Position protection, breaking through on-chain — has the new paradigm of BTC leveraged trading arrived?
On March 19, 2025, 137Labs and the f(x) protocol held an X Space event themed 'Position Protection + Low Fees to Create a New Era of BTC Leveraged Trading.' This event gathered several heavyweight guests from the DeFi leveraged field, including DeFi OG CM, core contributor of the f(x) protocol Tao, 137Labs researcher Ivan, and Oneone, who conducted in-depth discussions on the evolution of on-chain leveraged trading.
During the event, guests focused on the f(x) protocol's newly launched WBTC leveraged trading market, discussing how it reconstructs the on-chain leveraged experience through the product mechanisms of 'automatic position protection' and 'low-cost high certainty.' They not only shared their understanding of the current BTC market structure but also analyzed how the f(x) protocol aligns with CEX leveraged trading scenarios in a decentralized manner to meet the differentiated needs of long-term holding users from multiple angles, including user experience, security mechanisms, and revenue distribution.
What is the f(x) protocol?
Tao stated that the f(x) protocol is a protocol that simultaneously satisfies users' stable income and leverage needs. On one hand, through the stable pool, users who prefer stable income can receive stable mining rewards; on the other hand, it provides users who want to leverage with a simple operation similar to perpetual contracts, avoiding the complex looping process in traditional lending protocols. Additionally, the f(x) protocol has a unique resource allocation advantage, where the transaction fees generated by leveraged users will be directly allocated to stable pool users, forming an effective yield redistribution. In this v2 update, the f(x) protocol has expanded from only supporting the splitting of Ethereum to now supporting the splitting of Bitcoin, i.e., supporting Bitcoin leveraged trading, while the stable pool benefits from Bitcoin leveraged trading.
How does the f(x) product operate? How can users use the protocol for leveraged trading or to provide liquidity?
Tao pointed out that for users wishing to use leverage, the operations of the f(x) protocol are similar to those of traditional perpetual contract exchanges. Users can choose their leverage multiple (such as 5x), and the protocol will calculate the corresponding position size and clearly display the risk control 'rebalance line' to help users manage risk. If the market price touches this line, part of the position may undergo rebalance, similar to reducing positions and increasing margins, ensuring that the real-time leverage can recover to around 7 times, which corresponds to a loan-to-value of about 88%. Tao specifically mentioned that the f(x) protocol does not charge funding fees in most cases, only incurring funding fees in very rare situations when fxUSD shows signs of detachment, and these fees are calculated based on AAVE's standards, making them relatively low and infrequent, which is markedly different from the high funding fees seen in traditional perpetual contract markets during bull markets. As for the Earn side, Tao stated that users only need to deposit USDC into the protocol's stable pool and then choose to earn in the form of wstETH or the protocol token FXN, which is one of the highlights of this protocol update, enhancing the flexibility and diversity of users' earning strategies.
How is the market performance of the f(x) protocol currently in Q3? How are key metrics like TVL, user scale, and trading volume?
Tao stated that at the peak, the protocol's reserve pool held about 20,000 wstETH due to strong demand for bullish positions in the Ethereum market. Recently, due to the overall weakening momentum in the Ethereum market, the current asset scale in the reserve pool is around 9,000 wstETH. Additionally, the scale of the stable pool in the protocol is approximately $38 million, with about $11 million in fxUSD-USDC liquidity. This portion of funds can support the opening funds when the market reverses and bullish demand rebounds.
How does the f(x) protocol maintain low liquidation risk while providing high leverage?
Tao pointed out that the f(x) protocol does not adopt the traditional CDP model to ensure the protocol's security but instead breaks the collateral down into leveraged positions (xPosition) and stablecoins (fxUSD). This design allows the protocol's capital utilization rate to reach 100%, eliminating the issue of idle funds present in the CDP model. To manage liquidation risk while providing high leverage, he first defined what liquidation means in the f(x) protocol context: the situation where all of the user's leverage and positions completely liquidate to zero. To avoid this scenario, the protocol has designed a risk control system similar to 'autopilot.' Specifically, when a user's leveraged position is impacted by a drop in the price of the underlying asset (like ETH or BTC), the real-time leverage ratio will increase, and when the leverage ratio gradually approaches the risk line (loan-to-value reaching about 88%, corresponding to over 7x leverage), the keeper will automatically trigger a rebalancing operation. This operation specifically involves the keeper selling a small portion of the user's collateral assets (Collateral), and the funds obtained from selling these assets will be used to repay the user's initial fxUSD debt. After this operation, the user's leverage level will return to the protocol's predetermined safe value, stabilizing the position risk again. This 'autopilot' mode significantly reduces the probability of liquidation. Because during significant market fluctuations or rapid price declines, individual users often lack the energy, time, or efficient means to closely monitor and manage their positions. Through the f(x) protocol's rebalance system, the risk management process of the position can be completed automatically and efficiently, greatly reducing the likelihood of users being fully liquidated.
Ivan shared his actual experience using the f(x) protocol v2 version from a user's perspective. He stated that at the launch of v2, Ethereum was priced at about $3,000, and he opened a position with 3x leverage. When the price dropped about 24%, that is, when Ethereum fell to between $2,200 and $2,300, the protocol would automatically trigger the first rebalancing. After that, whenever the price continued to drop by about 2.5%, the system would trigger rebalancing again to protect the user's principal from being liquidated all at once. Ivan particularly emphasized that this mechanism is significantly different from centralized exchanges. In centralized exchanges, if a user opens a position with 3x leverage and the asset price drops more than 30%, if they do not add margin in time, their funds may be directly liquidated, resulting in total loss. Moreover, in cases of insufficient liquidity on centralized exchanges, prices often experience abnormal fluctuations or 'spikes,' further exacerbating the user's liquidation risk. The advantage of the f(x) protocol is that even if users cannot monitor the market in real-time or timely add margin, it will not lead to liquidation all at once. Ivan pointed out that he can choose to add margin based on market conditions either before the price triggers rebalancing or after it stabilizes, allowing for flexible position management. He believes this mechanism significantly improves the experience of ordinary users in leveraged trading, especially those who cannot continuously monitor the market but wish to avoid extreme risks. At the same time, Ivan reminded users to be cautious in choosing leverage multiples. Although the f(x) protocol allows up to 7x leverage, excessive leverage also means more frequent triggering of rebalancing, which could ultimately lead to quicker liquidation. Therefore, users need to allocate reasonably based on their risk tolerance.
CM added that the f(x) protocol's mechanism is particularly suited to the needs of on-chain DeFi users. Compared to contract users on centralized exchanges, on-chain users tend to hold long-term, low-leverage positions and want full control over their assets. The f(x) protocol meets these needs well. First, when on-chain users open positions and hold assets on centralized exchanges during a bull market, they usually have to pay high funding rates, increasing the cost of long-term holding. In contrast, through the f(x) protocol, users' holding costs are significantly reduced, as most of the time they do not have to pay funding rates. Secondly, CM emphasized that he usually only uses 2 to 3 times leverage. Taking 2 to 3 times leverage to hold Ethereum as an example, if he opens a position through the f(x) protocol now, the risk line for rebalancing is very low, as the Ethereum price would need to drop significantly to about $1,100 to $1,200 to trigger rebalance, thus ensuring very safe risk control, suitable for long-term holding. Additionally, CM mentioned that there are obvious differences between on-chain DeFi users and centralized exchange users. Centralized exchange users typically engage in short-term speculation with high leverage, whereas the f(x) protocol's mechanism is particularly suited for long-term stable on-chain holding users. Although the current user base is still relatively niche and requires some learning costs, with the gradual increase of on-chain users, the number of people using the f(x) protocol is expected to gradually expand.
What safety measures has the f(x) protocol taken regarding smart contract security, fund management, liquidation mechanisms, etc., which are of paramount concern to users?
Tao stated that AladdinDAO places great importance on the security of the protocol. The f(x) protocol is the third product incubated by AladdinDAO. The AladdinDAO ecosystem has completed 43 security audits to date, with the f(x) protocol itself having undergone 14 audits. Every time there is a major update to the protocol, a comprehensive security audit is conducted, and this update also completed a new round of audits before going live, with related reports publicly released. Furthermore, the auditing security agency not only reviews the smart contract code itself but also ensures the accuracy of the multi-signature TxHash. In addition, the f(x) protocol actively collaborates with several on-chain real-time security monitoring platforms to enhance the overall security of the protocol through real-time monitoring of smart contract statuses. Tao emphasized that the team has been deeply involved in security for over four years, consistently employing top industry security practices to ensure the safety of the protocol and user funds.
What does the launch of the WBTC market mean for Bitcoin leveraged trading users? How does it differ from the ETH leveraged trading market?
Tao pointed out that this update of the f(x) protocol means that users can now conduct leveraged trading on Bitcoin on-chain. This is particularly beneficial for users, as Bitcoin has outperformed Ethereum in this cycle, so the newly added WBTC market provides on-chain users with a better leveraged holding option based on Bitcoin. For example, users can buy WBTC with several times leverage and hold it long-term in their wallets, achieving on-chain DCA (Dollar-Cost Averaging) strategies. Moreover, the launch of WBTC also continues the advantageous characteristics of the f(x) protocol in the ETH market, including up to 7x leverage and lower liquidation risks.
Tao also emphasized the benefits of the WBTC market launch for earn-side users: The revenue generated from WBTC leveraged trading will also be distributed to earn-side users. This update further optimizes the earnings mechanism of the stable pool, allowing users to choose the type of earning asset (wstETH or FXN), avoiding the increased secondary processing burden on users due to an excessive variety of earning asset types. Additionally, this change is also to prepare for the upcoming fxSAVE product, which will enable automatic compounding of earnings and tokenization, i.e., automatic interest-generating assets, further simplifying users' asset management processes.
Additionally, Tao specifically mentioned that this update has significantly optimized the keeper mechanism. In the previous v2 version, when the market falls sharply, the keeper mechanism had to handle each qualified rebalancing requirement separately, which was inefficient and had limited incentives. When the market crashes quickly, the Gas fees on the Ethereum chain are often very high, and liquidation activities across various protocols occur simultaneously, making the number of keepers and their response speed particularly crucial.
The optimization of the keeper mechanism ensures that more independent keepers can participate in the protocol's rebalancing actions, while also increasing the capability of keepers to process positions in batches, thus enhancing their responsiveness and execution efficiency. Tao emphasized that these mechanism optimizations have been validated through multiple stress tests in the actual market environment, proving that this system operates stably and reliably in practice.
How does this market achieve zero funding fees, and how is it different from the funding rate mechanism of traditional perpetual contracts?
Tao stated that the f(x) protocol achieves zero funding fees by charging a fixed fee when opening and closing positions and reallocating other revenues within the protocol, thus not relying on funding rates to balance market supply and demand. This mechanism is distinctly different from the funding rate mechanism of traditional perpetual contracts, as the funding rates of perpetual contracts are uncertain and dynamically adjusted, especially during bull markets or severe price fluctuations, which can lead to a significant increase in users' long-term holding costs. In contrast, the f(x) protocol aims to provide on-chain users with higher certainty through this fixed fee adjustment mode, so users need not overly worry about the high or unpredictable funding costs associated with long-term holdings. Therefore, users using the f(x) protocol only need to focus on the opening and closing prices, without having to bear the uncertain risks of funding rates as in traditional perpetual contracts, making the protocol particularly suitable for users holding positions for the medium to long term.
How can existing veFXN holders benefit from the trading activities in the WBTC market? Why will the stable pool earnings automatically convert to wstETH? Is it possible to increase more optional assets in the future?
Tao pointed out that the users on the earn side of the f(x) protocol are divided into two types: one type seeks high certainty and liquidity of income and does not necessarily hold the protocol token FXN. These users tend to prefer earning in the form of wstETH because it offers higher income certainty and better liquidity. The other type of user sees long-term growth potential in FXN and prefers to receive all earnings in FXN to capture the long-term benefits of the protocol's future growth.
The reason the protocol defaults to automatically converting stable pool earnings into wstETH is to provide a clearer foundation for subsequent upper-layer product designs, such as the upcoming fxSAVE product, avoiding the issues of having to frequently sell FXN after the launch of new products, which would incur substantial gas fees and cause market price fluctuations. Therefore, this approach not only saves the overall costs for the protocol but also helps better control the market price of FXN.
In the future, the protocol may further provide more asset options to allow users to select yield assets more flexibly based on their needs.
CM added that the increase in the WBTC market has very positive significance for the overall development of the f(x) protocol. He pointed out that the expansion of asset types can effectively enhance user choice, especially for on-chain users. Currently, in addition to products like hyperliquid that provide experiences similar to centralized exchanges, there are not many mechanisms for long-term holding of leveraged tokens purely on-chain. The f(x) protocol fills this market gap well, capturing the potential needs of users and significantly promoting the protocol’s overall market expansion.
At the same time, CM also pointed out that product optimization should not be limited to mechanisms but should also focus on user experience and front-end packaging. He believes that the current user experience of the product being difficult to understand or operate is largely due to product packaging and front-end design issues. Presenting complex mechanisms in a simple and understandable way to users is a challenging task that requires continuous user education and product optimization. CM stated that the recent optimizations made to the stable pool user experience are a positive step toward improving user experience, and he looks forward to f(x) protocol making even greater progress in user experience and front-end design in the future.
Oneone pointed out that as a long-term holder of Ethereum, his most direct feeling after the f(x) protocol launched the WBTC market is that the profits generated from trading in the WBTC market can be converted into ETH earnings, which is a significant benefit for long-term holders of ETH.
He further stated that the introduction of the WBTC market and the increase in leverage multiples have made the protocol's product offerings more diverse.
At the same time, he believes that the current market's leveraged products can be divided into two types: off-chain and on-chain. For off-chain, centralized exchanges face many issues, such as the potential for exchange malfeasance; while the general issue with on-chain contracts is that they have not completely moved away from traditional margin models, and recent frequent vulnerability attacks have also occurred.
Therefore, Oneone emphasized that the f(x) protocol provides a more effective and safer on-chain solution. However, he also suggested that the protocol's front-end design could be made clearer, such as intuitively displaying the leverage multiples for ordinary users and clearly explaining the meaning of rebalancing (e.g., using part of the assets to supplement margin), making it easier for users to understand. This optimization will significantly enhance the experience of new users, especially those who are 'new to the chain.'
What changes have been made to optimize the user experience for stable pool users?
Tao pointed out that the main changes to optimize the stable pool user experience are reflected in the withdrawal process. Previously, the f(x) protocol set a 30-minute lock-up period for withdrawals to prevent arbitrageurs from quickly entering and exiting the stable pool using flash loans, thus extracting profits from other users.
However, Tao mentioned that while this locking mechanism effectively prevents arbitrage, some users prefer that funds can be withdrawn quickly without waiting for 30 minutes. To address this issue, this optimization specifically added a 'quick withdrawal' option: users can voluntarily give up the 30-minute lock-up period by paying a 1% fee to withdraw immediately. This 1% fee will be redistributed to other users in the stable pool.
This design effectively prevents arbitrageurs from obtaining unfair profits through rapid entry and exit, while also providing ordinary users with a more flexible and faster withdrawal experience. Furthermore, the rollout of this feature is also beneficial for better integration and cooperation between the f(x) protocol and other DeFi protocols, as previous lock-up period restrictions could cause inconveniences in some cases, particularly for combinations between protocols (such as looping).
How do you view the launch of the fx WBTC leveraged trading product? What kind of impact do you think it will have on the market?
Tao believes that the timing of the f(x) protocol launching the WBTC leveraged trading product is very appropriate. Although the current market heat is low, this is precisely the best time for users to learn and familiarize themselves with the product mechanism. He described the current state as 'waiting for the wind to come,' indicating that the infrastructure is ready, and when the market warms up, the f(x) protocol will become an important place for users to conduct BTC and ETH leveraged trading.
From a personal perspective, Tao emphasized that he has a long-term bullish outlook on Bitcoin and Ethereum. He believes that using moderate leverage of around 2-3 times provided by the f(x) protocol to hold positions when asset prices drop to key support levels is a more certain way to invest. Compared to high-risk MEME asset investments, low-leverage positions in BTC and ETH have a higher win rate, making them more suitable for long-term investors.
Additionally, Tao mentioned that the stable pool earnings of the f(x) protocol have exceeded 15% over the past 30 days, significantly higher than other stablecoin yields like Ethena's sUSDe yield. This reflects that f(x) community users remain actively bullish during market downturns, demonstrating a counter-market strategy, indicating that many users are using the f(x) protocol for smarter long-term dollar-cost averaging (DCA). The launch of the WBTC market further expands the user base of the f(x) protocol, meeting the demand for Bitcoin leveraged investments from more investors, and its positive impact on the market will gradually become apparent.
From the perspective of user experience, Ivan further added the significant importance of the f(x) protocol launching the WBTC leveraged trading product. He pointed out that while there are some smaller exchanges in the market offering products packaged as leveraged tokens (such as 3x BTC or 3x ETH), these products have obvious flaws. When users purchase leveraged tokens on traditional exchanges, due to the internal funding rates of the products and frequent net asset value rebalancing mechanisms, even if the asset price drops and then returns to the opening price, users cannot break even.
In contrast, Ivan stated that his long-term experience using the f(x) protocol (since v1) shows that the f(x) protocol does not have this issue. When the asset price drops and then rebounds back to the initial position, the user's position can completely break even, and as the price continues to rise, they can start to profit. This is because the f(x) protocol does not charge funding rates, and as long as a user's position does not trigger the protocol's rebalancing mechanism, the position will not be reduced. This mechanism ensures that users can hold on-chain leveraged positions in a more transparent and certain manner while avoiding the adverse effects brought about by the 'black box' mechanisms of traditional exchanges.
Therefore, Ivan believes that for users who want to use leveraged strategies but do not wish to place their assets on exchanges and seek a more certain investment approach, the f(x) protocol is an excellent choice.
What is the planned product update (fxSAVE): What is fxSAVE? What are its main functions and target user groups? What characteristics does it have? How will its launch affect the fx protocol ecosystem?
Tao introduced that fxSAVE is expected to be officially launched next week. Essentially, it is an automatic compounding interest-generating asset, similar to Ethena's sUSDe. This product is actually a tokenized upgrade version of the f(x) protocol stable pool.
Functionally, the main feature of fxSAVE is its ability to automatically compound users' earnings in the stable pool, allowing users to avoid frequent manual operations, greatly simplifying the investment process. For users, the launch of fxSAVE means more efficient use of funds, enabling more diverse on-chain combinations and play styles. Especially for on-chain DeFi users, fxSAVE can be more conveniently integrated into other protocols, such as Pendle, allowing direct splitting of earnings for secondary stacking and enhancing earning potential.
Specifically, users can participate in various DeFi scenarios through fxSAVE assets. For instance, when the market performs well and the number of xPosition openings continues to increase, the potential appreciation space of fxSAVE will also expand. Tao stated that the f(x) protocol has already collaborated with several other protocols and will gradually launch more integrated scenarios in the future, including lending and other services.
Thus, fxSAVE not only simplifies the user asset management process but, more importantly, enhances the combination and utilization efficiency of funds within the f(x) protocol ecosystem, which is beneficial for attracting more on-chain users to join the ecosystem and further expanding the overall influence of the protocol.
How do you view the current development trend of the DeFi leveraged market? Compared to CEX leveraged trading, where do you see the future of decentralized leveraged trading? What do you think about decentralized leveraged tokens (3XBTC)?
Tao stated that the f(x) protocol team is continuously discussing the potential of leveraged tokens internally, with the core goal being to lower the cognitive threshold for users and attract more users to participate. He mentioned that since the launch of v2, some users have provided feedback that they prefer the experience of x tokens in v1, so the team is also considering whether they can design a truly meaningful on-chain leveraged token.
From personal experience, Tao believes that the reason traditional centralized exchange 3x leveraged tokens (like 3x BTC or 3x ETH) are popular is because they are simple and intuitive, allowing users not to delve deeply into the complex concepts in perpetual contracts (such as opening price, closing price, funding rates, etc.). Therefore, he believes that if a decentralized leveraged token similar to TQQQ (triple long on the Nasdaq 100) could be launched to solve volatility decay issues and lower holding costs, this simple and clear product format might be more favored by on-chain users.
Additionally, he pointed out that the current f(x) protocol v2 mainly provides downward position protection, while the reduction of real-time leverage rates during price increases requires users to manage it themselves. If the team could implement an automatic mechanism in the future to keep leveraged tokens consistently within a specific leverage range, it could further reduce users' management costs and enhance user experience.
Tao added that the f(x) protocol team has previously discussed the implementation of decentralized leveraged tokens in depth. One possible scenario currently envisioned is that the protocol first establishes a large unified xPosition and tokenizes this position. Next, an automated mechanism will manage this position, ensuring that it maintains a stable three-times leverage level.
However, he also mentioned that there are two key challenges in achieving this solution: first, how to ensure that this tokenized position has sufficient liquidity on-chain to meet users' needs for trading at any time; second, how to effectively reduce users' holding costs. Currently, similar products on the market (such as leveraged products launched by Index Coop) have relatively high holding costs, and on-chain liquidity is limited, requiring users to interact through dedicated websites, making the experience more akin to traditional funds rather than as convenient as ETFs.
Tao stated that if in the future it can be made user-friendly like TQQQ, allowing users to easily hold or trade directly, it would be highly attractive.
CM added that the demand for leveraged tokens in the market is very certain, and on-chain users particularly value holding leveraged tokens long-term to amplify asset gains. However, existing leveraged tokens provided by centralized exchanges have obvious flaws, particularly the issue of 'volatility decay,' which inevitably leads to losses on long-term holdings, and there is currently no perfect solution to this problem.
The advantage of on-chain leveraged tokens is that they are more suitable for long-term holding needs, especially for users who have a long-term bullish outlook on Ethereum or Bitcoin but wish to magnify their returns with low risk. This demand indeed exists and is stable in the on-chain market.
Additionally, CM pointed out that another key aspect of on-chain leveraged tokens is whether they can be designed in a standard token format, allowing for richer combinations and interactions with other DeFi protocols, such as lending and synthetic scenarios. If this can be achieved, the application space for on-chain leveraged tokens will be greatly expanded, not limited to merely holding.
However, CM also pointed out that there may be technical difficulties in the current implementation, as the existing xPosition of the f(x) protocol is non-fungible, and each user's position is independent, which makes standardization challenging.
Therefore, CM emphasized that on-chain leveraged tokens need to enhance their competitiveness in the future by further leveraging the combinatorial characteristics of the DeFi ecosystem, conducting deeper integrations and interactions with other protocols, and creating more new yield models and use cases.
From the user's perspective, Ivan expressed his hope that the f(x) protocol can quickly launch the Base version, as there are more tokens on the Base chain that can serve as underlying assets, which will provide greater expansion opportunities for the f(x) protocol. He believes that if the f(x) protocol can establish more asset support and product modules on Base, it has the potential to develop into the next Pendle.
In addition, Ivan mentioned that he has observed projects like Alphaping starting to explore the use of xETH and xCVX for DeFi Lego combinations. This project seems to plan to develop composable products based on these assets. If the f(x) protocol can truly launch a fixed leverage v2 version in the future and create ERC-standardized leveraged tokens based on that version, it will greatly enhance the protocol's composability and strengthen its application scenarios within the DeFi ecosystem.
He believes that this directional exploration will not only attract more users into the f(x) protocol but will also increase the overall demand for xPosition, bringing greater growth opportunities to the protocol.
Oneone shared his perspective on the trend of decentralized leveraged tokenization from the historical development of DeFi. He recalled the early stages of the DeFi 2.0 era when the market was just beginning to explore the concept of LP tokenization. Now, leveraged tokenization is gradually becoming a new direction for development, and the variety of assets in the DeFi ecosystem is constantly increasing.
He believes that leveraged tokenization products can be combined with more DeFi protocols, such as Pendle and Ethena, which essentially utilize tokenization to provide more play and yield possibilities for assets. Additionally, as an arbitrage strategy practitioner, he pointed out that the leveraged tokenization model is very friendly to arbitrage users, providing more arbitrage space and making capital flow more active.
However, Oneone also expressed his concerns about whether leveraged tokenization will lead to a large influx of arbitrageurs, affecting the protocol's long-term stability. He posed a question to Tao: Will there be mechanisms in place to prevent massive arbitrage behavior from impacting the system? This question pertains to how the protocol balances the innovation of decentralized leveraged products with sustainability, avoiding market imbalance or excessive consumption of liquidity due to arbitrage activities.
Tao responded to Oneone's concerns about arbitrage activities and explained the f(x) protocol's strategies for preventing malicious arbitrage. He pointed out that the protocol has established a series of monitoring and control mechanisms internally to ensure that arbitrage activities do not excessively impact the system. For instance, the previously added 30-minute lock-up period for withdrawals from the stable pool was to prevent arbitrageurs from using flash loans to quickly enter and exit the stable pool, thereby eroding the profits of other users.
At the same time, Tao emphasized that not all arbitrage activities are negative; moderate arbitrage can actually help the healthy development of the protocol's ecosystem. Reasonable arbitrage activities can enhance the system's price stability and liquidity, making the market healthier. Thus, the protocol team will conduct real-time monitoring to differentiate between healthy and malicious arbitrage, taking appropriate measures against the latter.
He added that in the overall design of the f(x) protocol, there are many mechanisms in place to regulate arbitrage behavior, ensuring that liquidity optimization does not pose a threat to the long-term stability of the protocol.
Conclusion
During this X Space event, the guests delved into the product design and market positioning of the f(x) protocol, discussing the evolution direction and practical significance of decentralized leveraged trading. Whether it is the position protection advantage brought by the automatic rebalancing mechanism or the long-term holding strategy under zero funding rates, they reflect that on-chain leveraged trading is moving towards a new stage that is safer, more efficient, and more user-friendly. With the increasing heat of the Bitcoin market and the growing demand from on-chain users, the new leveraged model represented by the f(x) protocol may lead the next round of DeFi infrastructure upgrades. It is hoped that this discussion can provide new perspectives and assist in finding more robust and certain paths for participation in the complex market environment.
