Proposal to migrate from the current staking mechanism to a vModel.

PROPOSAL EXEC SUMMARY

This proposal is for XDEFI Wallet to change its current $XDEFI token model to a new, simplified token model that will empower both $XDEFI token holders and XDEFI Wallet users.

If you are in favour of this proposal, you can vote by following the instructions here: https://www.xdefi.io/article/proposal-vote/

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PROPOSAL DETAILS

Current $XDEFI Token Design (as of 31 March 2023): Today, the $XDEFI token can be staked and locked up for a user-defined period of time ranging from 15 to 75 days.

• Stakers receive an NFT badge which represents their locked $XDEFI position (similar to UniV3).

• These $XDEFI NFT badges are called bXDEFIs (XDEFI Badges).

• Each bXDEFI has a score that ranges from 1 (lowest) to 13 (highest). => The bXDEFI score is calculated as follows: Score = AmountStaked * LockUpDuration. => The bXDEFI score determines a number of ‘credits’ attached to the badge (in addition to the locked $XDEFI position). These ‘credits’, while not spendable today, are designed to have future utility including voting rights.

• The current $XDEFI staking model has several limitations: => The 13 tiers of badges may cause confusion among some stakers. => There is a risk that a staker may sell their bXDEFI without realising that it represents their underlying $XDEFI position. => The 'credits' system is overly complicated in terms of understanding how many voting rights are attributed to a particular XDEFI Badge.

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PROPOSED NEW $XDEFI Token Design (this proposal)

• $XDEFI will follow a classic vModel design leveraging the ERC4626 standard: https://ethereum.org/en/developers/docs/standards/tokens/erc-4626/.

• $XDEFI holders will be able to stake their $XDEFI tokens and receive $vXDEFI in exchange, which is a transferable and fungible token.

• $vXDEFI represents the staker’s percentage ownership of the entire vault receiving the rewards in $XDEFI coming from the fees collected by XDEFI.

• No lock-up period.

• Rewards will auto-compound until stakers decide to convert their $vXDEFI back into $XDEFI tokens.

• $vXDEFI tokens can be used to vote on XDEFI community proposals via Snapshot.

Overall, this new model achieves THREE KEY BENEFITS:

1. It removes the staking lock-up period for greater flexibility.

2. Rewards will auto-compound.

3. It delivers a simpler and more intuitive voting mechanism to encourage community participation.

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WHAT DOES THIS MEAN FOR CURRENT $XDEFI STAKERS?

• For current stakers, the recommended strategy is: => Remain in the current staking contract until your current staking period ends (this will depend on your chosen lock period). => Migrate to the new staking contract when your current staking period ends or the current staking contract is deprecated; whichever happens first.

• There will be a transition period (75 days) during which XDEFI will supply both the current and new contracts with $XDEFI. => Throughout this transition period, XDEFI will strive to ensure the staking returns are similar for both the current and new contracts. => XDEFI will periodically adjust emissions into both vaults to maintain consistent APR payouts for both current and new pools.

• During the transition period, users will be able to un-stake their $XDEFI tokens from the current contract at any time. => In terms of APR, the position should generally remain indifferent between the current and new contracts, and users will be free to migrate to the new contract at any time.

• Following the transition to the new token model, XDEFI Badge holders (bXDEFI holders) will still be able to keep their bXDEFIs (only the badges with no $XDEFI tokens). => The plan is for holders of these original bXDEFIs to be entitled to certain future perks (that may include for example potential airdrops, wallet skins and/or priority access to new releases and testing).

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KEY DATES

• 31 March 2023: Proposal to move to new staking contract to be submitted and the 7 day voting period begins.

• 7 April 2023: Voting period for the proposal concludes (and, if passed, the proposal will then be passed to XDEFI to approve and implement).

• New staking contract will go live (est. 9 May 2023). => $XDEFI holders can no longer stake into the current staking contract. => Positions in the current staking contract can be unstaked at any time (and can be immediately staked into the new staking contract). => During this transition period, XDEFI will target equivalent APRs for both staking pools.

• Current staking contract will be deprecated. => This will take place 75 days after the new staking contract goes live. => All positions in the current staking contract will be automatically unstaked on that date, and stakers/$XDEFI holders who wish to continue to stake their $XDEFI tokens will be able to do so via the new staking contract. => Following the removal of the current staking contract, holders of any original bXDEFIs will still keep all their bXDEFIs (being the badges themselves but without any $XDEFI tokens attributed to them).