The DeFi ecosystem witnesses new financial primitives every day. At Stable Jack, we are also developing a new financial primitive, called xAVAX.

In this article, we will outline the reasons to utilize xAVAX so that you can have a clear understanding of the value proposition of xAVAX.

xAVAX is a volatile AVAX token that mirrors the price volatility of AVAX exponentially similar to leveraged contracts without funding fee or liquidation risk. It can be seen as a looping token as well, which allows you to increase your exposure to AVAX price without bothering with all the looping process. Moreover, you can also see it as a tokenized perpetual contract that can be used in DeFi.

There are several reasons to prefer xAVAX:

1. Leverage AVAX position: xAVAX typically offers leverage around 1.5-2x which will allow users to have exponential gains from AVAX’s price appreciation.

2. Extremely low liquidation risk: Traditional perpetual contracts carry inherent liquidation risks, however, the liquidation risk of xAVAX is almost impossible as the CR of the protocol has to be lower than 100%. Even in this case, the user still holds xAVAX and its price can rise again. Compared to leveraged contracts, you’re not wiped out.

3. No funding cost: Traditional perpetual contracts can be costly, especially for long-term holders. In contrast, xAVAX has zero funding costs as it is not a leveraged contract but a token that mirrors the AVAX volatility exponentially.

4. Simplifying looping: Looping is achieved via CDP stablecoins to allow users to have increased exposure to AVAX, however, it requires many transactions which is hard to manage and costly. Instead of creating a looping position manually, you can just buy xAVAX and have the same results.

5. Bullish on AVAX: xAVAX is an appealing option for those with a bullish outlook on AVAX and seeking long-term exposure.

6. DeFi composability: xAVAX is a DeFi-composable product that can be used in DeFi activities to further benefit from the token such as LPing, yield farming, and being used as collateral. This will allow more yield opportunities for xAVAX holders

7. Not affected by market makers: Most of the time sudden liquidations in leveraged contracts happen due to market maker speculation of upside or downside wicks. However, this can’t happen in the case of xAVAX.

8. No centralized party risk: Leverage contracts are exposed to the CEX’s arbitrary actions such as closing the position, limiting the position amount, or changing the leverage. These can’t happen if you hold xAVAX as there is no way that the protocol can interfere.

In the future, as we integrate with major DeFi protocols on Avalanche, you will be able to utilize xAVAX on those platforms as a supply/borrow asset or as collateral which will open further use cases and opportunities!

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