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You don't upgrade anything when you buy an upgraded item from Xur, what happens is that he is going to take one exotic shard, 7500 glimmer and your item and will give you a brand new one with no perks unlocked, you are not upgrading your gun, you are turning in your gun for a new one, he takes your beloved gun and gives you another one with higher attack/light that is it.
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Xur's upgrades are for people who got the exotics before the DLC was released. It's NOT "pay to unlock perks/upgrades," you still have to put xp into to unlock its perks. The old exotics only have 300 atk/ 30 light max, the upgrades allow them to be upgraded to get a 331 atk/ 36 light max at the cost of a bunch of materials and resetting all its perks.