At XFai, we are revolutionizing the way people interact with small-cap tokens within the DeFi space. One of the main drivers of this technical innovation is the DEX Liquidity Oracle — or more commonly known as DLO. XFai’s DLO is set to unlock potential for small-cap tokens in increasing liquidity and bringing additional utility for the token holders.
The Current Need for DLO
Within the current cryptocurrency market, there are more than 3000 individual token projects. In particular thanks to the standard protocol such as the ERC-20, it has never been easier for new projects to issue their native tokens to support their own ecosystem and utility.
Late 2020 witnessed one of the biggest surges in DeFi — short for decentralized finance. The popularity contributed to the increasing number of traders utilizing DEX (decentralized exchanges) such as Uniswap, and many projects leveraging this movement to create liquidity pools in which holders can add their tokens and the pairing token (often in ETH or USDT) to provide liquidity depth within the market for a share of the profit.
However, most often the drive for rapid innovation leaves behind the majority that is excluded from the top. In the current case, more than 90% of the small-cap tokens have been excluded from the DeFi movement. The gap is amplified by the liquidity pools focusing on the most popular tokens within the top 100 rank by market cap. This means that for those who are holding small-cap tokens with a strong foundation and unlimited potential, reaping the benefits of DeFi is next to impossible.
With most of the small-cap tokens having their liquidity locked in centralized exchanges, being held hostage to a big price drop once the liquidity has been pulled out, most small-cap token holders are at the mercy of the centralized exchanges’ hidden market makers.
XFai’s DLO is set to challenge the narrative that has formed into a norm for far too long. The DLO synchronizes the price feed and the liquidity between centralized and decentralized exchanges, making DEX more attractive with minimum price slippage, even without the hidden market makers that centralized exchanges provide.
How does DLO work?
XFai’s unique API reads the order book on the centralized exchanges. The reading is converted into a total price-to-volume ratio. The ratio is compared to that of the equivalent trading pair on DEX. If the DEX has a lower ratio, XFai’s DLO sends liquidity to the DEX order book to match the ratio provided on the centralized exchanges. If the ratio on DEX is above that of centralized exchanges, DLO removes liquidity to match.
XFai’s DLO has the full potential to make trading on Uniswap as efficient as trading on centralized exchanges, if not more efficient.
The DLO Benefits for Token Holders
Most small-cap token holders participating in trading have experienced the slippage on centralized exchanges being far bigger than what they have expected. For example, selling even $1000 USD worth of small-cap tokens on a centralized exchange could trigger the hidden market maker to push the price down further, triggering other centralized exchanges to do the same to reduce arbitrage. As a small-cap token holder, exiting in portion would have a devastating effect on the rest of the holdings.
With XFai’s DLO, small-cap token holders are able to move their liquidity from centralized exchanges to DEX with low risk and safely trade on DEX that boasts the same depth as the order books on centralized exchanges.
The embedded anti-slippage mechanism of DLO also ensures that each action done by the holder would be accounted for accurately, allowing the users to not be harmed by any unexpected slippage while keeping it minimal.
DLO’s synthetic curve reflects the micro-changes within the liquidity of the centralized exchanges on the DEX liquidity to provide an optimal trading environment on DEX. This is a key, unique feature of the XFai DLO that cannot be found in any other oracles.
The DLO Benefits for Projects
XFai’s DLO is revolutionary not only for the token holders and traders but also for the projects. All projects would agree that there is nothing like a new price discovery that excites and engages the token holders and the community members. However, price discovery can only be supported if there is sufficient liquidity provided. Most small-cap tokens do not have the sufficient liquidity necessary to make this happen, which results in lower community engagement, and lack of excitement among the trader community.
The DLO solves all of this issue at once, at no cost. The flexible injection of liquidity not only simply increases the liquidity, but it also supercharges the return for liquidity farmers. This unlocks the potential for small-cap tokens to be highly attractive for those looking to increase the profit of their liquidity farming operations, thus increasing the liquidity with little to no effort.
Moreover, projects with a treasury fund that generate fees with a minimum risk by simply putting their fund into XFai’s DLO and utilize it to provide an optimum trading environment for their holders with no cost, yet with unlimited potential for the token’s price movement.. It is a win-win for the project, traders, and other stakeholders.
Get Involved and Start Earning
The DLO will be one of the main components within the overall XFai ecosystem and the set of solutions that we are geared to provide within the DeFi space. The team at XFai has been working tirelessly to bring the vision to life, and now is your opportunity to get involved.
The main launch of XFai will be our Liquidity Generation Event (LGE), set tentatively at the end of March 2021. During the event, everyone will have a fair opportunity to experience the XFai ecosystem first-hand. To help prepare you for the highly-anticipated XFai LGE, here are the steps you can take today to not miss out:
- Follow XFai on Twitter
- Join the XFai community on Telegram
- Subscribe to the XFai Telegram announcement channel
We look forward to having you as an integral part of the XFai journey, and to empower the small-cap token projects and holders with a fairer trading ground and increased earnings potential.
