller centralized exchanges so far.
c. Year 2 Rewards – 10 000 XBE MINT
Year 2 will follow the same logic as unpacked for year 1 above for all accepted liquidity providers as dictated by governance votes.
Summarising the minting proposal for new XBE:
This yield program (minted XBE – income 4) will only run for a fixed 2-year period, and by default, no more XBE tokens would be minted after the end of year 2. It is our view that the protocol will be generating sustainable long-term income from xbEURO minting fees by then to distribute as both LP and XBE staking rewards and therefore would not require further XBE token inflation to be self-sufficient.
Below you will find the projected returns for current XBE holders that participate in the Long-term Lock-up (Dilution Compensation Program) with our assumptions. Please note these figures are subject to change.
Assumptions:
- XBE price remains at 1500 USD/XBE
- Examples 1-3 include lockup values; it is obviously impossible to predict this and thus assumptions have been made of lockup values.
- These values are approximations and are subject to change based on XBE price, total liquidity, deployed funds, and vault strategies among others.
- This model assumes that the staked amounts remain linear. However, it illustrates the % of staked amounts. (ie. 3500 staked = 23%, 5000 staked = 30%, 8000 staked = 53% etc.)
Objectives:
We wish to introduce a mechanism to reward liquidity providers (in any pool on ETH as well as BSC – by staking their respective LP tokens). Thus, the new DAO must have the ability to accept any LP token approved by governance. We mint 10,000 XBE in year 1 – 27.39~ XBE paid per day to LPs, and our initial strategy is simply to reward an xbEURO curve pool and an XBE Uniswap pool.
We propose to start by splitting the 27.39 (100%) daily rewards in a 1:3 ratio, being 25% to the XBE pool and the remaining 75% to the xbEURO Curve pool – in doing so; the result is 6.8475 XBE to XBE pool and 20.5424 XBE to the curve pool daily.
We are developing the capacity to change these weightings AND add/remove additional pools through governance to ensure we can remain flexible and adapt as the protocol needs it.
For example, if we decide to add a 3rd pool and change the weighting to 25% XBE on Uniswap, 25% XBE on Pancakeswap (BSC) and 50% to curve pool (ETH), we could easily achieve this by voting.
We launch year 1 rewards, AND the lockup rewards XBE (for locking up your XBE for 23 months) at the same time from day 0. Rewards start immediately for LP providers and from day 0 to day 30 anyone that holds XBE will be able to freely lockup their XBE in the long-term rewards (Dilution Compensation) contract for 23 months (to earn their proportional share of 5,000 XBE over the 23 months term AND their relevant XBE staking rewards).
All locked up XBE for the lockup rewards must STILL be eligible for Maximum possible boost rewards above the 5% from the institutional vault + protocol fees. At the end of day 30 the bonus XBE contract will no longer allow anyone to lockup XBE for the lockup rewards.
Anyone who stakes their XBE after this point cannot lockup their XBE for bonus rewards and is only eligible for the rewards from the Institutional vault. During this first 30-day period users will have the choice to lockup for a) 23 months (max possible boost), or b) lockup boost (boost depending on locked XBE).
3. You will have 3 types of reward structures:
3.1. A user who lockups XBE (only eligible by staking & locking up from day 0 ending day 30) for 23 months will earn the following: XBE Lockup rewards (proportional share of 5000 XBE), XBE yield from institutional vault (anything above 5% paid to staked XBE at MAXIMUM POSSIBLE BOOST) and any other fees (xbEURO minting rewards) over the period of the 23-month lockup.
3.2. A user who stakes XBE (but chooses no lockup) will only earn rewards from the institutional vault (anything above 5% paid to staked XBE – staked XBE includes bonus lockup XBE) and the rewards distributed from xbEURO minting fees. This value will change based on their lockup boost. The more XBE locked up, the higher the boost and the higher the reward. This is available starting from NO lockup, up to a full 24-month lockup for boost (XBE Token holder’s choice).
3.3. A liquidity provider without staked XBE will earn XBE proportional to their liquidity provided, with no lockup. They are of course welcome to stake their LP XBE rewards to increase boost.
*rewards are paid per block and freely claimable.
The general idea is simple, with no lockup an XBE holder should walk out with roughly the same after 2 years, and with lockup - an XBE holder should increase their current protocol percentage.
Motivation:
By introducing a base protocol fee, we can ensure sustainability of the protocol itself with the goal of being an open protocol for anyone to issue accepted securities on chain, and in turn apply those tokenized securities to yield strategies. We also aim to distribute XBE even further to ensure its sufficiently decentralized. This allows us to simultaneously distribute the protocol but also apply additional yield to remain competitive in this fast-evolving market.
Commitments:
The founding team will fund the entire development, deployment, and hosting (front end items) of this proposal at their expense. It will further provide additional support to the maintenance of the network. The founding team will further pay for audits of the developed code.
Specification:
xbEURO is a non-inflationary ERC20 token. XBE is a non-inflationary ERC20 token.
Github - TBD
Contract address - TBD
Useful links
Application: https://app.eurxb.finance
Website: https://EURxb.finance
Position Paper: https://EURxb.finance/position-paper (PDF at https://downloads.eurxb.finance/EurxbPositionPaper.pdf)
Youtube Channel : https://www.youtube.com/channel/UCJyDXiVYn-2PBFu9ssssPKA (EURxb overview, and EURxb Reserves Explainers)
Github: https://github.com/EURxbfinance
Proof Of Bond Reserve ISIN: https://eurxb.finance/partners/miris-senior-secured-green-bond/executive-summary and https://www.no0010912843.no/
FAQs
With 2.5x the XBE being minted how am I protected as an XBE holder so that this inflation doesn’t dilute me?
Whats important to understand is the deployment of capital of the XIV, as this will account for approximately 50% of the Curve pool up to a total pool size of roughly 120m USD. ~50% of the LP rewards will be paid to the XIV of which 95% goes to XBE holders.
If we cross over 120m USD pool size this is a massive movement for us to deploy more assets. Considering we have 400m EURO more to deploy this year alone we are confident at maintaining ~50% of those respective pools. So primary focus is a) ensure XIV is at ~50% b) remain competitive and c) the additional yield gives us room to move into other farms in future by spreading yield. The focus on yield will always be to maintain deep liquidity for the XIV and in turn additional clients.
There are billions on EUROs waiting for a suitable onramp into DeFi. That onramp is almost entirely dependent on liquidity. This model ensures XBE stakers (even the non-locked up tokens) are covered for their position within the protocol. The tokenomics support supply restriction, while any price increase simply compounds this yield.
Do I have to lockup XBE in order to protect my network percentage?
The general idea is simple, no lockup should allow an XBE holder to walk out with roughly the same network percentage, with lockup – an XBE user should increase their current protocol percentage.
Am I able to choose a lockup period as an XBE staker if I choose not to stake for 23 months?
Yes, you are able to choose a range of lockup periods to increase your boost. The following lockup periods are available: 1 Week, 1 Month, 3 Months, 6 Months, 1 Year and 2 Years (this is on the basis that the users missed the window to stake for the 5000 bonus XBE). All lockup periods are irreversible.
How does the projected daily fees compare to other protocols?
Considering the current rankings of protocols (not a complete list however a good metric to compare against) of https://cryptofees.info/, the XBE protocol revenue from one issuance of 53mm EURxb will provide approximately 9516.77 USD per day. This is comparable to other major protocols valued significantly higher than XBE.
How is this proposal addressing XBE holders that just wanted to hold the tokens and grow their portfolio value through speculating on the XBE price, and didn’t care about the XIV rewards?
Staking XBE can be considered a way to farm XBE without any impermanent loss. The instrument you stake (XBE) is earning rewards in the same instrument (XBE) - and therefore if you are long XBE, staking XBE presents no impermanent loss risk with the benefit of increasing your holdings of XBE at the same time. Furthermore, staking XBE does not require you to lock-up your XBE whatsoever! Locking-up XBE only improves the rate at which you earn rewards - you don’t HAVE to lock-up your XBE to earn (pretty decent) rewards, you just earn even better rewards when you DO lock-up staked XBE.
This means that staking XBE with no lock-up actually offers viable compensation against the value dilution of their XBE portfolio to those XBE holders that were long XBE primarily for the benefit of price speculation, and who wanted to take advantage of the low maximum supply cap (which even at the proposed 40,000 tokens is still quite low considering DeFi norms!).
ELI5
Add protocol minting fee paid as protocol rewards. Introduce xbEURO token (The xbEURO is a non-inflationary stablecoin that allows holders of our inflationary stablecoins - currently the EURxb, with more to come in future - to lock-up their tokens for the full interest term). Mint fixed amount of XBE. Provide mechanism for current XBE holders to maintain current % of protocol without buying more (lockup rewards). Locked up XBE allows users to boost their rewards. XBE minted in 3 ways: to locked up XBE, to XBE stakers and to LPs. Major upgrades leading protocol to complete self sufficiency. Special thanks to Curve.fi.