lsWAX Exchange Rate

There has been some confusion about how the lsWAX exchange rate works. We hope this page can clarify things for you.

Let us start off by saying that when we say "Exchange Rate", what we are referring to is the "Backing" of lsWAX. That is, the amount of WAX in the protocol that is backing your lsWAX.

We are not referring to the price on decentralized exchanges, as we have 0 control over that. The open market will do what the open market wants to do. It is not something in our control.

We are talking solely about exchanging WAX to lsWAX, and vice versa, directly on WaxFusion.

Example Scenario

Minting

Let's use a hypothetical example here. When WaxFusion first launched, there were 0 WAX in the protocol. There were also 0 lsWAX in existence.

This means that if you wanted 1 lsWAX, you would've had to deposit 1 WAX (since 0 WAX was backing 0 lsWAX at this time, the exchange rate was 1 to 1).

So, you deposited 1 WAX and got 1 lsWAX. 1 WAX is now backing 1 lsWAX. The exchange rate would still be 1 to 1 at this time, which means that you could bring your 1 lsWAX back to WaxFusion, and exchange it for 1 WAX.

Rewards

Now, let's say that you hold the 1 lsWAX in your wallet for a week. The 1 WAX that you deposited into the protocol will be staked, and possibly also used for CPU rentals. Let's pretend that this 1 WAX that you deposited was able to generate 0.1 WAX in rewards.

If this happened, it would mean that 1.1 WAX is now backing lsWAX, but there is still only 1 lsWAX that exists.

This means that the new exchange rate (or backing) is now 1.1 WAX = 1 lsWAX. Your 1 lsWAX can now be redeemed for 1.1 WAX instead of just 1 WAX - because your initial 1 WAX is still there, plus the 0.1 WAX in rewards that it generated.

New User Mints lsWAX

At this time, we know that the exchange rate is 1.1 WAX for 1 lsWAX. This means that if a second user comes along and wants to mint 1 lsWAX, they need to deposit at the current exchange rate. This new user needs to deposit 1.1 WAX for every 1 lsWAX that they want to mint, because that is the current ratio.

Can The Exchange Rate Ever Go Down?

No! Keep in mind that once again, we are only talking about the WaxFusion exchange rate here (the backing of lsWAX).

This has absolutely nothing to do with the price on any decentralized exchange.

Since your WAX deposit stays in the protocol, and your lsWAX is constantly backed by the extra rewards that it earns, the exchange rate can only go up (1 lsWAX becomes worth more WAX over time).

The only way that the exchange rate could go down, is if your WAX deposit went "poof", and disappeared. The WAX that you deposited does not disappear into thin air. It remains there until it is redeemed.

Since our contracts are open source and under a multisig with the WAX team, multiple block producers, and the OIG, we could not touch your funds even if we wanted to. Code is law.