xPlanet Finance

xPlanet Logo

Inspiration

For about the past year we have been exploring the applications within the NFT scene and its meaning and effect on the DeFi ecosystem. Through our research we have deduced that xPlanet Finance will be a very promising project and road map which will take DeFi and Derivatives and combine them with NFTs. The success of Uniswap V3 which transferred LP tokens into LP NFT inspired us also.

What it does

xPlanet Finance is a decentralized yield trading protocol powered by NFT, which allows users to cash, discount and hedge the future yield from lending protocols.

How we built it

The MVP is the Mint Center and Marketplace for DeFi NFT focusing on creating and trading DeFi NFTs which are charged with aToken/cToken from AAVE Protocol and Compound Protocol respectively. Traditionally, one would deposit USDT in AAVE, in return, AAVE would provide aUSDT as the deposit certification. At this time, in order to get additional benefit from deposit, one would be able to take the aUSDT into xPlanet’s Mint Center and adopt time lock smart contract. The user would be able to choose the expiration date, and the aUSDT would be minted into two NFTs. One is yNFT, which is equal to the right to claim the interest before the expiration date, and the other one is pNFT, which means the principal deposited in AAVE.

Challenges we ran into

The challenge from product side is how to price the yNFT. At this time the DCF (Discounted Cash Flow) model can not be easily applied in these instances, mainly because the blockchain industry lacks an acknowledged risk free rate, as well as a predictable future deposit APY. The challenge comes from market side also. There are several projects dealing with yield trading using different solutions, like Alchemix, Element, Pendle and Sense Finance. And it will take time to teach users the strengths of using NFT+OTC market replacing FT+AMM.

Accomplishments that we're proud of

xPlanet Mint Center can transfer fungible tokens into NFT and realize asset-backed securitization through the process. The Marketplace can show the information and valuation of NFTs clearly. Accordingly, we have the ability to take NFTs as financial derivatives.

What we learned

We see the strength and weakness of using AMM or orderbook for yield trading in other projects like Element or Pendle. They separate yield from principal/ownership and use fungible tokens to represent the yield. This kind of model has obvious defects: 1.User-unfriendly There is a premise for these protocols that users need to have a united expiration date when they want to separate the principal/ownership and interest, and only through this can AMM provide liquidity or orderbook work. Users' customization is not supported. 2.Worse Impermanent Loss Impermanent loss happens in AMM and there is no perfect solutions right now. Especially, when the liquidity falls, the loss becomes worse. There is a big fall before the shutdown of AMM which causes worse impermanent loss. 3.Unsustainable Liquidity At the beginning and ending part of the AMM, there could be big problem about liquidity. The prices would fluctuate dramatically, and can be apparently deflect from yield's real value. Also, as the motivation of supplying liquidity decreases when close to the expiration date. So the protocol needs to set up new AMM for yield tokens with different expiration dates which splits the liquidity. _ So we designed new models for pricing and trading yield and decided to use NFT to make it custimizible and user-friendly. _

What's next for xPlanet Finance

We will launch xBroker smart contracts to provide fundmental liquidity for the Marketplace, incentive mechanism for trading, and also multi-chain products. xPlanet's vision will lead strategies into the next progression by transferring fungible tokens into NFTs and providing infinite financial instrument possibilities for asset management and financial derivatives.