DEXTF Newsletter #17
3 new token(s) to the list of collaterals to build tokenized funds (XTF2) | DEXTF’s Centurion (Ambassador) Program | Trading competition 100,000 $DEXTF in prize | The path to liquidity
Hey Everyone,
Welcome to this week's edition of the DEXTF Newsletter!
You can follow the community conversations on Discord, Telegram, Twitter, and Reddit!
DEXTF updates
We have added 3 new token(s) to the list of collaterals to build tokenized funds (XTF2)! (total 84)
Applications for DEXTF’s Centurion (Ambassador) Program are now open!
To celebrate our listing, we are running a mega trading competition. It ends on 21 August at 11 AM UTC.
Trading is live now! 👉 bitrue.com/trade/dextf_us… 👈 100,000 $DEXTF in prizes worth ~$30k for the top 100 winners! Happy trading Romans! 📈Trading for $DEXTF @dextfprotocol on $DEXTF / $USDT is now available on Bitrue! https://t.co/nnpwvaRwpg Together with trading, we're about to launch a DEXTF trading contest with a gigantic 100,000 DEXTF in prizes available for the top 100 winners. Details https://t.co/RoC33SEP5M https://t.co/yaSnx72PYhBitrue @BitrueOfficial
For those that want to dig into what’s DEXTF, this is a good start:
Also, DEXTF is hiring! If you think this is you, reach out to us. DMs are open.
Portfolio Metrics
[As of 19th August 2021].
Please refer to the DEXTF website for the latest APRs:
DEXTF/ETH is offering a 59% APR
XTF/DEXTF is offering a 36% APR
You can also earn $DEXTF by providing liquidity on Uniswap (29.6K tokens daily) or investing in any of the XTF funds (12K tokens daily)
Current TVL is US$2,080,000
You can invest by buying on Uniswap or on the DEXTF app
Here’s a quick guide on how to buy
Protocol Revenue
DEXTF has earned cumulatively US$82,205K in revenue since the Treasury started its asset allocation strategies. This has resulted in an additional buyback of 53575 $DEXTF.
To date, the cumulative amount of assets bought back by the Treasury are:
248,732 $DEXTF
4547 B-UMA-USDC
15 $BAL
2.3 $ETH
Concept of the Week
⚖️ The path to liquidity (an ongoing discussion)
DeFi projects have long relied on pool2 to bootstrap liquidity.
DEXTF Protocol is no different.
With DEXTF v1, funds were static with no rebalancing function, which meant that performance depended entirely on when the portfolio was launched.
DEXTF is basically a launchpad for fund strategies, that require sufficient liquidity to be scalable.
Liquidity Providers (LPs) aka volatility shorters
LPs are profitable only if the token they are providing liquidity for is range trading. Any sudden movements, either way, LPs experience impermanent loss. However, it's also true that LPs are getting rewarded with the same token to offset the risk of impermanent loss.
Are there ways to mitigate impermanent loss though for an LP?
Yes, in fact, standard liquidity pools as we know them through Uniswap or Sushiswap are 50/50. Half the assets of one token and half of the other (e.g. DEXTF/ETH). These pools are indeed the most dangerous when it comes to providing liquidity but most efficient when it comes to slippage. You need less capital to achieve a lower slippage.
Balancer has 80/20 or 95/5 liquidity pools that are less efficient in slippage, because you need more capital to achieve the same result, but lower impermanent loss risk. So if you're looking to still gain from a potential token appreciation, Balancer pools would be more suitable for you.
Fund tokens liquidity issue
Being a fund launchpad, it's important to understand that launching a successful funds means nothing if there's no assets under management. Do get that, liquidity must be sufficient for big traders/long term investors to move in and out with low slippage.
The current rewards system is based on what type of protocol user you are.
The DEXTF Protocol has always recognised 4 types of users: fund investors, fund managers, liquidity providers, and arbitrageurs.
Fund investors would earn DEXTF rewards simply by holding XTF fund tokens.
Fund managers would earn DEXTF rewards by creating and launching the fund token.
Liquidity providers would earn DEXTF for providing liquidity to the whitelisted pairs.
Arbitrageurs are not incentivized because their incentives are already baked into the transaction. The transaction wouldn't start if there was no profit to be made.
What is DEXTF Protocol's main objective?
provide low-slippage access to strategies/funds to any interested trader/long term investor
tokenize portfolios to earn both performance fees and trading fees.
DEXTF issued funds, are collateralized tokens that can be minted or redeemed for their collateral.
In other words, liquidity may not be that important for those fund managers that already own the specific portfolio created, because the fund managers can always redeem the fund tokens for the collateral.
So why should fund managers use DEXTF?
When holding and managing a portfolio, rebalancing becomes essential. To rebalance means to change the relative portfolio weights into the desired asset configuration.
Individual investors are doing this manually today, if at all. DEXTF v2 allows fund tokens to change, add and remove assets from an existing tokenized portfolio (XTF2).
Rebalancing is what makes asset management go from passive (DEXTF v1) to active (DEXTF v2), justifying the introduction of performance fees for fund managers.
A consistent fund performance due to active asset management should drive up the demand for that fund incentivizing new fund tokens to be minted and sold into the pool to capture the arbitrage. A performing fund also delivers returns progressively, giving LPs peace of mind, while earning rewards and trading fees.
Established above, it's important to understand how the current rewards mechanism plays out in practice.
Rewarding investors for just holding the fund tokens did not yield the expected result, which is to increase the demand for fund tokens launched by fund managers. It also didn't help when it was clear that investors could provide liquidity and earn additional rewards, given that LPs were also investors for half the assets provided.
Rewarding fund managers for creating and launching fund tokens also turned out to be easily gamed. In fact, very quickly funds resembled single-staking funds, with very low diversification benefits or risks.
Rewarding liquidity providers, given the above two rewards, dampened the propulsive force for liquidity to rise across funds launched on DEXTF. In fact, short-term players mixed with long-term believers, leading to a continuous cost-benefit analysis on the best APR, and freezing the protocol from growing and serving the DeFi community.
So if currently, DEXTF attracts fund managers that launch portfolios without providing liquidity to interested parties (because FM decides to hold all the fund tokens to earn rewards without providing any value to the wider community) or simply launches a $0 AUM fund to earn rewards without any skin in the game then the reward for fund managers should be stripped.
Next are the fund investors that earn rewards easily by just holding the portfolio, which is good marketing but adds no value if all investors were to keep the fund tokens in their wallets, without providing liquidity.
Therefore it's clear now that liquidity is what the rewards mechanism was trying to achieve and yet failed to do so. In our opinion this is due to a few reasons:
it is overly complicated, and it assumes that users are rational and that they would proceed to do what the ultimate objective should be (for liquidity to increase)
it is fragmented, subjecting users to different APRs and different rules
it has poor reflexivity on the way up (as the value does not hold, users are still confused), but high on the way down. A fragmented rewards mechanism meant that all incentives would drop as DEXTF token price drops due to poor growth
Liquidity pairs have been a contentious issue too. However, incentivizing one type of pair over another complicates the rewards.
The market knows what it wants and pools should be created to serve that need accordingly. If LPs prefer to pair with $USDC or $WETH then it should be an easy decision, as rewards are distributed only to LPs with no discrimination on the paired token.
This is an ongoing discussion that anyone can join and contribute to in our Telegram channel: https://t.me/dextfprotocol.
Semper Fortis
DEXTF Team