Auto-compounding, single-asset staking to maximize yields and value-accrual
We’re very excited to announce that we’re going to launch $STELLA’s single-asset staking facility: xSTELLA! This feature will allow all $STELLA holders to stake their $STELLA and earn a portion of every swap fee generated by StellaSwap’s DEX.
Strengthening our tokenomics requires a sustainable value-accrual mechanism that maximizes tokenholder value. Rather than just inflate our emissions for our current Vault feature, a more sustainable way for rewards distribution is through allocating a portion of profits made from every swap — aka swap fees — back to $STELLA tokenholders. This ensures that future STELLA yields is based on ongoing profits contributed by trade volume, not solely on emissions.
xSTELLA is the solution to fortifying our tokenomics and more importantly, create strong synergies across the DeFi space, in the form of composability. Furthermore, xSTELLA would naturally auto-compound, which has been something the community has always wanted, and something our current Vaults fall short at. In conceptualizing the xSTELLA feature, StellaSwap is also establishing the first step towards full governance.
Here’s a summary on why we will be transitioning from Vaults to xSTELLA and why it is important for StellaSwap:
- Recurring buybacks creates continual demand for $STELLA, resulting in strong price sustainability.
- xSTELLA rewards is based on trade volume revenue rather than purely emissions; this will alleviate inflation and sell pressure.
- Convenience; users can ‘set and forget’ while earning more $STELLA, basically auto-compounding your rewards.
- xSTELLA will be the core medium for access to StellaSwap ecosystem like earning project partner tokens, earning boosted APRs on farms, exclusive access to IDO Launchpad, NFT minting etc.
- xSTELLA enables composability, which means it can be used as an underlying asset in various DeFi protocols that will ultimately strengthen $STELLA utility.
- First step towards Governance; in the future, holders of xSTELLA would be able to vote on major decisions.
Salient points of xSTELLA
- Launch on March 7, while Vaults feature will be retired (detailed transition plan to be announced in the next 48 hours)
- Single-staking of $STELLA that will generate xSTELLA, which is a yield-bearing token that represents user’s share of the pool.
- In the long-run, xSTELLA holder’s share of the underlying $STELLA will always grow, since 0.05% of fees for every swap will be used to buyback $STELLA and distributed to xSTELLA holders.
- No impermanent loss since users need only to stake $STELLA to get xSTELLA
- No timelock; users are free to unstake anytime.
StellaSwap charges a 0.25% fee for every swap or trade on our DEX, which is the lowest fee of any DEX. 0.20% of the fees are distributed back to liquidity providers (i.e. stakers), while 0.05% is accrued to protocol’s treasury.
With the launch of xSTELLA, the 0.05% that was originally accrued to treasury will now be distributed to xSTELLA holders in the form of more $STELLA.
Every time a trade is executed on StellaSwap, 0.05% of trade fees will be used to buyback $STELLA from the market. This $STELLA is accrued to one single, shared pool and is divided pro-rata to xSTELLA stakers. xSTELLA can be unstaked at any time, upon which user’s allocated $STELLA will be sent back to their wallets.
Example of xSTELLA in Action
On Day 1 of xSTELLA launching, the ratio between $STELLA : xSTELLA follows a 1:1 ratio. More specifically, for every STELLA staked, users would receive 1 xSTELLA. However, this ratio will change because of the effect of continuous buyback, resulting in more $STELLA accrued into the pool.
For instance, assume Bob is the first and only user to deposit into the xSTELLA feature. He would deposit 100 STELLA and receive 100 xSTELLA in return, as the starting ratio is 1:1.
After a few days, 0.05% of trade fees are used to buyback a total of 100 STELLA and sent to the xSTELLA pool, which now has 200 STELLA. The ratio now changes to 100 xSTELLA : 200 STELLA, which is a ratio of 1:2. Bob could very well unstake his 100 xSTELLA and redeem 200 STELLA. If he doesn’t, then anyone who deposits $STELLA will get xSTELLA according to the 1:2 ratio. This means Mary who staked 100 STELLA will get 50 xSTELLA.
The amount of xSTELLA users get back is based on the amount of STELLA already in the pool and the current total supply of xSTELLA. The ratio will change as fees are used to buyback $STELLA, which is then sent to the pool and split equally among all xSTELLA holders, since each xSTELLA will be worth more $STELLA.
When you stake $STELLA, you will get back xSTELLA. xSTELLA will represent your portion of the accumulated $STELLA that was bought back using the 0.05% of fees from every trade. This means that the rate of xSTELLA to $STELLA will change over time as more $STELLA is accumulated from fees.
While your xSTELLA amount stays constant, you will continue to accumulate more $STELLA over time based on your share of the pool. When you unstake and unstake, you will receive more $STELLA than what you entered with (provided you remained staked for at least 24 hours, since we have automated the buyback to be executed minimum once daily).
Not only is xSTELLA holders eligible for higher yields (earning more $STELLA), but they will have access to a variety of utility, access and perks across StellaSwap’s ecosystem. These include;
With xSTELLA being the core value-accrual mechanism and core medium of access, the incentive to hold and acquire $STELLA will continually build up. This will result in maximization of tokenholder value in the long-run.