Detailed Explanation of the Surge in Ethereum Gas Due to XEN Crypto: How to Participate, Can You Participate?

Written by: Misty Sea, PANews

In the early hours of October 9, Ethereum Gas suddenly surged, with Ethereum explorers showing 200 gwei. Tracing its source, it turns out that various social media and communities are continuously minting, spreading, and discussing the project XEN Crypto. Twelve hours later, the minting enthusiasm for XEN Crypto has not diminished. According to ultrasound data, as of now, the amount of ETH destroyed through XEN Crypto has reached 1,092, accounting for 45% of the total destruction on the network today. Currently, the number of addresses participating in XEN minting has reached 140,000.

Why did XEN Crypto explode overnight in the Chinese community? This article will outline the concept of XEN, its design mechanism, how rewards are obtained, and predictions for its future development.

Why launch XEN?

According to the introduction in XEN's white paper, the goal of XEN is to become a community-built cryptocurrency asset, realizing the original mission of blockchain: decentralization, transparency, censorship resistance, peer-to-peer value exchange, and ownership. XEN allows users to enter with the lowest threshold through its unique economic design.

The team's intention in designing XEN is to address the polarization of cryptocurrency assets, where well-known assets are continuously overbought and then sold off; lesser-known assets are long ignored by many investors, while being pre-mined and sold off by founding teams and whales. XEN aims to solve these two problems through fair issuance.

XEN is designed to empower individuals, with no pre-mined coins, no admin private keys, immutable contracts, no centralized exchanges, and 100% transparency on-chain.

Who launched XEN?

On August 13, 2022, Jack Levin posted on Twitter about the vision of the FairCrypto Foundation and XEN Crypto, developed by partners, with team members from computer science, communications, software and product development, marketing, and investment fields. The goal of the FairCrypto Foundation is to realize its vision through education, organization, and launching blockchain projects. Jack Levin is an open-source technology expert and claims to be Google’s 21st employee (1999-2005), but public records show that Google’s 21st employee was Marissa Mayer, who served as CEO of Yahoo. However, multiple sources indicate that Jack Levin was indeed an early employee at Google, though his LinkedIn does not show experience with XEN Crypto.

How is XEN generated?

XEN Crypto completed its audit through the security company CertiK on September 30 and submitted the audit report. XEN uses a PoP (Proof of Participation) mining mechanism, where participants in XEN mining own the XEN tokens they mine. As the number of participants increases, the mining difficulty increases, and the supply decreases. There is no need to lock or stake any assets to obtain XEN tokens; simply connect your wallet to mint. The various variables and calculation formulas affecting the minting quantity are as follows:

First, open the official minting address (https://xen.network/mainnet/mint) and connect your wallet (Ethereum chain), where you can see the current global rank and waiting period (Term, in days).

The global rank will continuously increase as more addresses participate in minting, while the waiting period indicates how many days you choose to wait before receiving XEN.

The limit on the waiting period (Term, in days) is set based on the total number of interactions in the participation protocol. Specifically, the initial maximum minting term is limited to 100 days until the number of participating addresses exceeds 5,000. As more participants join the protocol interactions, the waiting period will begin to increase logarithmically, with the specific formula as follows:

According to the formula, the maximum waiting period that the 5,001st address can choose is 287.5 days, while the 405,000th address can choose a maximum waiting period of about 370 days, and so on.

After clicking mint, the XEN smart contract will generate and provide you with your current minting rank (cRank). cRank is a natural number representing your relative position in the entire XEN ecosystem, indicating how many people have participated in minting before you.

The user's final reward (Ru) is calculated by multiplying the difference between the user's rank (cRank) and the global rank (Global Rank) by the waiting time (T) chosen at minting, along with the time-related reward amplifier (AMP) and early participant amplifier (EAA). The detailed formula is as follows:

Note: The reward amplifier (AMP) is a time-related constant that decreases daily after the genesis minting begins (when users mint and receive their rank, the AMP at that time is recorded on-chain). The early participant amplifier (EAA) provides an additional reward rate for the earliest participants in XEN, starting at 10% during the genesis minting, and decreasing by 0.1% every time the global rank (Global Rank) increases by 100,000.

The current formula can be simplified to: mining quantity = 3000 * log2(global rank - my rank) * waiting period (the current amplification factor AMP value is 3000, and the early participant amplification factor (EAA) is 9.9%).

The minting quantity at the moment of minting can be calculated. For example, if the current global rank is 122,517, your rank is 122,509, and the waiting period is 100 days, then the mining quantity at that moment would be 900,000 XEN. Subsequently, the number of rewards you receive will continue to increase as the number of minting participants increases, and the final reward composition is shown in the following diagram:

According to the design mechanism, XEN has no upper limit. However, because the output function is logarithmic, as more people join and participate in minting, the difficulty of producing more XEN will continuously increase. As indicated in the formula above, this difficulty refers to the waiting time. This means that each new participant will either receive less XEN or need to significantly extend the waiting time to obtain more XEN. In other words, the only way to mint and obtain more XEN in the future is to extend the waiting time for receiving XEN.

Multi-chain launch beyond Ethereum

According to Jack Levin, the founder of XEN Crypto and faircrypto.org, XEN will first launch on Ethereum and will be available on other networks a few days later, such as Polygon/MATIC, BSC, Avalanche, Optimism, ETHW, and more.

On BSC, it will be bXEN, and on PulseChain, it will be pXEN. Each chain will have different supplies and global rankings, and the XEN on each chain will not merge or be exchanged at a 1:1 ratio, as the Gas fees and security of each chain vary.

XEN will establish a unified liquidity pool (LP) and then set an exchange ratio to facilitate transactions across different bridges. For example, sending XEN between Polygon and Ethereum via SushiSwap's Stargate, users will enter the Polygon XEN pool and receive EthereumXEN on Ethereum according to the set LP ratio.

XEN claiming mechanism

According to the design of XEN's contract, after the waiting period ends, you should claim your XEN tokens within 24 hours; otherwise, your rewards will be penalized and gradually decrease. The gradual decrease is to prevent users who mint using multiple addresses from claiming all at once and selling off, causing a significant drop in XEN's price. The gradual decrease occurs daily, with the claimable amount reducing to zero after 7 days.

XEN staking mechanism

According to the design of XEN's contract, after the waiting period ends, users can choose to stake XEN, with a staking period of 1-1000 days. After the agreed staking period, users can terminate the staking of XEN at any time without penalty; however, if they terminate staking before the end of the staking period, the system will not pay rewards according to the agreed annualized yield rate.

Users can stake XEN for any number of days between 1-1000 and receive corresponding annualized yield rewards, starting from 20% at the genesis minting of XEN, decreasing by 1% every 90 days until reaching 2%, after which it will remain indefinitely at 2%. This means that the annualized yield for each participant staking XEN is determined at the time of staking, depending on how many days have passed since the genesis of XEN.

For example, if you stake 100,000 XEN within the first 90 days after the genesis of XEN, after 365 days you will be able to receive 120,000 XEN. The rewards are based on a non-compounding annualized yield rate. The specific calculation formula is as follows:

Through the above outline, user participation in the XEN system can be divided into the following three processes:

1. Participate in minting to obtain your rank (cRank)

2. Claim your XEN tokens after the term expires

3. Stake XEN to earn rewards or sell through exchanges like Uniswap

Predictions for XEN's future development

• Zero-sum game resembling a Ponzi scheme, duration of cycles unknown

Upon examining XEN's design mechanism, its minting process implicitly contains an incentive for everyone to invite others. This is because those who have already participated need more people to join in order to receive more rewards, leading to an incentive for existing participants to invite new addresses. According to the operational process of previous Ponzi scheme-like models in blockchain games, such models will eventually reach a critical point, and when no one enters, a collapse will occur.

One clever aspect of its design is that the penalties for the waiting period and claiming period distribute the selling pressure of XEN tokens. However, as the cycle changes and FOMO dissipates, when no one is left to take over, the arbitrage space will disappear, and even small selling pressure can trigger significant declines.

According to on-chain data created by Dune user @sixdegree, among the addresses currently participating in minting, 27.9% have waiting periods of 330-360 days, the highest proportion, followed by 20.7% with waiting periods of 1-30 days, showing a polarized state.

According to the Ponzi scheme model, a prolonged cycle dilutes the scale effect, making it difficult to trigger group FOMO. As Todd, a partner at Nothing Research, stated: XEN is a standard social experiment version 1.0, creating a token that anyone can take advantage of. One of the games: delayed gratification (over 300 days): the longer you wait, the more you get; immediate gratification (1-3 days): the shorter you wait, the less you get; a common flaw of social experiment version 1.0 is that it does not consider witch attacks. Users can have 1,000,000 accounts, claiming daily from 1 day to 300 days, making the experiment difficult to sustain.

Historically, in 2019, a project called Enumivo (Avocado ENU) appeared on the EOS chain, which allowed mining by consuming CPU and RAM resources through transfers. Initially, it triggered FOMO in the EOS community, but gradually disappeared after reaching a critical value.

• Short-term price of XEN tokens in the secondary market has speculative potential

As mentioned earlier, the minting of XEN tokens leads to an increase in the amount of ETH destroyed, providing an incentive for ETH whales to expand the scale of XEN minting. However, due to the existence of primary and secondary arbitrage, users should participate cautiously.

• Arbitrage mechanism will keep Gas high in the short term

According to XEN's minting design, users will try to mint when Gas is relatively low. The mutual game among users also keeps the current Gas around 25 gwei.

As time goes on, the difficulty increases, and the number of mintable XEN tokens decreases. Even extending the waiting period yields little effect. At this point, community members who have not participated are likely to buy in through the secondary market rather than choose to wait.

However, the price in the secondary market will be constrained by the current Gas, participation scale, and waiting time. When the price reaches a certain critical value that users are willing to mint, a large number of users will participate in arbitrage, minting to sell for profit. This also means that as long as the XEN system does not collapse, the price support for XEN tokens will be the current Gas, which may lead to a short-term equilibrium state for Gas on the Ethereum chain.

In the struggle between the clam and the snipe, the fisherman benefits; regardless of how XEN unfolds, ETH and other on-chain fuel tokens will ultimately be the winners.