Fluid xDOT staking is finally live, so why not use it to bid for us as your favorite parachain? You’ll get xDOT in exchange for it, and keep liquidity for your staked DOTs. Let us explain what xDOT is and which use cases are available for it.
What is xDOT?
xDOT is a yield-bearing instrument by the Equilibrium team designed to make the Polkadot crowdloan ecosystem way more convenient and productive. In a soundbyte, it’s a synthetic asset that’s redeemable for conventional DOT tokens that were contributed for a parachain slot and locked for a slot lease period.
xDOT will be initially issued on Genshiro, our Kusama-based canary network. Tokens will be minted at a 1:1 rate for locked DOT for each project individually, as soon as it wins a slot. xDOT will be also available on Equilibrium when the project becomes a parachain on Polkadot. We will effectively bridge the Polkadot and Kusama ecosystems together, providing a multitude of use-cases to both.
You might think about xDOT as a bond with its DOT principal, paid out upon maturity after approximately 2 years with сoupons periodically paid out in project tokens. We can price xDOT like a bond if we know the market interest rate — a good proxy for this interest rate in the Polkadot ecosystem is the DOT staking rate, which is currently around 14.4% APY.
For every project that Equilibrium’s xDOT supports, we have the following assets at play:
- DOT locked for the duration of the parachain lease period
- xDOT tokens minted at a 1:1 rate for locked DOT
- Project token cash flows determined by the project’s PLO strategy
We will list xDOT tokens on our own DEX and make them tradable against our native USD-pegged EQD stablecoin, just like any other asset. Market forces will then decide the actual price of xDOT tokens, which will in turn imply the price of the corresponding project token.
Your regular crowdloan rewards
Corresponding xDOTs act as a claim right on project token cash flows. We will make periodic xDOT balance snapshots across the system, calculate proportions of xDOT distribution among its holders, and based on these proportions, distribute project token rewards to accounts on the according project parachain.
The actual schedule of this process can vary from project to project, and it largely depends on their PLO mechanics and vesting schedule.
As such, xDOT offers a wide variety of utility to the user, depending on that user’s market strategy:
- Earning up to 40% APR on top of regular crowdloan rewards
- Collateralizing xDOT to borrow stablecoins (and other assets)
- Using xDOT as margin for trading with leverage
- Swapping xDOT for DOT
- Arbitrage opportunities
When project tokens list on open markets, there will be a natural codependence in the price of xDOT and the price of the project token, opening a way for this kind of arbitrage.
xDOT is robust from the day one as all DOTs collected from users are securely stored on a multisignature wallet joined by us and influential VCs of the ecosystem: Signum Capital, DFG, Genesis Block Ventures, and PNYX Ventures. Every single DOT transfer from this address requires an approval from at least three of these counterparties.
When Equilibrium becomes a parachain, xDOT will transition from the trusted setup of multi signature wallets and proxy accounts to the trustless setup where an Equilibrium parachain account will control contributions and handle asset distribution logic.
Currently supported projects
Here are crowdloan campaigns that are available for you on our platform right now:
Equilibrium is not running a crowdloan yet, but you can already support us through the xDOT platform. We have prepared special bonuses for early supporters like yourself. Everyone who locks their DOT for Equilibrium until November 25, 2021 will get an exclusive 20% bonus on their regular rewards.
Fluid xDOT staking is LIVE! Get To Know Our New xDOT was originally published in Equilibrium on Medium, where people are continuing the conversation by highlighting and responding to this story.