General
- 1.Borrow XIM against $WETH (or $WBTC or other tokens) by opening a Trove
- 2.Secure XIM by providing XIM to the Stability Pool in exchange for SPACE rewards
- 3.Lock SPACE for xSPACE token
- 4.Stake xSPACE to earn the fee revenue paid for borrowing and redeeming XIM.
- 5.Redeem
1XIM for1 USDworth of $WETH or WBTC when the XIM peg falls below$1
There is a one-off fee whenever XIM is borrowed, and when XIM is redeemed:
- For borrowers, there is a borrowing fee on loans as a percentage of the drawn amount (in XIM).
- For redeemers, there is a redeem fee on the amount paid to users by the system (in $WETH) when exchanging XIM for $WETH or $WBTC. Note that redemption is separate from repaying your loan as a borrower, which is free of charge.
Both fees depend on the redemption volumes, i.e. they increase upon every redemption in function of the redeemed amount, and decay over time as long as no redemptions take place. The intent is to throttle large redemptions with higher fees, and to throttle borrowing directly after large redemption volumes. The fee decay over time ensures that the fee for both borrowers and redeemers will “cool down”, while redemptions volumes are low.
The fees cannot become smaller than
0.5% (except in Recovery Mode), which protects the redemption facility from being misused by arbitrageurs front-running the price feed. The borrowing fee is capped at 5%, keeping the system (somewhat) attractive for borrowers even in phases where the monetary is contracting due to redemptions. Other than that, the two fees are identical and are depicted as "Fee" in the following exemplary chart:
There are two different ways to generate revenue using xDollar:
- Deposit XIM to the Stability Pool and earn liquidation gains (in $WETH) and SPACE rewards.
- Lock SPACE for xSPACE
- Stake xSPACE and earn XIM and $WETH or $WBTC or other tokens revenue from borrowing fees and redemption fees.
As a non-custodial system, all the tokens sent to the platform will be held and managed algorithmically without the interference of any person or legal entity. That means your funds will only be subject to the rules set forth in the smart contract code.
There are two scenarios under which you may lose a part of your funds:
- You are a borrower (Trove/Account owner) and your collateral in $WETH or $WBTC is liquidated. You will still keep your borrowed XIM, but your Trove will be closed and your collateral will be used to compensate Stability Pool depositors.
- You are a Stability Pool depositor and your deposited XIM is used to repay debt from liquidated borrowers. Since liquidations are triggered any time borrowers’ collateral drops below
110%, you will receive more $WETH or $WBTC in return with a very high probability. However, if $WETH decreases in price and you maintain exposure, you may lose value in your total pool deposits.
Please note that a hack or a bug that results in losses for the users can never be fully excluded.
Last modified 1yr ago