BeinCrypto presents our new series, Terranova Picks. BIC’s global head of trading and investments, Vinícius Terranova, brings readers non-biased research articles to help them understand the new projects launching on the market. These articles are not financial advice and are only for educational purposes.
When we analyze the cryptocurrency market over a course of a few years, we can see that it has passed through more volatile times than we see nowadays. While many investors have gained from these market oscillations, others have lost a lot on this journey.
The past solution was the creation of stablecoins that helped minimize this issue. However, they ended up falling into the realm of centralization of capital. Which is something totally outside what cryptocurrency holders believe in.
Currently, we see a completely different scenario. Stablecoins are not used much as a hedge against volatility. Rather they are an asset for the decentralized finance (DeFi) environment.
Meanwhile, we also observe that the price of bitcoin (BTC) is more stable. That is, it does not have as many rises and falls as in previous years. Ethereum (ETH), the main altcoin, is also heading that way. However, the smaller capitalization tokens still experience periods of great volatility.
Volatility may seem a bit scary to a lot of people, but it is through this that the greatest profitability of the blockchain market comes.
However, knowing how to deal with all this is not an easy task. In fact, the lack of understanding combined with the small window of opportunity to maximize your profits in moments of variations can be something that hinders your development.
This is where XFai’s platform comes in. It is set to solve this problem for you.
Earning returns on autopilot
XFai is a set of autonomous liquidity management smart contracts for tokens with low trade volumes and market caps. It allows holders of small cap tokens to earn returns on these tokens when providing liquidity. This, therefore, increases their position in those projects.
XFai has a DEX Liquidity Oracle (DLO) which provides data in the form of price feeds and triggers to third parties. In addition, it actively provides and manages token liquidity on Uniswap, the main decentralized exchange, and similar decentralized exchanges (DEXs).
As a result, small cap token holders earn returns denominated on autopilot. Its DLO synchronizes and optimally manages its own liquidity. This is an important step for DeFi, as it corresponds to two fundamental requirements:
- The first point is that it manages to optimize the DeFi financial system and bring automatic strategies for that.
- The second one is to solve what people really want since they do not want the data, but the strategies used.
As such, strategy and liquidity contracts will apparently become the approach of the future. XFai is already at the forefront of this path.
XFai’s DLO deploys small cap tokens borrowed by their holders via strategy contract to pools of DEXs to shape their curves to match and optimize the price/volume ratio of centralized exchanges (CEXs).
This process removes organically big and small traders and investors from CEXs. Soon after, we will see a process of liquidity and migration fees entering the DEXs. These fees will be given to small cap token lenders increasing their financial position to tokens.
- The user deposits the token in XFai’s liquidity pool. Then, the contract pulls the tokens from these pools and deploys them to sync the curve.
- The DLO reads exchange APIs on multiple large order books for those token pairs.
- It constructs synthetic curves by averaging the order book volume out. One synthetic curve per pair per exchange is created.
- The same synthetic pair curves across multiple exchanges and combine to create a single synthetic curve per pair. This synthetic curve is then the reference curve against Uniswap, until the Uniswap liquidity matches or exceeds the combined liquidity of all exchanges.
- The strategy contract then adds or removes liquidity of tokens to the actual Uniswap curves until it matches the synthetic curve.
This process continuously repeats to keep both curves in sync.
Exchange value is funneled to the XFIT token in several ways:
- Governance: the XFIT token is used for the signaling of votes in the XFai ecosystem.
- Fee Discounts: holders of tokens will pay significantly lower fees when accessing contracts.
- Combinatorial Uniswap Pairs: XFIT will trade directly in Uniswap pairs with every new token onboarded to the DLO and other products.
- Continuous Liquidity Farming: All profits/fees made first by the DLO and then later products will be used to continuously “liquidity farm” the XFai token itself on all DLO Uniswap pairs.
XFai is offering the approach that is expected to gain popularity and interest in the future. By managing DeFi with automatic systems, token holders are able to earn returns on autopilot.