Five Minutes to Understand the Operation Model of Cross-Chain Exchange Aggregator XY Finance

Written by: Karen

In the context of the coexistence of multiple chains and the prosperity of DeFi, NFT, and GameFi, cross-chain exchange aggregators have become an indispensable key infrastructure in the entire cryptocurrency market, and the exploration of how to achieve more efficient and convenient cross-chain exchanges has never stopped.

XY Finance is a decentralized cross-chain exchange and liquidity provision aggregator targeting DeFi and the metaverse, aiming to provide users with efficient cross-chain exchange services at optimal prices. Recently, it completed a $12 million financing round, with investors including several influential venture capital firms, exchanges, and investors, such as Circle, Mechanism Capital, Animoca Brands, Yield Guild Games, Infinity Ventures Crypto, Lemniscap, AppWorks, AnySwap, QCP Capital, Morningstar Ventures, Looksrare.vc, PANONY, and others.

Additionally, individual investors such as Ben Chan, Vice President of Engineering at ChainlinkLabs, Kevin Tai, Co-founder of LinearFinance, Tom Schmidt, Investment Partner at Dragonfly Capital, and Tempo, CEO of Perpetual Protocol, have also invested.

XY Finance Operation Mode

The competitive advantage of XY Finance mainly comes from the combination of two components: X Swap and Y Pool, which is also the operating model of XY Finance. Among them, X Swap provides users with cross-chain transfer and exchange services, while Y Pool incentivizes users to provide liquidity. Liquidity providers can earn both exchange fees and governance token rewards. Currently, X Swap supports cross-chain exchanges on Ethereum, Binance Smart Chain, Polygon, and Fantom, and the newly launched Y Pool has opened liquidity provision services to users.

In simple terms, X Swap finds the optimal cross-chain and trading routes for users, supporting cross-chain exchanges between any assets. Users can exchange assets on a single chain or transfer or exchange across two chains. For example, to exchange UNI on Ethereum for BUSD on Binance Smart Chain, the cross-chain exchange process involves first exchanging UNI for bridgeable assets (such as USDC, USDT, etc.) on Ethereum, then using O3 Swap, AnySwap, and multichain.xyz to cross-chain to Binance Smart Chain, and finally exchanging for BUSD.

Although the operation process of X Swap seems complex, for users, they only need to initiate the transaction on the first chain, and the subsequent exchange and cross-chain processes are automatically executed by the protocol, significantly simplifying the user's trading operation process.

Currently, X Swap mainly utilizes liquidity from DEXs such as Uniswap, SushiSwap, and 1inch, while the newly launched Y Pool will allow users to provide liquidity directly on XY Finance, enabling users to earn exchange fees and XY token rewards.

The biggest advantage of Y Pool is that a single pool can manage the liquidity of the same asset across multiple chains. For example, the USDT Y Pool can accept USDT assets from ERC-20 USDT, BEP-20 USDT, Polygon USDT, and other chains, which are used to provide liquidity for X Swap. Additionally, to balance the liquidity in Y Pool, XY Finance has proposed a rebalancing incentive mechanism that will reward users who help rebalance assets across different chains with XY token rewards.

XY Finance Fees and Token Distribution Model

Regarding the fee model of XY Finance, in Y Pool, in addition to XY liquidity rewards, 80% of the exchange fees obtained from X Swap will be distributed to liquidity providers, while 20% will be allocated to the DAO treasury. Furthermore, 60% of the exchange fees allocated to the DAO treasury and the royalty income from the NFT project GalaXY Kats, which combines with GameFi, will be used to repurchase XY tokens from the secondary market and then burn 50% of them, which is significantly beneficial for the positive feedback mechanism of XY.

The native token of XY Finance, XY, will be provided on each chain supported by the protocol, with a total supply of 100 million tokens, of which 35% will be used for liquidity mining funds and GameFi rewards, 15% allocated to the team and advisors, 24% allocated to seed round, private placement, and strategic round investors, 6% for public sale, and 15% for marketing funds and bounties. XY Finance will conduct its IDO on the Copper platform on December 9.

XY Token Distribution Model

veXY is the governance voting token of XY Finance, which can be obtained by locking XY. It can be used to propose proposals, vote, change system parameters, and launch new Y Pools, among other functions. Additionally, a portion of the exchange fees will also be allocated to the XY DAO as a security fund.

Summary

Regarding the future development plans of XY Finance, the protocol also plans to support Cronos, Ronin, Avalanche, Arbitrum, and launch the NFT liquidity aggregator NFT Satellite before the end of this year, and support more networks such as Flow, Solana, and Polkadot in the first quarter of next year. More importantly, XY Finance will also support NFT markets and launch NFT wrappers and NFT sweepers "NFT Sweeper," and will later support limit order functions.

XY Finance Roadmap

Overall, XY Finance has built an efficient and user-friendly cross-chain exchange and single-coin liquidity provision model through X Swap and Y Pool, which not only meets users' exchange needs across multiple chains but also helps liquidity providers earn profits. Coupled with the repurchase and burn mechanism and the mutual empowerment of its NFT project GalaXY Kats, whether it can become a dark horse in the cross-chain exchange track remains to be seen.