By now, those in the MXC community may have already heard about the arrival of XSD - a first-of-its-kind stablecoin issued by the MXC Foundation. While pioneering innovation is inspiring, we also understand that it always requires sufficient information and explanation. Hence, in this article, we aim to provide a full description of XSD, its inherent design, utility, benefits, and ultimately the goal XSD accomplishes.
In short, XSD is a new type of stablecoin that is over-collateralized by real-world assets (RWAs) in order to remain a true peg to 1 USD worth of goods per XSD. If that sounds slightly complicated, then you may not be alone. The concept of on-chain RWAs is relatively new while understanding the meaning of “true peg” and “worth of goods” requires a good overall sense of economics. While this article further explains these foreign concepts, it is important that our community understands that the purpose of XSD is to create true neutrality in the market, while equipping them with a powerful, new type of stablecoin that can create a more stable DeFi and the larger Web3 economy.
Real World Assets (RWAs)
RWAs are not necessarily a new idea, but the execution of it is rather recent. RWAs - or Real World Assets - is the Web3 terminology to call any object that has inherent value within our physical world. Ranging from precious metals such as gold and silver to exclusive goods such as limited apparel and bottle of rare wine, RWAs cover a wide array of physical goods that are ready to be brought on-chain.
However, RWAs lack in one particular area - authenticity. Since blockchain smart contracts are irreversible in most cases, RWAs must pass a rigorous authenticity test before being authorized to create a digital equivalent on-chain. An RWA that exists on-chain as an exclusive good would not be in good standing if a little later it is shown that the RWA in the physical world is not genuine.
This is where MXC comes in. Using the MXC NFT tag, manufacturers and certified authenticators can prove that the good is genuine. This information is uploaded to the blockchain, and the existing miners can easily track the transfer of this good while continuing to ensure its authenticity in perpetuity.
The uploaded information on the blockchain is stored in the form of an NFT, making access and trading increasingly easier and more transparent.
True Peg and True Dollar
We have all witnessed the rise of stablecoins, and some of us have witnessed either a partial depeg of the stablecoins - in which one of the stablecoins did not equal one US dollar - or a complete collapse of the stablecoin. A stablecoin that cannot maintain a true peg to its backing asset cannot be categorized as a stablecoin.
This is why many stablecoins use the US dollar as the backing asset to provide a treasury. In theory, the Tether Foundation has nearly $84 billion US Dollars in a secure treasury that fully backs its nearly 84 billion USDT in circulation. However, “1 stablecoin = 1 US Dollar” is not a statement of true stability either, since the value of the US Dollar is decreasing due to inflation (with the exceptional cases of 2009 and 2015).
In response, some protocols use various crypto and DeFi assets to create a true stablecoin. Stablecoins such as DAI are backed by on-chain assets, while some newer stablecoins accept not only blue-chip crypto assets but also yield-generating staked assets (commonly called LSD, or Liquid Staking Derivatives). However, the integrity of such structures can fall vulnerable to exploits and hacks that often result in millions of dollars in losses.
This is why MXC’s XSD can be the pioneering stablecoin. By utilizing RWA and mining-consensus-driven certification of authenticity, XSD ensures that it can maintain a secure peg to the true dollar based on goods, rather than the inflationary US dollars. XSD keeps our community safe while focusing on creating stability that is dynamic enough to follow inflation and other macroeconomic conditions.
Even in some of the most perfect designs, a margin must be made to account for future volatility. This is why we at MXC have decided to make XSD overcollateralized by design, ensuring that each XSD is backed not by 1, but by 1.2 of goods, creating a minimum of 120% overcollateralization. This significantly improves the standing of XSD, allowing it to be a more reliable stablecoin for future operations of the users.
Utility in DeFi and Beyond
The primary purpose of introducing XSD is to provide a level of stability and safety for the MXC community and holders of the MXC token. We understand that our community is interested in protecting their principal capital in a bear market while still being exposed to the potential upside that may occur. With XSD, users can simply swap their MXC for XSD to make a temporary exit while staying within the vibrant MXC ecosystem. Alternatively, users can also use their MXC to purchase RWA-backed NFTs, which in turn they will be able to mint XSD.
However, there is an additional way for users to not let go of their MXC holdings yet still obtain XSD momentarily to ride through a bear market by utilizing DeFi (decentralized finance). Users can provide MXC tokens as collateral and take out a loan in XSD. Then, users can use the XSD to make trades, and ultimately pay back the XSD loan and interest in full to receive their MXC collateral in full.
MXC Foundation is currently working on a collaboration with other DeFi protocols and platforms to expand the acceptance of XSD. Soon, the MXC community will be able to completely absorb the opportunity costs and impermanent loss while taking full advantage of the MXC ecosystem through any market conditions.
Current Priorities and What is Next
At the moment, increasing the reliability and stability of XSD is of utmost importance. MXC Foundation is working with various retailers and independent parties to onboard various types of luxury goods with finite or fixed supply to the MXC zkEVM blockchain. This significantly increases the diversity of RWAs used to back the value of XSD, which in turn makes XSD more market-resilient.
Next, our community can expect a full-scale launch of the XSD platform, in which they will be able to receive or provide loans in MXC and XSD, empowering them to create a passive income opportunity purely through token utility. Meanwhile, additional collaboration with DeFi protocols and the launch of new, exciting products will serve the MXC community to fully utilize their MXC tokens and XSD stablecoin to their full potential.
We invite you to get involved in this exciting frontier with us. Start here to experience the first, controlled beta launch of the XSD money market platform: https://xsd.mxc.com