Tezos-based Decentralized Finance (DeFi) platform Youves continues to expand its platform with new features. Since the platform launched in July 2021, Youves enables users to mint, burn, stake, save (with interest) and trade several tokens that can be used in other DeFi platforms within the Tezos DeFi ecosystem. Youves has now launched its Gold tracker token uXAU, which enables users to leverage Gold valued tokens in Tezos DeFi.
uXAU
uXAU is a synthetic token, which means that the value of gold is tracked by the token and the token itself is not backed by any actual gold. The value is backed by other collateral, in this case, Tezos-based Tether (USDt). USDT is tethered to the US dollar, the idea in theory being that you can trade 1 Tether for 1 US dollar, regardless of market conditions.
Minting uXAU can be done by depositing a collateral of USDt on the Youves platform. Since gold is a more stable asset (in USD value) than crypto-assets, the collateral ratio for minting uXAU is lower than most. It is currently set at a 115% target and the liquidation ratio is set at 110%.
You can retrieve your collateral by burning uXAU on Youves.
Minting and selling uXAU offers a viable option for those with a bearish outlook on the price of gold. By minting uXAU, users can effectively create a synthetic gold tracker and subsequently trade or sell uXAU for another token, thereby establishing a short position in gold. Bear in mind that subsequently, you establish a long position on the other token you buy with your uXAU. This way you can leverage both the value decrease of gold and the value increase of the token you bought.
For example: you mint uXAU worth 100 USD, with a collateral of 300 USDt. Now you buy for 100 USD worth of XTZ with your minted uXAU tokens. If the gold price decreases, the uXAU that you minted is now worth, for example, 90 USD. If the USD price of XTZ remains the same, you can now buy back the same amount of uXAU for less XTZ, which means you end up with extra XTZ.
If at the same time, the USD price of XTZ goes up, you will end up with more XTZ as a result. That way you have leveraged both the value decrease of gold and the value increase of XTZ.
It can obviously also go the other way, which in the worst case means that the gold price increases and the XTZ price drops. Then you’ll not be able to buy back the same amount of uXAU with the XTZ you bought with your minted uXAU. At the same time, you might need to increase your collateral in USDt, because the uXAU increases in value which changes your collateral ratio (and as a result you’ll now either have to spend extra XTZ to buy back the uXAU to be able to burn and collect your collateral, or spend extra USDt to increase your collateral to prevent liquidation).
Earn yield
uXAU can also be used to earn yield. By adding liquidity into the uXAU/uUSD Youves yield pool, you’ll earn the following rewards, proportional to your share of the pool:
Trading fees: 0.175% of all trades on this pair.
Interest: The interest rate payments from all uXAU engines.
Rewards accrue in real-time and can be claimed by withdrawing your liquidity.
Trading hours: The price trackers for gold are obtained from the actual gold market, which has limited trading hours. That means that during weekends and public holidays, there are no price feeds possible. For this reason, some activities are limited during those times.
“The Gold market (XAU/USD) operates within the conditions of “traditional finance” and mirrors the behavior of a foreign exchange market. As a result, obtaining price feeds for gold during weekends and public holidays becomes unattainable. This behavior poses a challenge for certain actions involving uXAU that rely on oracle price feeds for execution, as these actions are rendered impossible during non-forex trading hours. To clarify, the weekends or non-forex trading hours span from Friday to Sunday (start and ending time is not defined yet).“
Before using Youves, please first read their platform documentation, which can be found here.
