Quick look back
In my previous article regarding X7 Finance, I discussed the X7 Deposit token (X7D), and the incredible passive income opportunity it presents.
“There is a complex interplay between the various tokens and contracts within the X7 ecosystem”
Understanding this “complex interplay” will be very advantageous for you, as how to best position yourself within the ecosystem.
“X7 is designed to address the needs of four major quadrants within decentralized finance. The symbiotic nature of each segment in the X7 Finance ecosystem provides fluid insurance for lenders and mutual funding for all other market participants”
As parts of a body work together for the benefit of the whole; the same can be said for the many components of X7. In my previous article about X7D, I likened Xchange & the Lending Pool to be the Heart & Soul of X7, and the X7D token as the Life Blood.
Continuing with this line of thinking, I present to you the brains of the operation…
X7DAO
“X7DAO is a utility token and will be traded by swing traders and held by power users of the ecosystem”
In order to fully grasp the importance of this token, you must first understand the philosophy of the X7 system design.
Before I continue, I want to encourage you to read through the whitepaper yourself https://x7finance.org/docs/whitepaper, as I am merely highlighting some of the things I read, and giving you my opinion.
X7 is designed to be “Permissionless, trustless, censorship-resistant, decentralized architecture, decentralized governance”
X7 gives “power back to the people”
When I consider the entirety of the X7 ecosystem body, I think of X7DAO as the Brain.
Dao Governance Charter
“All dynamic aspects of the X7 ecosystem will ultimately rest with the DAO to decide upon.
The DAO will be responsible for modifying tokenomics, changing profit allocation, upgrading the upgradeable components, and determining the long-term fate of locked liquidity.
The X7DAO token is the voting token within the DAO, and a portion of project revenue will flow into the DAO token in the form of liquidity injections.
The expected outcome is that DAO holders will maximize the medium and long-term gain of the DAO token. The ecosystem properly aligns this selfish profit motive with the efficient and healthy operation of the ecosystem.”
The game theory for this token is pretty much summed up in the last statement in the charter “The ecosystem properly aligns this selfish profit motive with the efficient and healthy operation of the ecosystem”
The X7DAO governance token…
“allows holders to vote on fee rates, loan terms, funding terms, tradable token tax terms, distribution of capital flows and any additional settings on and off chain. This includes the establishment of committees and other foundational efforts off chain.”
Since all components of the ecosystem are deeply interconnected, the X7DAO holders are incentivized not only to vote on what is best for themselves individually, but to vote on the best outcome for the ecosystem.
“A portion of lending and DEX revenue will flow into the X7DAO liquidity pair as buybacks and liquidity additions as well as direct rewards to X7DAO voters”
This is all bullish for X7DAO, and I personally like this: “direct rewards to X7DAO voters”.
What effect could all this have on X7DAO token value?
Well, only time will tell, but I can speculate…
To begin with, receiving a portion of lending and DEX revenue is HUGE!!!
I foresee other forms of rewards possibly bestowed upon active voters, such as bonus tokens, nft's, access to early projects via launchpad services, etc.
I believe that the rewards will be significant enough so that token holders won't want to sell their tokens, and demand will increase due to this fact.
As revenue increases, more money flows back into the X7DAO pair, rewards go up for X7DAO voters, token demand increases, token value goes up.
“The X7 DAO structure is highly codified and provides almost no direct latitude for human intervention. This is by design and is one of the greatest strengths of the X7 DAO governance structure”
There are checks and balances in place to ensure that X7DAO holders operate in the best interest of the entire ecosystem; this comes in the form of Magister tokens. There is a total of 49, of which 7 have been given to the development team.
If a majority of magister token holders vote against a proposal, it will require a ¾ supermajority DAO vote to overturn a Magister veto.
So, the power ultimately lies with the DAO as a ¾ vote can overturn a veto.
“The final governance influence of the original developers will become minimal once all Magister tokens have been minted”
Who is the X7DAO token for?
There's nothing stopping anyone from buying X7DAO and taking advantage of a rising token price, however I believe the true value will come in the form of the rewards received for voting on proposals.
X7DAO provides the means for you to be intricately involved in the governance of the project, and be rewarded handsomely for your efforts. Keep in mind that if you want to make a proposal, you'll need to stake a minimum of 500k tokens.
I am of the opinion that active, voting X7DAO holders will be privy to exclusive opportunities within the ecosystem.
X7R
The astute investor has many options from which to profit inside the X7 ecosystem. For the average investor who isn't a trader, or doesn't want to be involved with governance, X7R is the perfect solution.
X7R was the first token launched, and it is the token for the masses. It has been designed to appeal to a much wider audience, and will…
“ensure that the number of people that can benefit from this decentralized system is maximized”
It is for these reasons that I consider X7R to be the ‘Face' of the ecosystem.
X7R isn't just a pretty face; it packs quite a punch! X7R is a Reward token which has a few concepts that the wider crypto community can grasp hold of right away…
It's Deflationary!!!
“a percentage of all transaction fees are used to buy and burn tokens, reducing total supply of available tokens”
“25% of X7DAO's fees are used to buy back and burn X7R tokens, thus reducing supply”
“A portion of all the transaction fees is used to add liquidity”
Over time, as the ecosystem grows, it is expected that trading fee will be lowered to zero as there will be…
“less need for ad-hoc manual capital injection”
As the ‘Brain' of the ecosystem, X7DAO plays an important role in the performance of the X7R token. Due to the wider audience appeal, X7DAO voters are incentivized to make sure X7R puts on its best ‘Face'.
X7R's purpose is to attract as many interested parties as possible into the ecosystem, and is expected to eventually be traded on every major centralized exchange.
X7100 Constellation Tokens
In the game of chess, having a good pawn structure is vital for a game winning strategy. A great pawn structure will protect major pieces as well as create opportunities to advance your position on the board.
As in chess, I view the constellation tokens as being this ‘pawn structure' or, as I like to refer it, the ‘Backbone' of the X7 ecosystem.
So, what exactly are the constellation tokens and what do they do?
“A novel — eventually price consistent collection of five tokens. These act as the backstop to the Lending Pool. The X7100 series of tokens are burned on every transaction. While continually raising its floor price — it also provides further opportunities to mint new X7Deposit tokens”
“Collateralized reserves for Lending Pool's X7 Deposit tokens, with the functionality to accumulate token value and act as lender of last resort against X7Deposit token issuance”
“The lending pool will maintain a reserve of constellation tokens sufficient to back any externally funded lending pool liquidity”
“A large portion of the lending proceeds will go towards buying back and adding locked liquidity to the Constellation tokens
Okay, so what is the opportunity in constellation tokens?
Continually rising floor price!!!
Eventual price consistency will provide arbitrage trading opportunities
The money flow between the lending pool, the deposit token (X7D), and the Constellation tokens will provide advanced traders opportunities for arbitrage and swing trading (strategies to be discovered), which…
“will drive tokens and fees back into the rest of the ecosystem and provide a solid financial vehicle for speculation on future growth”
Final thoughts,
As the parts of our body are connected & interdependent on one another, so it is with all the different parts of the X7 ecosystem.
As investors, X7 Finance provides us with many opportunities; maybe you have a passion for X7 Finance and want to get involved as an X7DAO voter, or perhaps you would prefer a more hands off approach with the X7R token. Then again, active traders may be eager to take advantage of the arbitrage & swing trading opportunities that the Constellation tokens provide.
Whatever investment strategy you prefer, from collecting a passive income to swing trading, X7 Finance has you covered.
X7 Finance is still very early stage, and over time, as the ecosystem grows, so will the number of opportunities grow.
Cheers!
“Trust no one. Trust code. Long live Defi.”