Translator and editor: @Goldenchichi1
Original article: 投资NFT交易平台代币x2y2需要搞清楚的14个问题
Disclaimer: This paper is for sharing and learning purposes only. The content of this article is not investment advice and does not constitute any offer or solicitation to offer or recommendation of any investment product. Always DYOR.
BTCDayu and Lanxing, the moderators of X2Y2, raised 14 serious questions about X2Y2. An investor in the crypto market is not strange to DYOR. The meaning behind that is to be rational and responsible for every investment decision you made, and minimize the negative impact of emotion as much as possible. Lanxing answered the questions frankly with true data support will be a great example of DYOR. Let’s dive deep into the questions:
X2Y2, an NFT exchange platform similar to Opensea, profits from charging trading fees to NFT traders. The fee rate in June 2022 is 0.5%, meaning a seller pays 0.5e if his NFT worth of 100e is sold on X2Y2.
We can check the daily trading fee data directly from Dune or NFTscan, collecting trading volume data and multiplying it by 0.5%. We can see a range between 60e to 90e as the average daily trading fee X2Y2 is calming, and the 7-day average is 72e, equal to 130k USD per day.
The fee is 100% distributed to X2Y2 token holders (who are staking), including the ILO (Initial Liquidity Offer) participants. Therefore, how much you can share depends on the percentage of how many tokens you are staking verse the total staking amount and then multiplies by daily fees. According to the data from Dune, the total number of staking tokens is around 232M and 70e daily fee income now, and thus you can share around 0.03e daily for every 100k tokens staked.
Take the no. 1 holder as an example. The address is staking more than 30M X2Y2 tokens and earns 5e - 9e daily.
According to the official document of tokenomics, the total supply is 1B. 90M tokens, initially for the airdrop purpose, were burned, and thus the current supply is around 910M. The team and treasury are allocated 100M tokens (10%), respectively.
The team’s portion is locked, and the token will linearly unlock 1/4 (2.5% of total supply) in another 180 days after 180 days. It also shares a cut from the market fee from day one but does not share the staking rewards.
The graph below shows how the fees are distributed (You can monitor them here). The total fee was 87e yesterday. The team, the treasury, ILO participants, and the staking holders were allocated 17e, 14.73e, 3.3e, and 51.55e, respectively.
X2Y2 genuinely distributes the trading fees to token holders, with no pre-staking, market making, or competing with stakeholders. The team reacts quickly to the market and has published bulk purchases, bulk listing, and community-driven marketing. The founder (TP) keeps collecting advice from the community in the DC group and replies in person.
As for LOOKS, you can refer to this article. LOOKS’s team transacted 50% of its staking reward to cryptocurrency tumblers by controlling the market; this is an act of sacrificing LOOKS’s retail investors and destroying community trust, not to mention there was a pre-staking mechanism for private offers (a big halve of benefit to latecomers!).
The 30-day price chart of X2Y2 and LOOKS are shown below:
BAYC community is active in LOOKS’s private offers, and among them, many are KOLs which puts LOOKS in an advantageous position. But it is worth noticing that the Otherdeed collection is traded in volumes of 34k e and 44k e in LOOKS and X2Y2, respectively.
The trading volume of new projects on X2Y2 has already surpassed that of LOOKS’s, while the active daily user on X2Y2 is three times of LOOKS’s.
The performance of X2Y2 on price also outperforms in a downtrend bear market. The two competitors will collide in price within two months to think optimistically.
We can see the emission schedule below or have more details here.
As mentioned above, the total supply now is less than 910M X2Y2. Tokens owned by the team and treasury (200M) are not in the circulating supply but are collecting the fees. The unlocking schedule of the team and treasury’s token is shown below. X2Y2 was launched on 2 Feb, the 1st treasury unlocked was in May, and the 1st unlock of the team’s token will be in August.
We then talk about X2Y2 Tokenomics 2.0.
624,902 X2Y2 tokens are distributed to both seller and buyer daily. 604,902 tokens are for selling incentive, while 20,000 is for purchase incentive.
There was a mistake in setting the initial parameters of the staking rewards contract. The error resulted in per stage having, instead of the intended per block halving, ended up distributing 56% of the total 200M rewards in the first 30 days instead of the 18% initially intended.
4500M X2Y2 tokens are allocated for trading rewards, releasing 624,902 tokens every day from 15 Feb.
15M ILO tokens are linearly unlocked and can be neglected.
597,790.8 tokens are allocated for the staking pool. 91.7% of tokens now (~2327M tokens) are in the pool.
Currently, the selling pressure is mainly from the trading rewards. Despite 70% of the trading volume being from wash trading (for the token rebate), the actual volume is still more than 10% of Opensea’s.
Therefore, the foreseeable future selling pressure shall be due to the deductions of trading rewards and staking rewards. The staking holders are more likely to observe the growth rate of users and daily trading fees income to decide what is next.
See below for X2Y2’s circulating supply:
X2Y2 is not a Ponzi scheme since there are actual trading fees as profit to support. Token holders who are staking are rewarded X2Y2 and share WETH from trading fees. The business model is akin to a royalty business but shares dividends every day instead of quarterly.
The current staking APY is 93.1%, trading fee APY is 61.2%.
For inquiry on trading volume, please refer to question 1.
For the token emission schedule, please refer to question 3.
Many users appreciate X2Y2 for its extra-low fee on trading and smooth user experience.
@0x0nassis, who has more than 105k followers on Twitter, publicly admires X2Y2.
Recently free mint is the trend, and people can save a ton of trading fees simply by using the user-friendly X2Y2 exchange, as said in the real user experience below:
Research institutions, including Delphi, have already mentioned X2Y2 twice.
Active daily user pumping from 100 in Feb to a stable number of over 6000 now is the best evidence showing how user-friendly X2Y2 is from the users’ perspective. At least, we can be so proud of saying our server does not go down often like Opensea.
Of course. The need for exchanging is one kind of inelastic demand.
Initially, the development fund came from the team’s pocket, and part of it now comes from the share of the trading fee. It is worth mentioning that X2Y2 spends almost nothing on marketing since the community takes the initiative to handle this part.
Partnership with VCs is on our list, and we will announce details at the right moment. We think the resources a VC could bring are more critical to the financial support.
X2Y2 is already listed on MEXC, and some big exchanges are also approaching us.
Price follows the supply-and-demand theory.
The initial price was 0.5U and pumped to 4.5U for only two days. The team did not manipulate the market. The market was so hype because, on the one hand, investors were affected by emotion (since many Chinese KOL twitted about it), and some were trying to make a profit by using this hype (by pushing the price to a great altitude and dumping it at a high price). Also, the extra-high staking APY attracted people to be part of us.
However, that is not the whole story.
First, the result of changing people’s behavior with tokenomics 1.0 did not meet our original expectations. Still, it attracted those who wanted to make profits with the mechanism instead (I am totally fine with this behavior since this is part of the market). 200M tokens were prepared for listing rewards and were proportional related to the listing period; thus, most of the listings were low liquidity/ hard to sell, so they could generate more listing rewards. This was not what we wanted! No trading, no profit. The team then modified the listing reward mechanism several times during that period and kept developing new functions.
The mistake of the emission schedule also contributes to the drop. Initially, there should be 1.23M tokens released daily, but they ended up being 3.7M tokens instead (Question 2). The APY was super high in the first month (10,000%) and became colossal selling pressure later.
Thirdly, newbies, who did not understand Defi but were optimistic about the NFT market, might buy the tokens in FOMO and be scared off by the drop.
The trading volume of the X2Y2 token was more than 10M daily during that period. Most of the selling was from staking and listing rewards, and the buying force was insufficient. More importantly, our NFT trading volume did not benefit from the incentives, and thus investors were reluctant to get into X2Y2 anymore.
However, it is worth mentioning that if someone buys 100k tokens at 1U and stakes, the number of tokens now becomes around 350k. Plus the share of trading fees, the investment is already in profit in ETH-standard and can exchange for more ETH than he paid.
During the sudden drop, the community was overwhelmed with pessimistic emotion, especially ILO participants. There were also complaints from KOL. The team was lacking sleep too. After that, TP initiated several AMA and promised to change the situation with execution. The team believed that the only way out was to attract the actual NFT traders, so the platform can start making profits to stabilize the price. Therefore, we waved the trading fee (0%) in April, compensated the gas fee with daily 620k X2Y2 tokens, canceled the listing rewards, burned the 92M unclaimed tokens, and publicized the status of development (question 5). We found this was working and continued promotion in May, charging only a 0.5% fee on trading. The Otherdeed was hot in the month, and its trading volume on X2Y2 excesses more than 10k e. This is how X2Y2 has become the second biggest NFT exchange.
We organized an X2Y2 volunteering group in early March starting with only several people. And now, we can see from the Twitter, Wechat group, DC, etc., are promoting X2Y2. X2Y2 now has over 6k daily active users and 72e average daily trading fee income. The income is based on a 0.5% trading fee rate still, which will be 360e daily if the rate is the same as Opensea (2.5%).
The valuation of Opensea now is $13B. Since X2Y2’s daily user and net trading volume has already exceeded 10% of Opensea, giving X2Y2 a valuation of $1.3B seems fair.
Pessimistically or in the short term, I may start to buy and stake the tokens when it drops to $0.15U.
This question is answered in Question 2. To understand the differences, you also need to clarify what a Ponzi scheme is. Having income from outer layer sources like X2Y2’s profit model is not a Ponzi scheme.
Questions raised by Lanxing：
Please check the article below (Only the Chinese version is available now):
I would like to hear from you, and I will give you a surprise if it is a good answer.
I would like to hear from you too.
X2Y2 official mirror：https://mirror.xyz/x2y2.eth/k2Bv3UMpNFJTJiYdf5m48sANHn-Ei3m6ohmkO29qeoU
X2Y2 FAQ DC channel：https://discord.gg/5Bc9AjjNaJ
X2Y2 official documents：https://docs.x2y2.io/zh/tokens/tokenomics
BTCDayu’s paper about X2Y2：https://mp.weixin.qq.com/s/Ax4MXZXFks3svysBwDvMrA
Lanxing’s first paper about X2Y2：https://mirror.xyz/0x4631e0eCda7a39ba951f297c65C1A6E680dc94c4/b_lHA9u8N7r-2wIZH-VC_dVBgukjkZEfTlRXVqc5QYk
By the people. For the people.