xGov Proposal 159 - Dynamic Interest Stability and Zap Vaults Impl

Hi guys, please feel free to discuss our xGov proposal here:

Author: Giles Campbell, Nimi

Advisors: Michael Cotton, AJ Milne

Discussions: Discord

Company Name: xBacked

Category: dApps

Focus Area: Depeg Mechanism, Dynamic Loan Rates, Zap Function

Open Source: No

Amount Requested: 175,000 ALGO

Status: Final


This proposal outlines the development of innovative features within the xBacked ecosystem on Algorand. We aim to introduce a new peg mechanism with dynamic loan rates, ensuring the stability of the pegged value. Additionally, we plan to build a zap function for vaults, enabling users to bring one side of the LP, allowing the protocol to mint xUSD for the other side. These vaults will operate on an auto-compounding mechanism, gradually paying off loans and enhancing the ecosystem’s resilience.

Project Components:

Dynamic Loan Rates for Peg Stability:

Design and Implement Dynamic Loan Rate Mechanism: Develop a robust mechanism that dynamically adjusts loan rates based on the peg’s stability. If xUSD depegs, falling below the desired $1 value the protocol interest rates will increase with the increase varying depending on the severity of the depeg.

Integration with xUSD Protocol: Integrate the dynamic loan rate mechanism seamlessly into the xUSD protocol.

Smart Contract Development: Develop and deploy smart contracts to enable the dynamic adjustment of loan rates.

Zap Function for Vaults:

Design and Development:

Create a user-friendly zap function allowing users to bring only one side of a whitelisted LP, triggering the protocol to mint xUSD for the other side with the LP becoming collateral for the xUSD issued.

Auto-Compounding Mechanism:

Implement an auto-compounding feature within vaults to ensure continuous rewards are compounded into an increased collateral position.

Security Audits and Testing:

Conduct thorough security audits and extensive testing to ensure the reliability and safety of the zap function and auto-compounding mechanism.


  • Nimi: Lead blockchain developer.
  • Giles Campbell: Support


  • Michael Cotton
  • AJ Milne

Experience with Algorand:

x-Backed spearheaded the development of a decentralised, permissionless stablecoin known as xUSD on Algorand. In contrast to conventional stablecoins backed by fiat currency, xUSD derives its value from a diverse range of digital assets, including goBTC, gALGO, mALGO, GOLD$, SILVER$, goETH, and ALGO and more. This unique approach not only provides users with a stablecoin solution but also enables them to hedge against market volatility. The xUSD stablecoin is easily minted on the x-Backed platform, allowing users to unlock capital at a low reliable interest rate. By deploying xUSD to partner platforms, users can earn yield, adding to the stablecoin’s appeal. xBacked places a strong emphasis on vault health monitoring, urging users to maintain healthy collateral ratios to avoid liquidation. This commitment underscores x-Backed’s dedication to fostering a secure and reliable decentralised finance (DeFi) environment on the Algorand blockchain.

Present Proposal:

This proposal seeks funding of 175,000 ALGO to implement new and exciting features within the xBacked ecosystem. We aim to introduce a dynamic loan rate mechanism to stabilise the peg and a zap function for vaults, providing users with a more efficient and user-friendly experience. The auto-compounding mechanism within the vaults will enhance the ecosystem’s sustainability by gradually paying off vault holder loans.

Benefits for the Community:

  • Peg Stability: Introduce a dynamic loan rate mechanism to maintain stability in the pegged value.
  • User-Friendly Vaults: Enhance user experience with a zap function for vaults, simplifying the process of minting xUSD.
  • Auto-Compounding Rewards: Vaults will operate on an auto-compounding mechanism, ensuring continuous rewards are reinvested, contributing to the long-term health of the ecosystem.

Additional Information:

Can you edit your post to include all the proposal info here? The idea of this forum is helping people who are not familiar with github to evaluate your proposal.


You received significant funding from VCs and your whitepaper includes things like the option of staking xUSD to be used for liquidations and people who stake earning a fee then which still havent been built. Where did all the money go? Why do you think xGovs should give you more ALGOs after we saw what you did with your initial funding and not delivering?

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Honestly I’d like to see more from you guys before another proposal request. You guys don’t market your tools and platform as is.

Why give more money to xbacked? I don’t see any value in your project or this proposal. Is this the same Micheal Cotton from Optio Capital you listed as an advisor?

A good deal of the infrastructure for this has already been built and the smart contract was also audited by Reach, but I believe we need the governance token to be able to deploy this and set it in motion, also an additional round of funding was intended to compete the roadmap as discussed with investors including the Algorand Foundation. This was unable to be done due to market conditions and lack of interest in the ecosystem from investors. As one of the only projects who has continued to build within Algorand against the odds and continue to deliver I don’t think your statement is a fair description.

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Yes it is the same Michael Cotton, Marketing is a waste of time in a bear market and we have addressed this with you previously regarding loosing our marketing lead,

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Right. So why give more money to a project that doesn’t have the tools to be successful.

Seems like you guys should reevaluate your business and plans before you ask for funds. A lot of eternal work needs to be done.

If you need to hire a marketing lead in the first place and that’s your excuse on why you can’t stay active then that’s another issue.

Your a DeFi platform not an NFT project in discord. Please have higher standards of business.

Micheal Cotton working with Algomint, Algorai and xbacked. Another :triangular_flag_on_post:

You know, dealing with the general toxicity and constant negative jibes from folk like you and Lobo make it harder and harder to keep working in this ecosystem. The constant negativity and short sightedness towards projects that still persist in an ecosystem that has been struggling from inception, compounded by the myalgo exploit is beyond comprehension. We have an opportunity to apply for x-gov funding to try and grow the project beyond it’s current state. If you don’t like it then don’t support it.


We are the shortsighted ones when you had the chance to launch way earlier and establish yourself on algorand but wanted to wait till the market got better and then just launched anyways and then didnt build the things you promised in the time you have been waiting for the better market?

I am here to see if you are a good project to invest the xGov funds in and instead of you responding why the money was not enough and why you might have done mistakes you are just responding with the same old lines “you are toxic”

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Also pretty sure Michael Cotton has nothing to with Algorai and he very active and one of the more knowledgeable and respected individuals in the ecosystem, so suggesting it’s a red flag having him as an advisor is just absurd. What exactly are you suggesting is a red flag?


I can not speak for lobo but this is a chance for us to poke holes in what you are doing. Which in turn should make you stronger, provide new ideas or be able to crush the fud.

Which getting frustrated shows only more of why this is not a good idea to invest in what you’re doing. If you can’t handle questions then you will not make it.

Me asking questions is trying to understand it better so I can have a better understanding on how I can or if I should support.

Playing the victim card for your business model is not a good idea. Good Luck

Having the same person advise and invest in projects. Optio Capital is Micheal’s Investment which is also not active account.

If all the projects need advisor help before the business takes off then that says the people in charge don’t actually know what to do. So a goal should be just take all algomint, Algorai, xbacked and just combine them into one to make one strong project.

All these projects have received grants and still don’t have a chance to compete with Folks, Tiny, Vestige, even Humble. Maybe even Pact.

There is a large uphill battle and at this point these funds would be wasted with a team that is already stretched thin and needs funding to build simple task. Asking for 20K as a DeFi platform is worrisome. Should already have that in the bank. Again your a defi platform not a NFT project. Higher standards

No you don’t need to poke holes in what everyone is doing, you should have the intelligence to ask informative questions instead of “red flag” or “you should reevaluate your business plans” or needing to hire a marketing lead is an excuse… None of this is productive and doesn’t even touch on the value or need for something like xUSD in an ecosystem its just the typical crypto fud and adds no value to the discussion. How many VC’s are currently investing in the ecosystem? How much support has Michael Cotton given to this ecosystem? Nobody is making money here (one reason why its such a ghost town) its a labour of love and as for playing the victim, I am just not putting up with this BS anymore. If you have serious questions and can manage to frame them in a productive way then we will answer them.


I wasn’t on the team at all back then, like many others in the ecosystem they left for greener pastures (can you blame them?) but here we are trying to get things moving again so we can try to build on what has been laid before us. We have been in this ecosystem longer than most, I personally have been here since day one (well before the dutch auction). I have seen all the unkept promises and failed projects too, been frustrated with the lack of uptake and failed AF initiatives. Yet we are still here trying to build and keep the faith that something will make it all worth while and here I am at 1.20am having to deal with Rich and Lobo again. Make an effort to be more productive and less aggressive, you obviously have a good head on your shoulders but if folk just see you as a constant antagonist they will just ignore you.


Yah I feel the people on the xBacked team have been trying to bring it back to life and I have been in the discord and which the project for a while now and I have seen the improvements I know you guys can do everything as quickly as people like it to get big I noticed so much negativity way of going about asking questions instead of trying to build up a really cool company on Algorand xUSD now have over $940,000 in TVL which would so is a nice accomplish just a few months ago it was way way less . So I woukd say let give this team a chance to build something and they have my vote :ballot_box: :blush:

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all i want is you actually responding to the comments. say that people were on xBacked and didnt built what they should have with the money they got but you are now trying hard to make it, to be different. Just saying “oh it wasnt me and at least we are still on algorand, pls gib money now” helps no one to decide if that proposal is worth the grant. reflect on the past of xBacked of what could have been doing better and why it wont be like that anymore

also i cant know who exactly you are since its just the xBacked account posting and in general i personally have no clue who is left of the original team and who is in what position exactly

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to answer your question, the infrastructure for staking was already built by the team and the contract for staking was also audited by Reach, but making a deployment of the staking infrastructure requires a platform token that has not yet been launched and we are hoping it will be launched soon depending on the market


Also @lobo you mentioned something about having the opportunity to launch earlier. We could not launch earlier because we needed box storage to be available on Algorand before we launched; before box storage we were using local storage to store each user’s vault details and local storage could always be cleared by a user which means that we could have untracked vaults and that was why we had to delay the launch until box storage was available.


Yah I remember that being something about box :package: Storage which was a technical thing that had to be work out and you guys was waiting for that to come to the L1 blockchain of Algorand .to be far xbacked is also the only stable coin project left on Algorand and I like the fact xbacked has more then one asset one can bring to mint xUSD one of my favorite thing about the project many of thing can be work out like I would like to see the website updated but I am patient and I know you guys get it done with the right amount of community support :slightly_smiling_face:

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Hey Rich,
How are you?
I don’t think the Red Flag is fair, I work with a number of projects including Tinyman & Folks who also all have advisors as well. I don’t think projects looking for help from different individuals they think can add value is a negative at all, almost every major successful business in the world has lent on advisors where needed. The formal stable version being a board which is still often complimented with additional advisors depending on the business size. Also most of the Algorand projects had far more advisors who have since moved out of the ecosystem, including several high profile funds / individuals the fact myself & a handful of others stayed to contribute & support the ecosystem shouldn’t be a red flag.
Marketing wise I do think most of the projects can do more, though there needs to be some sensibility in that most marketing efforts around Algorand DeFi currently are going to have a negative ROI which starts the debate of what spend v negative ROI is acceptable when it reduces runway.
My view would be that xBacked could do more on its socials organically with minimal cost which will be more about keeping the brand and product relevant and front of mind for Algorand users. I have spoken to several projects about this after our discussions on the forum a couple of weeks and they are all looking to implement this, I do think the ROI will still be a negative one but I think it is a minimum base case. But it might help explain but not excuse why it wasn’t a priority.
Optio isn’t very active on Twitter no, though I don’t think it is a fair representation of the work we do as you imply. For example in the last 6 months to name a few things we have helped fund, fully organise, manage and manned the Algorand stand at SXSW Sydney, helped man the Algorand Token2049 Stand in Singapore, promoted and represented Algorand on the 2032 Brisbane Olympics roundtable with the Australian government, I have been a speaker at more than a dozen events from universities to crypto & fintech conferences promoting Algorand and have been a guest on several podcasts and AMAs doing the same. At both the Token2049 & SXSW we helped coordinate a collaboration with Tinyman to have a simple QR scan onboarding to Pera where within seconds users could have a wallet loaded with a range of assets to get them started. We have focused our energies on these kinds of initiatives which we believe has been more valuable. But open to thoughts as to why Optio should prioritise Twitter.
On the xBacked topic I think a key question is do we want an over collateralised stable coin in the Algorand ecosystem? What do you think Algorand (overall) DeFi strategy should be, does an over collateralised stable coin fit in that? A part of this will be determined by the strategy Algorand Foundation have been talking about releasing for the last 18 months which I understand is close. Ideally it will give clarity as to what the B2B & B2C focus will be taking in to account the range of opportunities, cost & competitors so define where the focus should be. I do have my own thoughts here but I do think focus needs to be a priority.
In terms of poking holes & asking questions, I definitely think that is fine I would say what @xBacked was getting at is the way we communicate can have a significant impact on the results. In reality we are all still here because we want Algorand to succeed & we should be engaging with each in a way that is most likely to result in discussions & outcomes that have this shared goal in mind.
Ok I am rambling but always happy to chat.