f(x) Protocol is a DeFi protocol developed by AladdinDAO, focusing on improving Stablecoin and leveraged trading by separating assets into fxUSD (Stablecoin) and xPOSITION (leverage position).
The highlight of f(x) Protocol lies in the automatic rebalancing mechanism, 100% on-chain, independent of traditional assets, helping to optimize capital, maintain yield, and minimize liquidation risk.
MAIN CONTENT
f(x) Protocol separates assets into fxUSD and xPOSITION, balancing stability and leverage.
The f(x) Invariant and Auto Rebalancing mechanisms help reduce liquidation risk, maintaining a stable Peg.
Integrating multiple Yield sources (stETH, WBTC, Aave, Perps) to ensure sustainable yield.
What is f(x) Protocol?
f(x) Protocol is a decentralized financial (DeFi) protocol that combines Stablecoin and leveraged trading, developed by AladdinDAO.
This protocol separates assets into two parts: fxUSD (Stablecoin) and xPOSITION (leverage position).
Unlike other Stablecoin models, f(x) Protocol uses the f(x) Invariant mathematical mechanism to maintain stability and optimize capital.
Thus, the protocol facilitates leveraged trading for users while minimizing the risk of liquidation.
What is the mission of f(x) Protocol?
The mission of f(x) Protocol is to build a decentralized, sustainable, and secure Stablecoin ecosystem, while providing transparent and effective leverage solutions for investors.
By not relying on traditional assets (RWA) or centralized third parties, f(x) Protocol aims to create a self-operating, transparent capital market that is resistant to systemic risks.
"We believe that the future of DeFi requires models that ensure sustainable yield while minimizing risks for users. f(x) Protocol is a step in that direction."
CEO AladdinDAO, 2023
What is the difference of f(x) Protocol?
f(x) Protocol stands out with the mechanism of separating assets into fxUSD and xPOSITION, allowing users to hold stable Stablecoin while opening leveraged positions with low risk.
Leverage can reach up to 7x, while Auto Rebalancing helps limit liquidation. In addition, fxUSD is a completely decentralized Stablecoin, independent of RWA, providing high transparency and safety.
What are the main components of f(x) Protocol?
f(x) Protocol is composed of many components such as fxUSD, xPOSITION, f(x) Invariant, Stability Pool, fxSAVE, and Keeper.
fxUSD acts as a Stablecoin, while xPOSITION is the token representing the leveraged position. The Stability Pool and fxSAVE help maintain Peg and sustainable yield, while Keeper automatically performs rebalancing when necessary.
What is fxUSD?
fxUSD is a decentralized Stablecoin minted when users open xPOSITION, representing a portion of safe and stable capital.
Unlike many Stablecoins linked to RWA, fxUSD is entirely based on an on-chain mechanism, supported by f(x) Invariant and Stability Pool to maintain Peg with USD.
What is xPOSITION?
xPOSITION is a token representing the user's leverage position in f(x) Protocol. It allows access to ETH or BTC with leverage up to 7x.
The strength of xPOSITION lies in its automatic rebalancing mechanism, helping to avoid total liquidation, even when the collateral asset price fluctuates significantly.
"The mechanisms of xPOSITION and fxUSD help separate risks, providing maximum flexibility for DeFi users."
Delphi Digital Report, 2023
How does f(x) Invariant work?
f(x) Invariant is a mathematical formula that ensures the total value of fxUSD and xPOSITION always equals the total value of collateral assets.
This mechanism helps the system maintain internal balance, ensuring that the issued value always corresponds to the backing assets, thereby limiting systemic risk and imbalances.
What role does the Stability Pool play?
The Stability Pool maintains the Peg for fxUSD and provides Yield from various sources such as staking stETH, WBTC, and Perps transaction fees.
In addition to supporting the Peg, the Stability Pool also serves as a profit distribution point and protects the system from abnormal market fluctuations.
What is fxSAVE?
fxSAVE is Vault 4626 in f(x) Protocol, where it accumulates and automatically reinvests rewards from wstETH and WBTC to convert into fxUSD or USDC.
Thus, fxSAVE provides a form of Stablecoin with sustainable interest rates, suitable for users seeking safe passive income.
How does the rebalancing mechanism (Auto Rebalancing) work?
When the market is highly volatile, if leverage exceeds the safe threshold (LTV > 88%), the Keeper will activate the rebalancing mechanism by burning a portion of fxUSD to reduce debt.
Thus, xPOSITION is brought back to a safe state instead of being fully liquidated, allowing users to maintain long-term positions. This is a significant advantage over traditional leverage models.
"Auto Rebalancing is the differentiating factor, helping f(x) Protocol almost eliminate the risk of total position liquidation."
DefiLlama Research, 2023
How does f(x) Protocol maintain the Peg of fxUSD?
When fxUSD loses its Peg to USD, the Stability Pool will automatically swap fxUSD ↔ USDC to adjust the price. If USDC depegs, the protocol will temporarily suspend the Peg operation to protect users.
This approach helps maintain stability in all scenarios while minimizing dependence on a single liquidity source.
Where does the profit in f(x) Protocol come from?
Profits mainly come from the yield of collateral assets (stETH, WBTC), Perps transaction fees, rebalance fees, and reinvestment through fxSAVE.
Profits are distributed to the Stability Pool and Treasury, with 75% of Treasury profits going to veFXN holders, increasing the incentive to participate in the ecosystem.
Who is the development team of f(x) Protocol?
f(x) Protocol is developed by AladdinDAO – a decentralized organization founded in 2021, known for DeFi projects like Concentrator and Clever.
With experience in building DeFi infrastructure, AladdinDAO aims for f(x) Protocol to become a leading Stablecoin and leverage solution in the decentralized market.
"AladdinDAO always aims for transparent and secure financial models. f(x) Protocol is the logical combination of that vision."
AladdinDAO representative, 2022
Frequently Asked Questions
Does f(x) Protocol rely on traditional assets?
No. f(x) Protocol is completely decentralized and does not rely on RWA or centralized third parties.
How does fxUSD maintain stability?
fxUSD is supported by f(x) Invariant and Stability Pool, ensuring Peg with USD through swapping and self-adjustment mechanisms.
How much leverage can users achieve with xPOSITION?
Users can achieve leverage up to 7x with xPOSITION, with low liquidation risk thanks to Auto Rebalancing.
What benefits does fxSAVE provide?
fxSAVE helps automatically reinvest yield into fxUSD/USDC, generating sustainable yield for Stablecoin holders.
How is profit distributed in the ecosystem?
Most of the profits are allocated to the Stability Pool and veFXN holders (75% from Treasury).
Source: https://tintucbitcoin.com/fx-protocol-la-gi-giao-thuc-defi-do-aladdindao-phat-trien/
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