Read on to learn how does the xWALLET token work
As we just launched staking for the $WALLET token, a lot of you have been coming to us with questions about the xWALLET tokens. This article explains what it is and how it works.
What is the xWALLET token
In a nutshell, xWALLET represents the share you have in the $WALLET staking pool.
If you are familiar with automated market makers (AMMs) like Uniswap, Curve, etc., then you are probably familiar with LP tokens as well. Think of xWALLET as of an LP token of sorts.
Is xWALLET equal to WALLET in value?
The short answer is: no. This is why the amount of xWALLET tokens you have is different from the amount of $WALLET you staked.
At the very beginning, 1 xWALLET = 1 WALLET. However, as stakers accumulate rewards, the value of their xWALLET tokens increases. This happens because the amount of xWALLET tokens a staker holds remains the same but their value increases as they accumulate staking rewards.
Here’s an example: The staking pool is launched, and at the moment of the launch 1 xWALLET = 1 WALLET. Then the pool accrues 10% yield in the first year, so the ratio is now changed and 1 xWALLET = 1.1 WALLET (10% more).
Of course, this is just an example and the numbers in it are only given for illustrative purposes. The Ambire staking pool currently offers annual yield that is much higher — at the time of writing this, the APY is a little over 250%.
Here’s another example. Imagine there is an electronically traded fund (ETF) with 1,000 AAPL shares. Apple makes profit, and the ETF receives dividends in dollars. The ETF buys one more AAPL share with the dividends, so it now holds 1,001 shares. This means that 1 share in the ETF is worth not 1 AAPL but actually 1.001 AAPL.
In this example, xWALLET is the ETF, and the rewards received from staking are the additional share that is purchased with the dividends. In other words, you still have the same amount of xWALLET but the value of your xWALLET has increased.
What happens to xWALLET when I unstake?
If you decide to stop staking and request an unbond, there is a cool-off period of 20 days first. Once that period is over and you are ready to finalize the unbonding, your xWALLET tokens are automatically burned and the WALLET tokens are transferred to you.