For those of you who are long-term holders of XAI, you know we have seen big changes in cryptocurrency since the original launch of the token in the summer of 2017. We’ve held off talking to the community until now so that we could come to you with a plan that had the potential to generate really attractive returns for our community. I’m writing this blog today to present you with a proposed restructuring of the project and a delivery schedule and information about your choices in an upcoming vote.
There are a number of key changes we propose to the XAI thesis that will both support new and necessary functionality and shift the balance back in favour of long term XAI holders vs benefiting sellers.
1. The token. We have already started to move XAI onto the Fantom blockchain in part to decrease voting costs. We have selected Fantom because it has a high transaction speed, low gas costs, full EVM implementation, a good DeFi ecosystem and a decentralised validator network. We considered a number of alternatives including ADA and SOL as well as Binance Smart Network which we ruled out because it uses POA and can be censored by the authorised validators. The move to FTM will bring the cost of voting down to pennies instead of the prices we had been looking at for voting! BTW, swapping for USDT will also be much cheaper.
2. Token Reallocation: At the same time we will be doing a 10:1 allocation of the New XAI. This means you will receive 10 new FTM based XAI for every 1 old ETH based XAI. There are currently just over 25 million ‘unburned’ XAI tokens so the initial distribution will be just over 250 million.
I put ‘unburned’ in quotes because the original contract was not written in a way that allowed for burning. We locked them permanently instead.
3. Staking Function: The new XAI token will include a staking function. Staking your tokens will generate a staking reward which will equal an annual yield of approximately 15% of your staked tokens. We have selected this value because it will, on average, offset the tokens burnt as part of the buyback keeping the token non-inflationary in an average month.
4. New Functionality: Burning: The token will incorporate proper burn functionality – this way the tokens that are bought back can be validated as burnt and the token count will reflect the reduced quantity.
5. Change to token buy back policy: Currently we only buy back tokens when we reach new equity highs on the traded capital. This model makes less sense with the introduction of the new token capabilities discussed below. Instead, every month where there is positive income from the project we will use 10% of that amount to buyback tokens. This will result in more frequent but smaller buybacks. As the new use case starts to take effect, the buy backs will more and more be driven by that use case, the trading profit smoothing out the months where there is less activity.
ADDITIONAL XAI USE CASE – DEFI: Fund Management Token
We have been moving XAI to operate in a much more decentralised manner. The next step is to convert XAI into a Fund Management DeFi Token. This token would facilitate funds being managed by independent fund managers with each investor’s capital held on decentralised exchanges. Independent investors choose to work with independent Fund Managers without losing custody of their assets. The token’s use case is to provide the smart contract that facilitates this relationship.
The past year has shown how valuable professional management of capital can be in bear markets as well as bull markets. We believe now is the right time to be launching this DeFi protocol.
There have been a couple of attempts at decentralised fund management on other blockchains though this would be a unique offering for Fantom. Something these other projects have in common, they all rely on some form of open Blockchain Oracle. This allows easy use of the service without paying the Fund Manager, this disincentivises the quality managers from using the service.
We have developed a method that allows the performance of the individual funds to be entirely transparent in terms of funds and performance while keeping the pre-trade signal hidden.
All trading will be executed on decentralised exchanges keeping the solution simple, non-proprietary and, most important, non-custodial, allowing investors to remain in control of their funds. We believe this will be a key selling point for this offering.
The tokenomics will be discussed in detail in the Whitepaper but, in high level terms there will be initiation fees for opening a new smart contract. These micro fees will be split into three portions, 1/3 will be burnt, 1/3 will go to the project treasury, and 1/3 will go to the Fund Network Validators.
Fund Managers control what their fees are as part of the contract initiation which are then embedded in the smart contract. The smart contract automatically charges the fees which are routed to the manager’s wallet. The contract collects a small fee from the manager’s income which, is then converted into XAI and burnt.
Finally, validators will ensure the smooth execution of all the smart contracts. These validators receive a small fee from every contract initiation plus staking rewards on the XAI they are obligated to maintain to operate as a validator. Fund Managers must either run their own validator node or become part of a third-party node.
Governance of the project will follow the accepted DeFi model. A foundation will be created to control the project and the treasury. The foundation will have a Governance body tasked with running the ongoing direction and development of the project.
While the initial development and launch will be paid for by Panxora, ongoing operation will be financed by the XAI token project. To achieve this we want to allocate a further 150m tokens, making a total pool of 402,483,274 new XAI.
The first 15m will be sold to an investor at $0.005 ($0.05 old basis). The purpose of these funds would be to establish the foundation, appoint the board consisting of 1 Panxora member, 1 new investor, and 1 appointee from the existing investors (selected by vote).
This board will decide and supervise all decisions made by the foundation. The foundation will control the remainder of the treasury. 10m of this treasury will be used for bug bounties and marketing costs
The remaining treasury will be released during subsequent investor rounds at increasingly higher price levels all aiming at a public launch of the token on a centralized exchange.
The new investor will expect existing XAI holders to be locked in on the same locking schedule that they have on their investment.
Raising funds for projects is incredibly challenging at the moment so this lock in will be critical to the success of fund raising in our opinion.
Timeline and Milestones.
- End of July: Delivery of the full whitepaper on the XAI Fund network proposition
- Early August. Launch the new token.
- During August. Provide a token swap capability to swap old XAI into new XAI.
- End August. Hold vote on above proposal.
If the vote is successful and this new strategy is approved we will proceed with sourcing a new investor for the proposition in September with the goal of securing this by end October.
Use of Capital
Our pencilled in expectation for future rounds to raise funds into the treasury are:
- $75k raise for 15m tokens ($0.005 per new XAI – equivalent to $0.05 per old XAI). Used for creating the foundation, launching the wallet and launching the XAI network smart contracts for use by 3rd parties and releasing the new token onto DeFi exchanges for use.
- $250k raise for 20m tokens ($0.025 per new XAI). Used for promoting the proposition and building community.
- $1.5m raise for 15m tokens ($0.10 per new XAI). Used for launching on a centralised exchange.
- This will leave 100m tokens (less any used for bug bounties) in the project treasury to cover foundation running costs and ongoing development.
Everything except the first of these raises will be set and approved by the foundation board at the time so they are subject to change based on the foundation’s decisions.
The goal is to grow the responsibility of the foundation to include all aspects of the token development and ongoing growth.
The new token’s relationship with Panxora will be much more arms’ length. We will still use the profits generated from the existing capital to continue buying back and burning XAI as before. This will be limited to the remaining 25,248,327 tokens not yet bought back (252,483,270 on new basis). If this project is as successful as we believe it will be then the price of new XAI will increase making the buybacks increasingly irrelevant as the token price will exceed the maximum bid price. As now there will be no time limit to buying these tokens back and Panxora will have the sole option of ending the relationship. In the event that Panxora chooses to end the relationship our obligation is limited to buying back the remaining original complement of tokens and burn them.
As mentioned above there will be a vote held with the new token to agree or reject this proposed new direction for the token project.
The vote will be split in 2 parts. The first vote will be to approve the changes to the staking / buyback approach. The second will be on the DeFi: XAI Decentralised Fund Management Network proposal.
Both will need to pass to move ahead with the fund management network (we can’t implement this strategy without built-in staking which drives the tokenomics).
The founders believe this new project direction has significant upside potential and are already putting the mechanism in place to execute the plan. While we could launch this as an entirely new project, we have decided to give the community the option to fold this into XAI.
We believe your support for the project over the past five years deserves recognition and we would welcome your involvement in the next phase which we believe has tremendous potential.