xTokens introduced two wrapped tokens in July this year, xKNC and xSNX. Now, users are capable of staking the xSNXa token as the project recently announced that their staking platform went live. However, some problems with the staking contract appeared on the very first day, forcing xTokens to disable it temporarily.
The Synthetix Network delivered a swiftly rising complex DeFi product last year for both investors and developers alike. Some enthusiasts deem the project as one of the most complicated ones in the decentralized finance sector. Because of the structure of the project, the same trait appears in the SNX token.
Investors who wish to hold and effectively use SNX will have to allocate a portion of their time to learn about the token model. Mastering hedging, collateralization, and the art of minting sUSD are just some of the features that holders deal with. This set of, nuances for some, makes it extremely difficult to attract new investors.
You buy once to get in and you sell once to get out. That’s all that is required to participate fully in the Synthetix network. – XToken
The Alternative – xSNX
According to the xToken team, xSNX is a preferable alternative to dealing with headaches. The wrapped token deals with all of the aforementioned processes and makes holding SNX as easy as buying it at one point and selling it later. It is the ‘Buy low and sell high’ of the DeFi market.
Moreover, holders do not have to deal with the extremely high fees seen in the past few months. SNX token holders who stake the product to create sUSD received fees ranging anywhere between $20 to $100 in gas. The high fees prevent anyone with a small bag from financially enjoying staking, which remains most profitable for whales.
xSNX solves both the issues of managing staking and fees by providing a managed fund for investors. Within the fund, staking yields and fees result in the net asset value of SNX staking.
The Process – Easy Solutions, Easy Problems
xSNX tokens are mintable with either ETH or SNX. At the time of writing, a single SNX token can yield ten xSNXa tokens. Tokens are minted on a ‘set-and-forget basis.’ All a holder has to do is simply mint; the XToken platform manages everything else.
The platform also manages staking and hedging instead of the user. An ‘admin controlled hedge function’ will mint sUSD and trade it for two assets in the fund. While 75% of sUSD go towards the TokenSet strategy, 25% of the fund goes towards vanilla ETH. The first version of xSNX, abbreviated xSNXa, are allocated to the ETHRSI6040 TokenSet.
According to XToken’s blog post released on August 18, investors should still properly inform themselves before staking. One part of their blog reads a fair warning:
We also feel compelled to note that xSNX is not a yield farming strategy and not a trading vehicle. xSNX holders should be long term believers in the Synthetix ecosystem. The fund is designed for long term value accrual. Short term holders may struggle to earn positive returns.
Furthermore, the blog notes that xSNX holders are still “exposed to several layers of smart contract complexity and should be aware of the risks that come with it.”
Staking for xSNX tokens disabled on the first day
The platform’s warnings were not for nothing. On the same day that XToken launched xSNXa staking, the team disabled minting and liquidated the contract into Ether. The team revealed the problem in a Tweet after a fellow Twitter user spotted an attack vector.
A follow-up tweet later confirmed that the platform would compensate participants for the gas costs and inconvenience. A team member apologized for the problems as well.