XPower Banq

Appearance

Bonus and malus ​

Locked positions adjust your effective interest rate. Suppliers earn a bonus; borrowers pay a reduced rate (the "malus" — meaning a smaller magnitude of interest, not a penalty). Both come out of the protocol's spread.

The mechanism ​

The default protocol spread is s = 10%. This is the half-width applied symmetrically:

  • Borrow rate = base × (1 + s) = base × 1.10
  • Supply rate = base × (1 − s) = base × 0.90

When you lock, your effective spread shrinks by an amount proportional to your lock ratio λ:

  • Locked supplier effective rate ≈ base × (1 − s + s · λ)
  • Locked borrower effective rate ≈ base × (1 + s − s · λ)

At λ = 1 (fully locked), both sides converge toward base × 1.0 — the supply and borrow rates equal the base rate. The protocol earns nothing in spread.

What is λ exactly? ​

λ is the time-weighted lock ratio. It accounts for both how much of your balance is locked and how long the locks remain.

The protocol uses an O(1) algorithm to compute a normalised commitment depth in token-equivalent units — see Ring-buffer locks if you want the details. For the user-facing intuition:

  • A permanent lock of all your principal → λ = 1.
  • A 1-quarter timed lock of all your principal → λ ≈ 1/16 (since the maximum horizon is 16 quarters).
  • A 4-year timed lock of all your principal → λ ≈ 1.
  • A permanent lock of half your principal → λ ≈ 0.5.

The bonus scales linearly with λ.

Ceiling ​

The bonus is capped by governance parameters:

  • LOCK_BONUS — maximum supply bonus (default = s = 10%)
  • LOCK_MALUS — maximum borrow reduction (default = s = 10%)

Both are bounded above by the spread s per parameter. The protocol enforces this on-chain (the supervisor rejects any new LOCK_BONUS/LOCK_MALUS above SPREAD, and any new SPREAD below the existing bonus or malus) — it's not possible for governance to set a bonus larger than the spread itself.

As a corollary, the combined constraint LOCK_BONUS + LOCK_MALUS ≤ 2s holds whenever the per-parameter bounds hold. This isn't enforced as a separate require, but it's a theorem about the per-parameter constraints. The practical consequence: even at full lock and maximum bonus, the protocol's spread margin can compress to zero but never go negative — if everyone locks, the protocol simply earns no spread, it doesn't lose money.

Worked example: locked supplier ​

Suppose:

  • Pool utilization is 50%, base rate is 5%.
  • You supply 1,000 XPOW and lock it permanently.
  • Default parameters: s = 10%, LOCK_BONUS = 10%.

Your effective supply rate at λ = 1:

rate = 5% × (1 - 0.10 + 0.10 × 1) = 5% × 1.00 = 5.00%

Compared to an unlocked supplier in the same pool:

rate = 5% × (1 - 0.10) = 5% × 0.90 = 4.50%

You earn an extra 50 bps annualised by locking permanently. Over a year on 1,000 XPOW, that's 5 XPOW — which sounds small but is meaningful at scale, especially if you're locked anyway for cascade-protection reasons.

Worked example: locked borrower ​

Suppose:

  • Pool utilization is 95%, base rate is 50% (post-kink).
  • You borrow 1,000 XPOW and lock it for 4 years.
  • Default parameters: s = 10%, LOCK_MALUS = 10%.

Your effective borrow rate at λ ≈ 1:

rate = 50% × (1 + 0.10 - 0.10 × 1) = 50% × 1.00 = 50.00%

Compared to an unlocked borrower:

rate = 50% × 1.10 = 55.00%

You save 500 bps annualised. On 1,000 XPOW, that's 50 XPOW/year — substantial.

When the bonus matters most ​

The bonus is structurally most attractive at high utilization. From the Nash equilibrium analysis:

  • Below 90% utilization: lock breakeven period is several years. Locking is marginal.
  • 90–95% utilization: breakeven drops to ~3 years.
  • 95–98% utilization: breakeven drops to under a year.
  • Above 98%: breakeven drops to a few months.

This is by design: when the protocol most needs cascade protection (high utilization, stressed market), locking is most attractive. The mechanism is counter-cyclical.

What about the protocol margin? ​

At full lock adoption (everyone locked, λ = 1 for all users), the protocol earns zero spread on locked positions. This is solvent — the protocol doesn't lose money — but it earns nothing.

In practice, full adoption is unlikely. Realistic equilibria are 10–20% lock adoption in calm markets, 40–70% in stressed markets, with the protocol margin landing in the 8–18% range of base interest. See the theory paper for the analysis.

Where to go next ​

© 2026 Moorhead LLC