Background & Motivation:
3 Is A Magic Number
Over the last year, the XB ecosystem has been exploring and adapting to ensure a solidified framework for onboarding institutions while simultaneously maturing to fit into its DeFi glove. With an initial product release of a euro stable coin backed by senior secured bonds and an enhancement of a protocol to encompass the larger audience – XBE is at a point today where we have released several innovative products with much more exploration ahead. We have shown that the concept of tokenizing real-world assets is achievable, already putting us one step forward in our mission of bringing TradFi to DeFi. Additionally, in the current state of the protocol, we have opened the doors to create capital and gas efficiency for the billions of dollars within Curve while also releasing the first-of-its-kind referral product into Curve.
Throughout these processes, we consistently seek to improve in any way, shape or form. The last few months have provided us with further insight into the problems that DeFi faces. It has given us first-hand guidance on how regulatory bodies and institutional clients view blockchain-based solutions. And more importantly, it has equipped us to understand how to become the pioneering protocol we strive to be.
To reiterate the goals of the XB Ecosystem, as well as how we see ourselves getting there:
The XB protocol has and will perpetually envision onboarding institutional actors into the decentralized financial world. Yet it is prudent to understand the pace at which this legacy system moves. They have a very frugal and meticulous approach which leads to day-in and day-out discussions and learning exercises. These actors also need to ensure their digital assets are safely and securely stored, with the ability to interact with them as they please. We aim to focus entirely on shipping problem-solving products that benefit its users, Web3 and the XB DAO stakeholders.
With the team’s unparalleled insight into regulatory compliance and the deep technical background in digital asset protocols, we stand at an advantage in ushering TradFi deployments into the ever expanding DeFi ecosystem.
In addition to this underlying vision, we plan on revolutionizing how people look at Curve liquidity. The xh LP tokens are a novel and opportunistic design leading to incalculable implementations, both from the traditional and decentralized spheres. These possibilities can reshape the way users interact with Curve LP, the way TradFi enters this space, and the current forms of liquidity provision – all while complementing Curve and Convex.
But we still have several unanswered questions.
How do we become this pioneering protocol zeroing in on efficient yield-bearing Curve liquidity? How do we onboard institutions into this ecosystem? And how do we ensure the project’s long-term sustainability in the following phases?
If we, as community contributors and investors, want to reach our ultimate goal of bridging the gap to DeFi for institutions, we need to do so in the most efficient way possible. Helping them onboard into a DeFi ecosystem - and not just one product - is the only sustainable implementation.
There are always areas to improve on once you’ve deployed a specific iteration of product code, and in our case we’ve identified several that we have addressed. An example in the current XBE design would be every time a user claims their Hive rewards; This action calls the earn() function, which pulls rewards from Convex to the strategy, making the overall gas cost of claiming rewards quite high. Additionally, if we wanted to expand into other solutions with xh Curve LP, the current codebase does not enable us to delegate the distribution of pooled earnings to the underlying participants.
All-round, there are several inefficiencies on a smart contract, tokenomic and UI level. These range (as almost all DeFi protocols from 2020 and 2021 share) from excessive payouts of inflationary rewards for renting liquidity and overwhelming information on the UI, all the way to the economic incentives of locking XBE for boosted protocol revenue.
These examples of the current inefficiencies are what we would like to address in this XIP10 proposal.
Considering the immutable nature of smart contracts, the necessary improvements and changes mean a need to redeploy several contracts. As such, we as the DAO team want to welcome you to the most upgraded and coherent XB code base to date:
Welcome to XB3 Finance
We will first explain the XB3 protocol, its upgraded features, and how it will expedite our underlying vision. Following this, we will explain the XIP10 proposal.
XB3 Finance is a new and improved protocol version with robust and efficient mechanics building off the foundation of XBE.
XB3 Finance will have the same vision and structure as XBE finance; however, it includes significant upgrades on a smart contract, tokenomic, product, and user experience level. With the redeployment of the XB code base, we can again progress on our protocol vision!.
We can start tapping into yield-bearing Curve LP, pioneering a new form of liquidity provision, and even providing TradFi with the necessary infrastructure to deploy within DeFi.
Before diving into the improved features of the XB3 protocol, it is vitally important to understand that the team, its vision and the current engagements are continuing as-is and confidently if I can say so myself. We are building as we learn, and as our insights grow we can improve the protocol from top to bottom in whatever capacity is required. Be that improving the efficiency of the Hive vaults, creating stronger underlying tokenomics, expanding onto additional Hive based products and even being at the forefront of a new era of Digital Asset Custody.
So without further ado:
The improved upgrades of the XB3 protocol:
More gas-efficient Hive Vaults.
Cheaper fees on Hive Vaults
Greater functionality with xh Curve LP.
Depositing into Hive Vaults with underlying tokens making it simpler for users to yield within Curve and Convex
One protocol built to be cross-chain revolving around the $XB3 governance token.
Improved and simplified UI’s (web and app).
- Protocol revenue distributed to lockers only.
- 80/20 emission mechanism
- veXB3 holders earn $CRV, $CVX, $XB3 and all future protocol fees in their base assets. (v2)
XB Vault Product
Institutional-grade Custody Solution.
Deep Dive into the XB3 improvements
After assessing the inflationary challenges within DeFi, specifically protocols’ tokenomics, the team has revised its approach to capturing as much value for the DAO and its stakeholders.
Generally speaking, the word ‘staking’ has been refined and repurposed. Instead of receiving rewards for contributing to chain security with collateral at stake, modern “staking” just seems to mean ‘we give you more tokens as a reward if you don’t sell your current tokens’. This model is severely detrimental to the protocol as it relies entirely on speculative price pumps (assuming there’s no yield generative product).
Contrast this with protocols like Curve with some of the most sustainable tokenomics within DeFi. Their veCRV system has shifted hundreds of DeFi protocols into following a similar path, with XB being one of the first. Curve’s success is in its complementary environment between product and tokenomics. They create value for users and protocols, all while rewarding its long-term supporters and stakeholders.
Building off both DeFi learnings and the Curve protocol:
The XB3 tokenomic model:
First and foremost, DAO users should get protocol revenue in a mixture of non-native and native tokens – this diversifies users’ earnings and restricts the selling pressure of your native token. Secondly, the native tokens should be yield-generative on their own, creating a complementary yield relationship. This idea of paying users in speculative non-yielding assets often initiates downward trends in price.
Improvements on the XB3 protocol:
The 80/20 emissions;
Liquidity providers in the Hive get paid out in $CRV, $CVX & $XB3, with 80% of the XB3 being locked as veXB3 until the end of the 2 year campaign. The remaining 20% is sent directly to the user’s wallet.
- In essence this increases the amount of veXB3 a user has, allowing them to earn a greater share of Hive and protocol rewards and additionally, protocol revenue.
veXB3 implicitly boosts users’ Hive rewards & protocol revenue. In a future implementation planned - users will also be able to boost their rewards from the XB vaults.
- This creates a positive feedback loop with Vault stakers earning more XB3 (and indirectly increasing their veXB3 balance) which ultimately earns them more rewards from the Vaults and from the protocols’ revenue.
ALL protocol revenue gets paid out to veXB3 holders in its base assets. This ultimately means that veXB3 holders earn $CRV, $CVX & $XB3 with multiple others to follow with future product offerings
- NOTE: Upon launch, the CRV and CVX rewards will sit in the Treasury Smart Contract until the finalized reward distribution contracts are deployed.
Claiming from the Hive:
Hive fees have now dropped from 21% down to 15%. This reduction comes in as the protocol no longer takes 1% to cover gas costs, and Referral rewards have dropped from 10% to 5%.
- The 10% used as protocol revenue still stands, and this fee is distributed among lockers only.
In future, ALL revenue from the Digital Asset Custody Offering will also get distributed to veXB3 holders, and in their base assets.
It is clearly evident that this approach has a much larger focus on complementary yield and fee generation.
XB3 includes amazing products for both DeFi and TradFi users’ with much larger ideations ahead
The XB3 Hive
With the new XB codebase, the XB3 Hive is the most efficient vault version to date with cheaper fees and more functionalities. The upgraded Hive Vaults wrap Curve liquidity into fungible, ERC20 compatible, yield-bearing LP tokens which can now tap into lending, stablecoin, and even liquidity provision solutions.
The improved Hive vaults charge a 15% fee on claims which is then distributed to the XB Referral program, as well veXB3 holders.
These new Hive vaults also offer the opportunity to deposit into Curve/Convex with the pools underlying tokens
EG. Users can deposit CRV, cvxCRV or Curve CRV/cvxCRV LP (from Factory pool 22) into the CRV/cvxCRV Hive vault. This makes the complex process of depositing assets into Curve and then staking the LP tokens into XB3 a lot more simplified.
Additionally, the foundation of these improved vaults shine light on other Hive based solutions (see XB Vaults).
XB3 Bonus Campaign
The XB3 Bonus Campaign will follow a similar suit to the original scope with XBE, with some slight differences.
The XB3 Bonus Campaign (BC) is a mechanism to reward early supporters and long term holders of the XB3 protocol.
Users who choose to lockup their XB3 for the full term, within the first two months of launch, will be at maximum boost for the entire campaign. This boost will not degrade as your unlock date approaches. Additionally and most importantly, BC participants will earn their proportional share of 5,000 XB3 tokens (minted after 18 months, and distributed over 6 months)
This means that Bonus Campaign participants will ultimately earn more rewards from the Hive, the products to come in future, and protocol revenue.
Bringing the best of Curve, Convex, SushiSwap, Olympus and XB3 together:
What if you could earn $CRV, $CVX, $XB3 (and indirectly veXB3) on your protocols base liquidity?
What if people and protocols could earn referral rewards on their base liquidity pool?
The XB vaults aim to take yield generative Curve LP (that is; xh Curve LP) and pair them with assets in Sushi vaults to allow users & protocols to earn $CRV, $CVX and $XB3 (80/20 rule) on their base pools liquidity.
This product will not be available upon launch. As spoken about in public platforms, the initial focus will be creating liquidity for the XBcvxCRV vault. Thus, XB vaults planned for phase 2/3 of protocol development.
The XB3 Custody Solution
XB3 Custody is a B2B product of the XB3 Finance protocol.
With the ever emerging interest from institutions and financial service providers, the XB3 Custody product gives DAOs the ability to offer their Tradfi and institutional clients safe and secure custodial private key management. It allows DAOs to focus on business success while leaving the securing and access provision of their digital assets to enterprise professionals.
XB3 Custody is a DSS and ISO compliant Custody solution that aims to provide the highest standard of institutional custody. As always, security is a top priority for XB3 and its envisioned goals.
A lot more will be spoken about Custody in the coming months as it is a foundational requirement to bridge the gap between TradFi and Defi - where customers simply are not able to manage their own private keys reliably.
The XB3 Custody Offering is currently in development & testing and is planned for phase 3 of protocol development.
XBE to XB3 Migration:
With several upgrades in this proposal, for us to improve all-round the protocol contract in itself will need to get redeployed and our token ultimately migrated.
This means that every holder of XBE tokens in current circulation - in their wallets, staked, or locked, including unclaimed rewards from the Hive vaults and Sushiswap pool, will be claimable from the new XB3 contract on deployment. Only tokens on centralised exchanges and in the Sushiswap pool will not be credited towards XB3 migration claims. So if this proposal is accepted we will be asking every member to remove XBE liquidity from pools and exchanges in order to ensure they get their full value of XB3 tokens.
The XB3 codebase is by far the most robust version to date with some great upgrades on multiple levels. We have learnt many lessons, and we will consistently look to improve in any way shape or form. By having a more efficient system, we can start to build further novel innovations rather than being prohibited in our current form. Our goal has and will always be onboarding Traditional Finance into this fast-paced, and infant Web3 industry, and we believe that the product offerings to come will usher this mass adoption.
Furthermore the cost to develop and audit the XB3 codebase has again been borne by the founding team and is provided to the community on an open source, “as is” basis, with no expectation of remuneration, no token allocation, and no funds from treasury applied to date.
This proposal is to redeploy the XB codebase and migrate the overall protocol to the new and improved XB3 Finance protocol, allowing XBE holders to claim new XB3 tokens on a 1:1 basis according to their XBE holdings at the time of migration snapshot.
Vote YES: XBE migrates to the XB3 protocol
Vote NO: XBE remains as XBE.
Link to snapshot: