Notes on the tokens for the xBacked protocol.
xBacked does not allow you to passively stake either xUSD or the protocol governance token. Below it is explained how fees are distributed to participants.
The xUSD token is a USD pegged stable coin backed by ALGO. The xBacked protocol always considers one xUSD token to be $1 USD.
Staking xUSD requires those tokens to be used in liquidations executed by the protocol. The fees from this action is then distributed proportionately.
To maintain a stable value for xUSD the following methods are used:
- Arbitrage when xUSD is discounted: if the price of xUSD is trading at a discount (below $1 USD) users are able to purchase it, and repay debt at a cheaper rate. As participants purchase xUSD the price rises
- Arbitrage when xUSD is trading at a premium: if the price of xUSD is trading at a premium (above $1 USD) participants could deposit collateral to mint xUSD to then sell on the open market. This selling of xUSD reduces the price.
This is the token used in governance of the xBacked protocol. Staking this token on the protocol will not receive a share of the xUSD fees generated by the protocol until a DAO vote is passed for this.
There are no guarantees that the governance token has any value, whatsoever.