What is xVYFI?

VyFinance
2 min readFeb 21, 2023

xVYFI is the token that represents your proportional ownership at the VyFi BAR. It is priced in $VYFI using the following formula;

xVYFI_Price = (VYFI in BAR) / (xVYFI minted)

xVYFI can be minted by depositing $VYFI into the BAR. The xVYFI will be minted at the current ratio of $VYFI to xVYFI in the BAR. As an example:

There is currently 10,000 $VYFI in the BAR and 8,000 xVYFI minted. The current ratio $VYFI:xVYFI is 5:4. This equates to 1 xVYFI = 1.2 $VYFI.

If a user were to deposit 1000 $VYFI into the BAR, they would receive 1000/1.2 which is equal to 833.33 xVYFI.

Let’s say a serve operation of 1000 $VYFI is made to the BAR (Serve operations DO NOT mint xVYFI). The new total $VYFI held in the BAR is 12000 (the original 10,000 + users 1,000 + 1,000 served), but the total xVYFI remains 8,833.33. In this scenario the new xVYFI price will be 12,000 / 8,833.33 = 1.36 $VYFI.

If the same user burns his 833.33 xVYFI to receive back his deposit, he will now receive 833.33 x 1.36 = 1,132 $VYFI thereby making a profit of 132 $VYFI.

Implementation of xVYFI on the VyFinance DEx

We want to motivate trading of the xVYFI token on our DEx. To facilitate this, we are introducing an xVYFI/ADA farm, and an xVYFI/VYFI farm. This means traders will be able to purchase xVYFI directly from the exchange, rather than having to swap it at our BAR. In doing so, we will create an arbitrage market between xVYFI liquidity pools and the BAR itself.

A scenario where xVYFI could be arbitraged in this manner:

A trader makes a large purchase of xVYFI through the xVYFI/ADA liquidity pool and pushes the price of xVYFI to 1.5 $VYFI per xVYFI.

The current ratio at the BAR is 1.45 $VYFI per xVYFI. This allows a trader to deposit $VYFI at the BAR and earn xVYFI at a discount rate to the liquidity pool. This trader can then sell his xVYFI for $ADA at a profit of 1-(1.45/5)= 3.34%.

These numbers are simplified for the sake of example. As the value of $VYFI, $ADA and xVYFI are all shifting, more complex calculations will be required to make a consistent profit.

Through implementing these combinations of liquidity, we hope to bring new trading opportunities to the Cardano blockchain, allowing for compound farming with $VYFI and xVYFI, as well as the arbitrage opportunities that are created between these markets.

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