Introducing xINV — Capital efficient yield-bearing governance token

Disclaimer: This is a proposal to Inverse DAO and is still pending discussions and approval of INV on-chain governance. Nothing in this article is officially endorsed by Inverse DAO, yet.

Background

Yield-bearing xTokens have risen in popularity across DeFi protocols as a simple and efficient method of sharing token inflation and/or protocol revenue with loyal stakers.

However, the use of xTokens also created 2 problems:

• Capital inefficiency: xToken holders cannot access the underlying token or use it as collateral to borrow while it’s staked
• Governance inefficiency: xToken holders cannot use the underlying token to vote in on-chain governance

Solution

The proposed xINV solution is the same as any other xToken except for 2 fundamental features:

• Staking INV and minting xINV automatically generates a credit line on Anchor, allowing xINV holders to borrow other assets or mint DOLA on Anchor using their growing INV stake as collateral
• xINV holders can directly vote or delegate voting power in Inverse DAO using their growing governance share

From a technical perspective, xINV is an INV Anchor market with governance voting power. Users can supply INV for xINV and redeem xINV for an increasing amount of INV. Borrowing INV on Anchor would be disabled in order to guarantee 100% xINV to INV redeemability for all stakers.

To distribute INV rewards to xINV holders, the treasury can simply vote to send INV to the xINV contract address which will automatically distribute it across all xINV holders, growing both their Anchor borrowing power and their governance voting power.

The current Inverse governance contract will be upgraded to allow both INV and xINV holders to vote together on future proposals. In other words, staking in xINV to vote will be optional. Users can still use INV to vote directly if they wish.

Anchor & DOLA’s Growth

Aside from the benefits for INV holders, this proposal also helps boost Anchor TVL, borrowing demand and the minted DOLA supply.

Since all xINV stakers will also become INV suppliers on Anchor, any staked INV will be contributed to Anchor’s TVL. Because xINV stakers would be paid to borrow in this case, they would be incentivized to borrow other assets and mint DOLA or other future synths on Anchor while continuously repaying their loan from their xINV income.

Status

The proposed xINV and new governance contracts are in development. If Inverse DAO reaches a rough consensus in favor of this proposal, the ETA for mainnet deployment and governance vote would be 1–2 weeks from now.