# Table of Contents - [Abstract | fx Docs](#abstract-fx-docs) - [Core Products of f(x) Protocol 2.0 | fx Docs](#core-products-of-f-x-protocol-2-0-fx-docs) - [Key Functions of f(x) 2.0 | fx Docs](#key-functions-of-f-x-2-0-fx-docs) - [The f(x) Invariant | fx Docs](#the-f-x-invariant-fx-docs) - [Advanced Peg Protection Mechanisms | fx Docs](#advanced-peg-protection-mechanisms-fx-docs) - [Risk framework | fx Docs](#risk-framework-fx-docs) - [Understanding the band system | fx Docs](#understanding-the-band-system-fx-docs) - [Understanding the redemption mechanism | fx Docs](#understanding-the-redemption-mechanism-fx-docs) - [Stability Pool | fx Docs](#stability-pool-fx-docs) - [Fees | fx Docs](#fees-fx-docs) - [Creating a Leveraged Position (xPOSITION) | fx Docs](#creating-a-leveraged-position-xposition-fx-docs) - [Liquidation process | fx Docs](#liquidation-process-fx-docs) - [Risk parameters | fx Docs](#risk-parameters-fx-docs) - [Developers | fx Docs](#developers-fx-docs) - [Rebalancing the Position (Liquidation Brake) | fx Docs](#rebalancing-the-position-liquidation-brake-fx-docs) - [Referral Program | fx Docs](#referral-program-fx-docs) - [How does f(x) Protocol minimize funding costs? | fx Docs](#how-does-f-x-protocol-minimize-funding-costs-fx-docs) - [How does f(x) Protocol minimize liquidations? | fx Docs](#how-does-f-x-protocol-minimize-liquidations-fx-docs) - [Is fxUSD an algorithmic stablecoin? | fx Docs](#is-fxusd-an-algorithmic-stablecoin-fx-docs) - [Audit Reports | fx Docs](#audit-reports-fx-docs) - [f(x) Protocol 1.0 | fx Docs](#f-x-protocol-1-0-fx-docs) - [What price drop would it require for my xPOSITION to be rebalanced/liquidated? | fx Docs](#what-price-drop-would-it-require-for-my-xposition-to-be-rebalanced-liquidated-fx-docs) - [What is the difference between f(x) Protocol V1 and V2? | fx Docs](#what-is-the-difference-between-f-x-protocol-v1-and-v2-fx-docs) - [Protocol Revenue & Distribution | fx Docs](#protocol-revenue-distribution-fx-docs) - [How to add/reduce a leverage position? | fx Docs](#how-to-add-reduce-a-leverage-position-fx-docs) - [Stability Mechanism | fx Docs](#stability-mechanism-fx-docs) - [USD high & sustainable yield | fx Docs](#usd-high-sustainable-yield-fx-docs) - [What could go wrong? | fx Docs](#what-could-go-wrong-fx-docs) - [How to stake into the stability pool? | fx Docs](#how-to-stake-into-the-stability-pool-fx-docs) - [Why are there different stablecoins? | fx Docs](#why-are-there-different-stablecoins-fx-docs) - [Token Breakdown | fx Docs](#token-breakdown-fx-docs) - [How to adjust your leverage / how to reduce your Liquidation Brake | fx Docs](#how-to-adjust-your-leverage-how-to-reduce-your-liquidation-brake-fx-docs) - [How to close a leverage position (xPOSITION) | fx Docs](#how-to-close-a-leverage-position-xposition-fx-docs) - [Leverage | fx Docs](#leverage-fx-docs) - [FX Auto-Compound | fx Docs](#fx-auto-compound-fx-docs) - [How to open a leverage position (xPOSITION) | fx Docs](#how-to-open-a-leverage-position-xposition-fx-docs) - [How to unstake from the stability pool? | fx Docs](#how-to-unstake-from-the-stability-pool-fx-docs) - [veFXN | fx Docs](#vefxn-fx-docs) - [Get involved - Community Booster Program | fx Docs](#get-involved-community-booster-program-fx-docs) - [How do f(x) Protocol stablecoins maintain stability? | fx Docs](#how-do-f-x-protocol-stablecoins-maintain-stability-fx-docs) - [Oracle | fx Docs](#oracle-fx-docs) - [Is there any LUNA-like risk? | fx Docs](#is-there-any-luna-like-risk-fx-docs) --- # Abstract | fx Docs Stablecoins and leverage trading are the backbone of the crypto industry. Surprisingly, most efficient approaches so far relied on a trust assumption that is the opposite of what DeFi stands for. This time is over; let's dive into f(x) Protocol's paradigm shift. [](#stablecoins) Stablecoins --------------------------------- Most stablecoins are either centralized, capital inefficient or have unreliable pegs. DeFi users, DAOs, and institutions need a scalable stablecoin that doesn't require trusting any entity. Moreover, they need it to provide sustainable and attractive yields. [](#leverage) Leverage --------------------------- By design, gaining leverage exposure can be dangerous. Liquidations melt the capital of the most adventurous traders, while funding rates erode it regardless. Regarding decentralization, most perps are built on centralized layers or rely on centralized execution elements, while the decentralized money markets offer very low leverage options. [](#the-genesis) The Genesis --------------------------------- March 2023, the most trusted stablecoin across DeFi, USDC, lost its peg toward $0,86 due to the collapse of a TradFi institution: the Silicon Valley Bank. Aladdin DAO attended, noted the above points, and, drawing on their experience as Concentrator and CLever, decided to change the paradigm of stablecoins and decentralized leverage forever. f(x) Protocol V1 was released on August 2023. By splitting any yield-bearing asset into a zero-volatility asset (stablecoin) and a high-volatility asset (leveraged token), it has already created the most capital-efficient decentralized stablecoin ever while offering a zero-liquidation solution for leverage traders. But the system could constantly be improved. 16 months and $70m TVL later, f(x) Protocol now unleashed it's V2 bringing: On the leverage side. * Up to 10x leverage on ETH * Very minimized liquidation risk thanks to the rebalancing mechanism * No funding cost under normal market conditions On the stable side, the first USD strategy: * Stays perfectly USD delta-neutral * Captures perp trading commissions * Earn enhanced stETH yield * Has no counterparty risks * Is 100% on-chain and doesn't rely on RWA TLDR: the most attractive, scalable & sustainable, decentralized, stable yield strategy. This documentation is here for you to get all the ins and outs of f(x) Protocol. You may finds all your questions answered. [Previousf(x) Protocol Documentation](/fx-docs) [NextCore Products of f(x) Protocol 2.0](/fx-docs/overview/core-products-of-f-x-protocol-2.0) Last updated 1 month ago --- # Core Products of f(x) Protocol 2.0 | fx Docs **xPOSITION (Leveraged Tool):** * Offers up to 10x leverage on ETH * Fully decentralized, collateralized and on-chain * Minimal liquidation risk * Zero funding fees under normal market conditions, maximizing user returns **fxUSD (Stablecoin):** * Fully decentralized and collateralized with a reliable and consistent peg * Minted and redeemed instantly in response to xPOSITION demand * Derives liquidity from collateral and generates sustainable on-chain yield [PreviousAbstract](/fx-docs/overview/abstract) [NextThe f(x) Invariant](/fx-docs/f-x-protocol-mechanisms/the-f-x-invariant) Last updated 12 days ago --- # Key Functions of f(x) 2.0 | fx Docs [PreviousThe f(x) Invariant](/fx-docs/f-x-protocol-mechanisms/the-f-x-invariant) [NextCreating a Leveraged Position (xPOSITION)](/fx-docs/f-x-protocol-mechanisms/creating-a-leveraged-position-xposition) Last updated 12 days ago **Opening and Closing xPOSITION - Minting fxUSD** * Users can open xPOSITION by providing stETH as collateral. fxUSD is minted as a byproduct of the xPOSITION opening using the [f(x) Invariant](/fx-docs/f-x-protocol-mechanisms/the-f-x-invariant) formula. * The system dynamically adjusts leverage ratios and fxUSD minting to maintain overall stability. **Rebalancing Operations** * Automatically adjusts leveraged positions to safe levels (see [Risk parameters](/fx-docs/risk-management/risk-parameters) ), significantly reducing liquidation risk. * This process is handled automatically by keepers. **Liquidation Mechanism** * If rebalancing fails, the protocol initiates liquidation by redeeming associated fxUSD to always protect fxUSD's integrity. * This process is handled automatically by keepers. **Stability Pool** * Offers yield opportunities for users while serving as a peg-keeper for fxUSD. * Maintains price stability through efficient arbitrage operations. ![](https://fxprotocol.gitbook.io/~gitbook/image?url=https%3A%2F%2F3804711989-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FYUipYKknBzY0ljM5ssnI%252Fuploads%252F8pmqY337m3iQUgVuaqsR%252F0.png%3Falt%3Dmedia&width=768&dpr=4&quality=100&sign=6bf07afe&sv=2) --- # The f(x) Invariant | fx Docs [PreviousCore Products of f(x) Protocol 2.0](/fx-docs/overview/core-products-of-f-x-protocol-2.0) [NextKey Functions of f(x) 2.0](/fx-docs/f-x-protocol-mechanisms/key-functions-of-f-x-2.0) Last updated 1 month ago The f(x) Invariant is the core mechanism behind both V1 and V2. It enables non-liquidatable leverage while delivering 100% capital efficiency for the stablecoins. f(x) Protocol ensures that the total value of all fxUSD combined with the total value of all xPOSITIONs is always equal to the total value of the collateral reserves. Dynamic adjustments to the leverage ratio of xPOSITION and the peg ratio of fxUSD enable seamless collaboration between low-volatility stablecoins and high-leverage trading tools. The relationship is represented as: Where: 𝑛 is the number of TOKEN collateral, 𝑠 is the TOKEN price in USD, ​nf is the number of fxUSD, 𝑓 is the fxUSD NAV in USD, nx is the number of xPOSITION units, and 𝑥 represents the NAV of xPOSITION in USD. This formula ensures that the system remains balanced, maintaining integrity and stability across its decentralized financial tools. ![](https://fxprotocol.gitbook.io/~gitbook/image?url=https%3A%2F%2Flh7-rt.googleusercontent.com%2Fdocsz%2FAD_4nXchdsHtOfLmBKidgm_bD95kHTUF0OBdfRALofMxDEajA5z6BSoHX42FOpRY4HQcw4wfneOcxrwd58b4ZgEujgCjc7HNuZREDkDMCSmZj2185By90016vCQ8T5zDSuLICDQb0rQI%3Fkey%3DqZd1xwlrsRmRqxNUnTlo-b4A&width=300&dpr=4&quality=100&sign=d0c69e32&sv=2) --- # Advanced Peg Protection Mechanisms | fx Docs Please learn below how the protocol ensures fxUSD's peg at all times. **Stability Pool acts as Peg-Keeper** The stability pool accepts both fxUSD and USDC. If fxUSd trades below $1.00, it will automatically buy it and sell it back to USDC if fxUSD trades above $1.00. ➡️ Ensures fxUSD stability through arbitrage operations in the fxUSD/USDC AMM pool. **Operational Restrictions During Depegging** If fxUSD is depegged, new xPOSITION openings are prohibited. This prevents excessive fxUSD minting and reduces selling pressure on fxUSD. ➡️ No more selling pressure on fxUSD if traded below peg. **xPOSITION Funding Fees** During a depeg event, funding fees are applied to xPOSITION holders. This funding is delivered to the Stability Pool, making it more attractive to USDc and fxUSD deposits, thus facilitating the peg restoration. ➡️ The Stability Pool gets a high real yield, facilitating the peg keeping. **Redemption of fxUSD** Users can always purchase fxUSD on the secondary market and redeem it for $1.00 worth of collateral, subject to applicable fees. ➡️ fxUSD has a hard peg by design, thanks to the redemption mechanism [PreviousRisk framework](/fx-docs/risk-management/risk-framework) [NextUnderstanding the redemption mechanism](/fx-docs/risk-management/advanced-peg-protection-mechanisms/understanding-the-redemption-mechanism) Last updated 1 month ago --- # Risk framework | fx Docs Aladdin DAO's absolute priority is to guarantee the integrity of all stakeholders' capital. Please find the risk framework applied to f(x) Protocol below. **Risk Management Framework** * Real-time monitoring of xPOSITION leverage and collateralization ratios, with automatic triggers for rebalancing or liquidation to ensure stability. **Real-Time Leverage Fluctuations** * Leverage ratios are dynamically adjusted in response to market volatility and user actions, maintaining balance across the system. **Rebalance and Liquidation Triggers** * Threshold-based mechanisms initiate rebalancing or liquidation to preserve system integrity and stability. **Reserve Fund and Bad Debt Redistribution** * Reserve funds bolster the system’s risk resistance. * In cases of under-collateralized debt, the shortfall is proportionally redistributed across active positions if reserves are insufficient. **Recapitalization** If the total collateralization ratio drops below 100%, the protocol halts new xPOSITION openings and deploys protocol assets to restore the fxUSD peg. [PreviousFees](/fx-docs/f-x-protocol-mechanisms/fees) [NextAdvanced Peg Protection Mechanisms](/fx-docs/risk-management/advanced-peg-protection-mechanisms) Last updated 1 month ago --- # Understanding the band system | fx Docs Rebalancing operations are handled when the underlying price reaches a certain threshold (see [Risk parameters](/fx-docs/risk-management/risk-parameters) ). To maximize the efficiency of these operations and ensure it is profitable for the keeper to execute them, all xPOSITIONs are grouped into the same price bands. Each price band width is 0.15%. If your rebalance price is $1710, when the price of ETH falls below that price, all xPOSITION who have a rebalance price between $1710 and $1712 will be rebalanced together. [](#example) Example ------------------------- Alice opens a 2x position when ETH trades at $3000. She will be rebalanced when ETH price falls 43.2%, which is $1704 (LTV=88%) Bob opens a 5x position when ETH trades at $1880. He will be rebalanced when ETH price falls 9.09% which is $1704 (LTV=88%) Both Alice and Bob put in the same band. Once ETH price falls below $1704, all positions in this band will be rebalanced and brought back below LTV=88%. [PreviousRebalancing the Position (Liquidation Brake)](/fx-docs/f-x-protocol-mechanisms/rebalancing-the-position-liquidation-brake) [NextLiquidation process](/fx-docs/f-x-protocol-mechanisms/rebalancing-the-position-liquidation-brake/liquidation-process) Last updated 23 days ago --- # Understanding the redemption mechanism | fx Docs Redemptions act as a last resort protection of $fxUSD's peg. They should only happen if the other [Advanced Peg Protection Mechanisms](/fx-docs/risk-management/advanced-peg-protection-mechanisms) fail. The redemption mechanism ensures that fxUSD can always be redeemed for $1 worth of fxUSD's collateral. The redeemed collateral is taken by reducing the debt xPOSITIONS, starting with the most leveraged one and not exceeding a certain proportion of each position before moving to the next leverage level. It gives an incentive to buy discounted fxUSD and redeem it for its collateral for a profit while restoring fxUSD's peg. The redemption can be triggered using the following [contract](https://etherscan.io/address/0x1a144095ad1cb488fe6378dbfc62368a7453d114#writeContract#F16) . Please note that a redemption fee is applied. Redemption fees and the maximum proportion of an xPOSITION to be redeemed can be found here. [🚨Risk parameters](/fx-docs/risk-management/risk-parameters) [PreviousAdvanced Peg Protection Mechanisms](/fx-docs/risk-management/advanced-peg-protection-mechanisms) [NextRisk parameters](/fx-docs/risk-management/risk-parameters) Last updated 23 days ago --- # Stability Pool | fx Docs Stability Pool is a cornerstone of the protocol, designed to maintain system stability and provide rewards for participants. **1\. Purpose and Rewards** Users can deposit fxUSD or USDC into the Stability Pool to earn token rewards and trading fees during normal market conditions. This incentivizes participation and strengthens the protocol’s resilience. **2\. Peg Stabilization** The Stability Pool ensures that fxUSD maintains its peg to USD through automatic swaps between fxUSD and USDC based on exchange conditions: * If fxUSD is undervalued: The pool swaps USDC for fxUSD to restore the peg. * If fxUSD is overvalued: The pool swaps fxUSD for USDC to stabilize its price. These adjustments are executed using Chainlink oracle prices to ensure accurate valuations, offering price stability while optimizing returns for users. **3\. Depeg Protection** In the rare event of a USDC depeg, the protocol halts peg maintenance and temporarily disables deposits to safeguard users and uphold system integrity. **4\. Rebalance and Liquidation Procedures** When necessary, the protocol redeems fxUSD from the Stability Pool. If the pool lacks sufficient fxUSD, the USDC obtained is used to repurchase fxUSD at a ratio not exceeding 1:1, thereby stabilizing the peg. **5\. Asynchronous or Synchronous Execution** Depending on market conditions, these operations can be carried out synchronously or asynchronously. This flexibility ensures sufficient liquidity while maintaining the fxUSD peg and supporting the overall stability of the system. Learn how to deposit into the Stability Pool and earn Stable yield 👇 [💰How to stake into the stability pool?](/fx-docs/guides/how-to-stake-into-the-stability-pool) [PreviousDevelopers](/fx-docs/f-x-protocol-mechanisms/rebalancing-the-position-liquidation-brake/developers) [NextFees](/fx-docs/f-x-protocol-mechanisms/fees) Last updated 29 days ago --- # Fees | fx Docs Please find all the fee settings below. Mind that they are all adjustable by governance. Fee Setting xPOSITION Opening fee 0.3% xPOSITION Closing fee 0.1% Funding Cost AAVE USDC borrowing rate charged only when fxUSD depegs (see [Advanced Peg Protection Mechanisms](/fx-docs/risk-management/advanced-peg-protection-mechanisms) ) Rebalance / Liquidation 10% of the bounty (see [Risk parameters](/fx-docs/risk-management/risk-parameters) ) Unused slippage f(x) offers the lowest trading commissions. To compensate for this, any unused slippage will be retained to incentivize stablecoin supply in the Stability Pool. You can set your own slippage. Collateral Yield & Funding harvesting bounty 1% Want to learn how these fees are redistributed? Take a look at the section below 👇 [🔥Protocol Revenue & Distribution](/fx-docs/earn-with-f-x/protocol-revenue-and-distribution) [PreviousStability Pool](/fx-docs/f-x-protocol-mechanisms/stability-pool) [NextRisk framework](/fx-docs/risk-management/risk-framework) Last updated 19 days ago --- # Creating a Leveraged Position (xPOSITION) | fx Docs xPOSITION is a non-fungible, high-beta leveraged long position that provides a powerful decentralized tool for on-chain high-leverage trading. When a user opens an xPOSITION, the process is seamlessly facilitated through the use of a flash loan. This is executed via an atomic transaction, ensuring that all steps are completed successfully or the entire transaction is reverted, preserving the integrity of both user funds and the protocol. #### [](#heres-how-the-process-works) Here’s how the process works: #### [](#id-1.-collateral-submission) 1\. Collateral Submission The user provides collateral (e.g., stETH), which is used to mint fxUSD, the protocol's stablecoin, and fund the leverage mechanism. #### [](#id-2.-flash-loan-for-collateral) 2\. Flash Loan for Collateral The protocol employs flash loans to obtain the required amount of collateral to back the leverage position. The flash loan and the position creation occur atomically, ensuring the entire transaction either execute completely or not at all, thus avoiding partial execution risks. #### [](#id-3.-minting-fxusd) 3\. Minting fxUSD For every unit of xPOSITION, the protocol mints the required amount of fxUSD to manage volatility and maintain full collateralization. For example, a 10x leveraged position will have 1 unit of xPOSITION backed by 9 units of fxUSD. Meanwhile, the underlying collateral remains in stETH, harnessing its yield while maintaining the desired leverage ratio. #### [](#id-4.-xposition-creation) 4\. xPOSITION Creation Once the collateral is secured through flash loans and the necessary fxUSD is minted, the leveraged position (xPOSITION) is activated. At this stage, the user gains exposure to the underlying assets, and their position is opened. [PreviousKey Functions of f(x) 2.0](/fx-docs/f-x-protocol-mechanisms/key-functions-of-f-x-2.0) [NextRebalancing the Position (Liquidation Brake)](/fx-docs/f-x-protocol-mechanisms/rebalancing-the-position-liquidation-brake) Last updated 12 days ago --- # Liquidation process | fx Docs If the rebalancing process fails, your xPOSITION could eventually reach the Liquidation line. If that happens, the rest of the position is entirely closed. It uses the same mechanism as described in the Rebalancing section, with two differences: * The entirety of the debt is burned * The liquidation process is handled on an individual position basis and does not use the band mechanism of the rebalancing process * The liquidation bounty isn't necessarily the same as for rebalancings Learn more about the rebalancing process here: [🪂Rebalancing the Position (Liquidation Brake)](/fx-docs/f-x-protocol-mechanisms/rebalancing-the-position-liquidation-brake) Learn more about the thresholds and bounty applied to the liquidation process here: [🚨Risk parameters](/fx-docs/risk-management/risk-parameters) [PreviousUnderstanding the band system](/fx-docs/f-x-protocol-mechanisms/rebalancing-the-position-liquidation-brake/understanding-the-band-system) [NextDevelopers](/fx-docs/f-x-protocol-mechanisms/rebalancing-the-position-liquidation-brake/developers) Last updated 23 days ago --- # Risk parameters | fx Docs Please find the risk parameters of the protocol below. Note that all of them are adjustable by governance. [](#global-risk-parameters) Global Risk Parameters ------------------------------------------------------- Parameter Value Rebalance Line LTV = 88% Rebalance Bounty 2,5% Liquidation Line LTV = 95% Liquidation Bounty 4% Stability Pool TVL threshold under which keepers can use their funds to rebalance $10,000 Leverage Range 1.1x - 7x Stablity Pool redemption Period 30 minutes [](#pegging-risk-parameters) Pegging Risk Parameters --------------------------------------------------------- Parameter Value Stability Pool peg arbitrage threshold 0.3% Redemption fee 0.5% Max redeemed fxUSD proportion of xPOSITION at a time, starting with the highest leverage 20% fxUSD Depeg threshold Curve fxUSD/USDC EMA price hits 0.998 USDC depeg threshold to disable USDC deposits into the Stability Pool USDC Oracle Price hits 0.995 or below [PreviousUnderstanding the redemption mechanism](/fx-docs/risk-management/advanced-peg-protection-mechanisms/understanding-the-redemption-mechanism) [NextOracle](/fx-docs/risk-management/oracle) Last updated 16 days ago --- # Developers | fx Docs The [rebalancing](/fx-docs/f-x-protocol-mechanisms/rebalancing-the-position-liquidation-brake) and [liquidation](/fx-docs/f-x-protocol-mechanisms/rebalancing-the-position-liquidation-brake/liquidation-process) operation offer discounted collateral opportunities to keepers. Rebalancing operations are more frequent than liquidations. They happen when leveragers reach 88% LTV to prevent them from being liquidated. Liquidation happens when/if they reach 95% LTV. The rebalancing process is done simultaneously for all leverage positions above 88% sitting in the same rebalancing price tick. A price tick is 0,15% wide. ### [](#parameter-wsteth-pool) Parameter wstETH Pool 0x6ecfa38fee8a5277b91efda204c235814f0122e8 ### [](#stability-pool-contract) Stability Pool contract If the stability pool capital is above $10k (very likely), you need to call the stability pool contract to rebalance or liquidate. * rebalance tick [https://etherscan.io/address/0x65C9A641afCEB9C0E6034e558A319488FA0FA3be#writeProxyContract#F9](https://etherscan.io/address/0x65C9A641afCEB9C0E6034e558A319488FA0FA3be#writeProxyContract#F9) * liquidate positionID [https://etherscan.io/address/0x65C9A641afCEB9C0E6034e558A319488FA0FA3be#writeProxyContract#F6](https://etherscan.io/address/0x65C9A641afCEB9C0E6034e558A319488FA0FA3be#writeProxyContract#F6) ### [](#poolmanager-contract) PoolManager contract If the stability pool has less than $10k TVL (unlikely, but it could happen in critical conditions), you must call the PoolManager contract. * rebalance tick [https://etherscan.io/address/0x250893CA4Ba5d05626C785e8da758026928FCD24#writeProxyContract#F8](https://etherscan.io/address/0x250893CA4Ba5d05626C785e8da758026928FCD24#writeProxyContract#F8) * liquidate positionID [https://etherscan.io/address/0x250893CA4Ba5d05626C785e8da758026928FCD24#writeProxyContract#F6](https://etherscan.io/address/0x250893CA4Ba5d05626C785e8da758026928FCD24#writeProxyContract#F6) If any questions, please join the [Aladdin DAO Discord](https://discord.gg/B8YKpXkU64) [PreviousLiquidation process](/fx-docs/f-x-protocol-mechanisms/rebalancing-the-position-liquidation-brake/liquidation-process) [NextStability Pool](/fx-docs/f-x-protocol-mechanisms/stability-pool) Last updated 9 days ago --- # Rebalancing the Position (Liquidation Brake) | fx Docs [](#the-rebalancing-mechanism) The rebalancing mechanism ------------------------------------------------------------- After a position is opened, the protocol employs an automated rebalancing mechanism to maintain stability and ensure the leverage ratio stays within predefined safe limits. Rebalance is an automatic operation triggered when the leverage of an xPOSITION reaches a predefined threshold. The protocol adjusts the leverage by redeeming a portion of fxUSD to bring it back to the rebalance line. During this operation: * fxUSD is first redeemed from the Stability Pool. * The underlying TOKEN is swapped for USDC to maintain system stability. **1\. Continuous Monitoring** External keepers continuously monitor market conditions and the leverage ratios of all open positions. If market fluctuations cause a position to drift outside safe leverage thresholds, the rebalancing mechanism is activated. **2\. Reducing Leverage via fxUSD Burning** If leverage exceeds the safe limits—such as when ETH prices drop—the protocol automatically burns a portion of the fxUSD associated with the xPOSITION. The stETH backing the burned fxUSD is sold for fxUSD or USDC and returned to the Stability Pool. This adjustment reduces the leverage ratio while maintaining the user’s exposure to the underlying asset, effectively avoiding liquidation. This automated rebalancing process eliminates the need for manual interventions and prevents forced liquidations, offering users a more secure and reliable way to manage positions in volatile markets. [](#example-of-a-rebalancing-operation) Example of a rebalancing operation ------------------------------------------------------------------------------- Alice opens a 5x position with 1ETH when ETH trades at $3000. She will be rebalanced when ETH price falls 9.09%, which is $2727 (LTV=88% - see [Risk parameters](/fx-docs/risk-management/risk-parameters) ). This is how her position looks at the opening. ETH Price xPosition size (USD) Position size (USD) Real time Leverage fxUSD debt LTV $3000 $3000 $15000 5.00 $12000 80.00% Lousy luck, ETH price collapsed by 10% and reached $2700: Alice's xPOSITION will be rebalanced. Before rebalancing, this is how her position now looks: ETH Price xPosition size (USD) Position size (USD) Real time Leverage fxUSD debt LTV $2700 $1500 $13500 9.00 $12000 88.89% The rebalancing process must burn enough fxUSD from her debt to bring her LTV back to 88%. The needed amount to burn can be calculated using the following formula. fxUSDtoBurn\=(Debt−PositionSize∗TargetLTV)/(1−TargetLTV)fxUSDtoBurn = ( Debt - PositionSize \* TargetLTV)/(1-TargetLTV)fxUSDtoBurn\=(Debt−PositionSize∗TargetLTV)/(1−TargetLTV) The redeeming bounty (see [Risk parameters](/fx-docs/risk-management/risk-parameters) ) is added to this amount. This is how the rebalancing process occurs: 1. $1000 worth of fxUSD are burnt from the stability pool and deducted from Alice’s debt 2. The corresponding amount of wsETH collateral + the keeper bounty is redeemed by the keeper. 3. The equivalent amount of fxUSD or USDC is returned to the Stability Pool. Alice'sAfter the rebalancing process, Alice's position looks like this: ETH Price xPosition size (USD) Position size (USD) Real time Leverage fxUSD debt LTV $2700 $1500 $12500 8.33 $11000 88% Her real-time leverage was stabilized to prevent her from liquidation. She kept market exposure. If the market recovers back to $3000: ETH Price xPosition size (USD) Position size (USD) Real time Leverage fxUSD debt LTV $3000 $2889 $13889 4.81 $11000 79.20% Read More: [🟦What price drop would it require for my xPOSITION to be rebalanced/liquidated?](/fx-docs/faq/what-price-drop-would-it-require-for-my-xposition-to-be-rebalanced-liquidated) [PreviousCreating a Leveraged Position (xPOSITION)](/fx-docs/f-x-protocol-mechanisms/creating-a-leveraged-position-xposition) [NextUnderstanding the band system](/fx-docs/f-x-protocol-mechanisms/rebalancing-the-position-liquidation-brake/understanding-the-band-system) Last updated 9 days ago --- # Referral Program | fx Docs [PreviousGet involved - Community Booster Program](/fx-docs/power-to-the-people/get-involved-community-booster-program) [NextIs fxUSD an algorithmic stablecoin?](/fx-docs/faq/is-fxusd-an-algorithmic-stablecoin) Last updated 23 days ago f(x) Protocol offers a very straightforward referral program that lets both referrer and referee earn extra yield. The mechanism is very simple: * Create a referral code using the [Referral center](https://fx.aladdin.club/account/) * Share your referral link or invite friends to use your code. To use your code, they can either follow your link or click on the "Earn extra APR" button on the Earn page to type your code. In both cases, they must sign the subscription using their wallet (no gas required). * Your friends earn an extra 0,5% APR on every stablecoin deposited into the **V2 Stability pool** or the **fxUSD/USDC Curve pool.** Convex deposits are eligible. * You earn 1% APR on all your friends deposits. You can claim the FXN rewards monthly by going to the referral center. ![](https://fxprotocol.gitbook.io/~gitbook/image?url=https%3A%2F%2F3804711989-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FYUipYKknBzY0ljM5ssnI%252Fuploads%252FgMw1z3hXbXTC5QVh47fZ%252Fimage.png%3Falt%3Dmedia%26token%3Dec30a91a-f51e-429d-9441-e058ddbe7653&width=300&dpr=4&quality=100&sign=3b2ea4cf&sv=2) --- # How does f(x) Protocol minimize funding costs? | fx Docs Most perp protocols rely on funding costs to balance long and short demand. f(x)’s unique design doesn’t rely on this, as the counterparty of every trade is a concentrated liquidity DEX pool with deep liquidity thanks to sustainable yields. A funding cost may only be applied to your xPOSITION when fxUSD is depegged. When fxUSD trades below the depeg threshold (see [Risk parameters](/fx-docs/risk-management/risk-parameters) ), the cost of borrowing USDC on Aave is charged to the xPOSITION and directed to the Stability Pool and/or the DEX pool until the peg is restored (see [Protocol Revenue & Distribution](/fx-docs/earn-with-f-x/protocol-revenue-and-distribution) ). Ideally, you don’t pay any funding. However, in the worst-case scenario, the Aave cost of borrowing USDC may be temporarily applied to your position. It's important to note that other peg-keeping mechanisms in place should prevent the worst-case scenario from happening regularly, providing a sense of reassurance. Learn more 👇 [✅Advanced Peg Protection Mechanisms](/fx-docs/risk-management/advanced-peg-protection-mechanisms) [PreviousHow does f(x) Protocol minimize liquidations?](/fx-docs/faq/how-does-f-x-protocol-minimize-liquidations) [NextWhat could go wrong?](/fx-docs/faq/what-could-go-wrong) Last updated 9 days ago --- # How does f(x) Protocol minimize liquidations? | fx Docs f(x) Protocol uses its rebalancing mechanism to minimize any risk of liquidation. This means scenarios where a sudden market drop that would normally liquidate your entire long position just before a rally are unlikely to occur. However, this doesn't eliminate the risk of losing money as leverage amplifies both potential gains and losses. xTokens (v1): In highly extreme scenarios, leveraged xTokens could potentially lose all of their value. However, the protocol's primary goal is to prevent this. Multiple [Stability Mechanism](/fx-docs/more/f-x-protocol-1.0/stability-mechanism) are in place to ensure this doesn't happen. xPOSITION (v2): If your position reaches a price level that would normally trigger liquidation on a regular perpetual exchange, it will instead be rebalanced to a different leverage level. While this operation incurs a small fee, it keeps you as much as possible exposed to the market, giving you a chance to recover. In extreme cases where the rebalancing operation fails, liquidation may occur to protect fxUSD's backing and peg. But there is a very small risk of this occurring. Learn more by following the link below. [🪂Rebalancing the Position (Liquidation Brake)](/fx-docs/f-x-protocol-mechanisms/rebalancing-the-position-liquidation-brake) [PreviousIs there any LUNA-like risk?](/fx-docs/faq/is-there-any-luna-like-risk) [NextHow does f(x) Protocol minimize funding costs?](/fx-docs/faq/how-does-f-x-protocol-minimize-funding-costs) Last updated 11 days ago --- # Is fxUSD an algorithmic stablecoin? | fx Docs Absolutely not. All stablecoins issued by f(x) Protocol, including its flagship fxUSD, are fully collateralized with top-tier DeFi assets. Specifically, fxUSD is backed solely by Lido's stETH. The f(x) invariant ensures unparalleled capital efficiency by maintaining the stablecoin's 100% collateralization, while the xPOSITION (v2) and leveraged tokens (v1) manage the protocol's over-collateralization. [PreviousReferral Program](/fx-docs/power-to-the-people/referral-program) [NextHow do f(x) Protocol stablecoins maintain stability?](/fx-docs/faq/how-do-f-x-protocol-stablecoins-maintain-stability) Last updated 1 month ago --- # Audit Reports | fx Docs As with every Aladdin DAO product, every line of code in production has been audited. Please find all the audits reports below. Audit Date Auditor All the Aladdin DAO audits [https://github.com/AladdinDAO/aladdin-v3-contracts/tree/main/audit-reports](https://github.com/AladdinDAO/aladdin-v3-contracts/tree/main/audit-reports) f(x) Protocol V1 June 14, 2023 Secbit [https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT\_f(x)\_Protocol\_Report\_v1.0\_20230614.pdf](https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT_f(x)_Protocol_Report_v1.0_20230614.pdf) Stability Pool July 25, 2023 Secbit [https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT\_f(x)\_Protocol\_RebalancePool\_Report\_v1.2\_20230725.pdf](https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT_f(x)_Protocol_RebalancePool_Report_v1.2_20230725.pdf) f(x) Protocol V1 Update september 17, 2023 Secbit [https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT\_f(x)\_Protocol\_Update\_Report\_v1.1\_20230917.pdf](https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT_f(x)_Protocol_Update_Report_v1.1_20230917.pdf) V1 Gauge mechanism November 29, 2023 Secbit [https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT\_f(x)\_Protocol\_New\_Features\_Report\_v1.1\_20231129.pdf](https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT_f(x)_Protocol_New_Features_Report_v1.1_20231129.pdf) Stability Pool Boost Mechanism December 13, 2023 Secbit [https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT\_f(x)\_Rebalance\_Pool\_Boost\_Report\_v1.0\_20231213.pdf](https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT_f(x)_Rebalance_Pool_Boost_Report_v1.0_20231213.pdf) veFXN boost delagation for stability pool farming January 18, 2024 Secbit [https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT\_f(x)\_Shareable\_RebalancePool\_Report\_20240118.pdf](https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT_f(x)_Shareable_RebalancePool_Report_20240118.pdf) V1 fxUSD February 23, 2024 Secbit [https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT\_f(x)\_FxUSD\_Report\_v1.0\_20240223.pdf](https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT_f(x)_FxUSD_Report_v1.0_20240223.pdf) f(x) Protocol overall audit April 16, 2024 Trail of Bits [https://github.com/trailofbits/publications/blob/master/reviews/2024-03-aladdinfxprotocol-securityreview.pdf](https://github.com/trailofbits/publications/blob/master/reviews/2024-03-aladdinfxprotocol-securityreview.pdf) btcUSD April 19, 2024 Secbit [https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/fx\_btcUSD\_Report\_v1.0\_2024\_04\_19.pdf](https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/fx_btcUSD_Report_v1.0_2024_04_19.pdf) New Oracle Design May 14, 2024 Secbit [https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT\_f(x)\_New\_Oracle\_Report\_v1.0\_20240514.pdf](https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT_f(x)_New_Oracle_Report_v1.0_20240514.pdf) arUSD June 18, 2024 Secbit [https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT\_Concentrator\_arUSD\_Report\_v1.0\_20240618.pdf](https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT_Concentrator_arUSD_Report_v1.0_20240618.pdf) New Oracle Design July 10, 2024 Trail of Bits [https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/TrailofBits\_fx\_oracle\_202406.pdf](https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/TrailofBits_fx_oracle_202406.pdf) aFXN July 26, 2024 Secbit [https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT\_Concentrator\_aFXN\_Report\_v1.0\_20240726.pdf](https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT_Concentrator_aFXN_Report_v1.0_20240726.pdf) f(x) Protocol V2 January 01, 2025 Secbit [https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT\_f(x)\_V2\_Report\_v1.2\_20250101.pdf](https://github.com/AladdinDAO/aladdin-v3-contracts/blob/main/audit-reports/SECBIT_f(x)_V2_Report_v1.2_20250101.pdf) [PreviousOracle](/fx-docs/risk-management/oracle) [NextUSD high & sustainable yield](/fx-docs/earn-with-f-x/usd-high-and-sustainable-yield) Last updated 1 month ago --- # f(x) Protocol 1.0 | fx Docs [Leverage](/fx-docs/more/f-x-protocol-1.0/leverage) [Earn](/fx-docs/more/f-x-protocol-1.0/earn) [Stability Mechanism](/fx-docs/more/f-x-protocol-1.0/stability-mechanism) [FX Auto-Compound](/fx-docs/more/f-x-protocol-1.0/fx-auto-compound) [Oracle](/fx-docs/more/f-x-protocol-1.0/oracle) [PreviousToken Breakdown](/fx-docs/more/token-breakdown) [NextLeverage](/fx-docs/more/f-x-protocol-1.0/leverage) --- # What price drop would it require for my xPOSITION to be rebalanced/liquidated? | fx Docs f(x) Protocol prevents leverage traders from being liquidated by rebalancing the positions before liquidation would be required. The LTV at which the protocol rebalances or liquidates the xPOSITION is set by governance (see [Risk parameters](/fx-docs/risk-management/risk-parameters) ). The price distance to reach the rebalancing LTV depends on the leverage level the user chooses. You can find some examples of price drops required to reach the rebalancing line or liquidation line according to the leverage of an xPOSITION below. The UI provides the exact price of rebalancing and liquidation line for your xPOSITION when opening it and can be consulted in your dashboard once the position is open. The table below is an example. Leverage Price drop to rebalance (LTV=88%) Price drop to liquidation (LTV=95%) 2 \-43.18% \-47.37% 3 \-24.24% \-29.82% 4 \-14.77% \-21.05% 5 \-9.09% \-15.79% 6 \-5.30% \-12.28% 7 \-2.60% \-9.77% Learn more about the rebalancing and liquidation process below. [🪂Rebalancing the Position (Liquidation Brake)](/fx-docs/f-x-protocol-mechanisms/rebalancing-the-position-liquidation-brake) [PreviousWhat is the difference between f(x) Protocol V1 and V2?](/fx-docs/faq/what-is-the-difference-between-f-x-protocol-v1-and-v2) [NextHow to open a leverage position (xPOSITION)](/fx-docs/guides/how-to-open-a-leverage-position-xposition) Last updated 1 month ago --- # What is the difference between f(x) Protocol V1 and V2? | fx Docs From a user perspective, v1 offers variable leverage tokens, providing up to 4.3x leverage on ETH and 5.6x on wBTC. Most leveraged tokens incur no funding costs. With its unique value proposition—leverage without liquidation or funding costs—and a scalable decentralized stablecoin, v1 serves as a robust solution. However, the unpredictability of variable leverage may not suit everyone's needs. This is where v2 steps in, introducing a groundbreaking feature: Fixed Leverage of up to 10x, fully on-chain, with minimal liquidation risk and funding costs. v2 also offers an exclusive feature through its stability pool, which delivers exceptionally high and sustainable yields derived from PERP trading commissions. These yields are achieved without exposing stakers to market volatility. The pool is USD delta-neutral and avoids counterparty risk, unlike other perpetual exchange protocols. v1 still remains an excellent option, offering a unique use case by splitting any yield-bearing asset into two tokens: a stablecoin and a leveraged xToken. The stablecoins can harness enhanced yield without market exposure, while xTokens enjoy enhanced market exposure without yield. [PreviousWhy are there different stablecoins?](/fx-docs/faq/why-are-there-different-stablecoins) [NextWhat price drop would it require for my xPOSITION to be rebalanced/liquidated?](/fx-docs/faq/what-price-drop-would-it-require-for-my-xposition-to-be-rebalanced-liquidated) Last updated 9 days ago --- # Protocol Revenue & Distribution | fx Docs The f(x) Protocol generates revenue through multiple mechanisms designed to sustain the system while rewarding participants and long-term supporters. **1\. Revenue Sources** * Collateral Yields: Earnings derived from the collateral (e.g., stETH) backing the protocol. * Opening and Closing Fees: Fees collected when users open or close xPOSITIONs, contributing to the protocol's revenue stream. **2\. Revenue Distribution** All fees and collateral yields are redistributed between the Stability Pool and the f(x) Treasury, with the allocation determined by governance. * Stability Pool: A portion of the revenue supports the Stability Pool, reinforcing system stability and rewarding participants. * f(x) Treasury: The remaining revenue is allocated to the Treasury, where a proportion of it is distributed to veFXN holders. This mechanism provides long-term supporters with substantial financial benefits, fostering a robust and engaged community around the protocol. [](#fees-distribution-parameters) Fees Distribution Parameters ------------------------------------------------------------------- Fee Distribution Collateral Yields 100% to the Stability Pool xPOSITION opening/closing fees 70% to the Stability Pool / 30% Protocol Revenue Rebalance / Liquidation: 10% of the bounty 70% to the Stability Pool / 30% Protocol Revenue Funding costs 100% to the Stability Pool Unused Slippage 70% to the Stability Pool / 30% to the Rebate Reserve \*The rebate reserve is built to offer a fee rebate in the future 👀 Looking at the fee settings? 👉 [Fees](/fx-docs/f-x-protocol-mechanisms/fees) [](#protocol-revenue-distribution-parameters) Protocol Revenue Distribution Parameters ------------------------------------------------------------------------------------------- All fees captured by the Treasury are distributed in this way. veFXN 75% Treasury Multisig 12,5% Reserve / Insurance Fund 12,5% The Treasury Multisig allocation helps to sustain the protocol by funding further developments [PreviousFXN Farming and veFXN Boost](/fx-docs/earn-with-f-x/usdfxn-tokenomics/fxn-farming-and-vefxn-boost) [NextGet involved - Community Booster Program](/fx-docs/power-to-the-people/get-involved-community-booster-program) Last updated 9 days ago --- # How to add/reduce a leverage position? | fx Docs [PreviousHow to adjust your leverage / how to reduce your Liquidation Brake](/fx-docs/guides/how-to-adjust-your-leverage-how-to-reduce-your-liquidation-brake) [NextHow to stake into the stability pool?](/fx-docs/guides/how-to-stake-into-the-stability-pool) Last updated 23 days ago Adding up or reducing an xPOSITION is as easy as creating or closing one. You can create as many xPOSITION as you want; they will all be aggregated into a single global one. For example, suppose you create a first xPOSITION with a 2x leverage worth $10,000 and a second xPOSITION with a 4x leverage worth $10,000. In that case, you will end up with a $20,000 xPOSITION with a 3x leverage (assuming you opened them simultaneously with the same execution price). Now, let’s see how to do that practically. ### [](#how-to-add-to-a-leverage-position) How to add to a leverage position * Head over to the [Trade](https://fx.aladdin.club/v2/trade) page. * If not already, hit the “Buy / Open” tab. * Connect your wallet using the upper right “Connect Wallet” button. * Set the requested leverage using the slider bar and wait for the preview to load. * Hit the Preview button to review your trade. * Review your trade and the evolution of your xPOSITION, then click the “Submit Transaction” button when ready. * Confirm the transaction using your wallet. ### [](#how-to-reduce-a-leverage-position) How to reduce a leverage position * Head over to the [Trade](https://fx.aladdin.club/v2/trade) page. * Connect your wallet using the upper right “Connect Wallet” button. * Click on the “Sell / Close” tab of the order box. * Slide the bar to the desired amount / Type the amount or the percentage in the text box you would like to close. * Hit the Preview button to review your trade. * Review your trade and the evolution of your xPOSITION, then click the “Submit Transaction” button when ready. * Confirm the transaction using your wallet. Input the amount you would like to leverage. The default asset is USDC; you can pledge other assets by clicking the down arrow. ![](https://fxprotocol.gitbook.io/~gitbook/image?url=https%3A%2F%2Flh7-rt.googleusercontent.com%2Fdocsz%2FAD_4nXcBj1aKjTd-0vKRw_o2XjN1e1tA7TZcc2pmEltj0TqVVFvowotyuNk7jrOixaOay1vG07fukskGcQAfbKOGjN6OKzuBSzK1IFOIS3Vp8Q68NmGDEA7VGrAf8WgjqKk_9I7JPOa_NA%3Fkey%3DGA1o45aLKYw_edI6IcXZgMv2&width=300&dpr=4&quality=100&sign=9b01fde5&sv=2) --- # Stability Mechanism | fx Docs Earn Pools also play a critical role in maintaining stability: * If the stable-leverage pair becomes unstable due to excessive minting of stables or insufficient xTokens, stables in the Earn Pool are redeemed for reserve assets at their Net Asset Value (NAV). * In stability mode, this operates like automatically buying ETH (or the reserve asset) at market price without slippage. * Otherwise, it enables farming of real, unstable yields using stablecoins. [PreviousEarn](/fx-docs/more/f-x-protocol-1.0/earn) [NextFX Auto-Compound](/fx-docs/more/f-x-protocol-1.0/fx-auto-compound) Last updated 1 month ago --- # USD high & sustainable yield | fx Docs [PreviousAudit Reports](/fx-docs/risk-management/audit-reports) [Next$FXN Tokenomics](/fx-docs/earn-with-f-x/usdfxn-tokenomics) Last updated 1 month ago f(x) Protocol V2 delivers a unique USD yield value proposition with its Stability Pool. It offers the best risk rewards strategy by being collateralized with Tier 1 DeFi assets and collecting high and sustainable yield sources. Learn more here 👇 The "Earn" section of the protocol also offers different stable strategies, such as the Curve fxUSD/USDC pool or V1 stability pool. Learn more about V1 stability pools here. [💰Stability Pool](/fx-docs/f-x-protocol-mechanisms/stability-pool) [Stability Mechanism](/fx-docs/more/f-x-protocol-1.0/stability-mechanism) 💲 --- # What could go wrong? | fx Docs xTokens (v1): In the worst-case scenario, all xTokens could potentially lose their value. Before this happens however, the stability mechanism is designed to trigger and rebalance them. However, if the mechanism becomes exhausted, xTokens could drop to zero. In such extreme cases, the protocol's total collateralization ratio remains at 100% and the stablecoin is always backed and pegged to the dollar. If the market continues to decline, the stablecoin may temporarily de-peg, with a strong likelihood of recovery if the underlying market (e.g., ETH) rebounds. For more details about the stability mechanism, please refer to the V1 [Stability Mechanism](/fx-docs/more/f-x-protocol-1.0/stability-mechanism) . xPOSITION (v2): Rebalancing and liquidation thresholds are carefully calibrated to prevent such scenarios. In an unlikely worst-case scenario where both rebalancing and liquidation mechanisms fail, the protocol may incur a bad debt. To safeguard users from this, f(x) Protocol allocates a significant portion of its revenue to a reserve fund specifically for such extreme cases. If the reserve fund is insufficient, the bad debt would be distributed among all xPOSITIONs. Learn more: [🧘‍♂️Risk framework](/fx-docs/risk-management/risk-framework) [✅Advanced Peg Protection Mechanisms](/fx-docs/risk-management/advanced-peg-protection-mechanisms) [PreviousHow does f(x) Protocol minimize funding costs?](/fx-docs/faq/how-does-f-x-protocol-minimize-funding-costs) [NextWhy are there different stablecoins?](/fx-docs/faq/why-are-there-different-stablecoins) Last updated 1 month ago --- # How to stake into the stability pool? | fx Docs [PreviousHow to add/reduce a leverage position?](/fx-docs/guides/how-to-add-reduce-a-leverage-position) [NextHow to unstake from the stability pool?](/fx-docs/guides/how-to-unstake-from-the-stability-pool) Last updated 1 month ago The f(x) Protocol stability pool offers a unique way of putting your stablecoins at efficient work. By staking either your fxUSD or USDC, you will not only earn enhanced LSD yields, xPOSITIONs trading commissions, and $FXN but will also contribute to making the protocol robust and scalable. Remember, this is not a counterparty vault. You are not betting against traders; your capital stays pegged to the USD. Understand that depositing and staking is a mandatory two-step process to earn all the rewards. You first need to deposit assets into the stability pool, then stake this stability pool token into the $FXN gauge. Hopefully, the UI abstracts this by triggering both transactions in a row. Let’s get into it. * Make sure you have either fxUSD or USDC in your wallet. * Head over to the “[Earn](https://fx.aladdin.club/v2/earn) ” page. * Connect your wallet using the upper right “Connect Wallet” button. * Look for the “fxUSD Stability Pool Gauge” strategy. * If not already, expand the strategy by clicking the down arrow button on the right of the box * Hit the “Deposit” button to see a deposit box popup. * Choose whether you want to deposit fxUSD or USDC using the down arrow * Type the desired amount * Keep the Stake toggle if you want to stake directly into the f(x) gauge. (Recommended - Untoggle it if you wish to stake elsewhere) * Click the “Deposit & Stake” button * Confirm the transactions in your wallet. If you have some unstaked Stability Pool tokens, you will see a “Stake” button; click it to stake them in the gauge and earn yield. * Type the desired amount. * Click the “Approve & Deposit” button (if already approved, it will be a simple “Deposit” button”) * Confirm the transactions in your wallet. 💰 ![](https://fxprotocol.gitbook.io/~gitbook/image?url=https%3A%2F%2Flh7-rt.googleusercontent.com%2Fdocsz%2FAD_4nXeel5Y3gyRJDAyc5pEFP327A6__bfoSMc8ypj2M4cf-aypIR_7T4Wv_pWl7hO5cux1l0XvbdQES0k8QVTtTQuhz7J1Uvwrr0sd_xlis-1dK_RQG3Bri9x8a1wXNKSbcMizvb3kK3w%3Fkey%3DGA1o45aLKYw_edI6IcXZgMv2&width=300&dpr=4&quality=100&sign=4d7af05&sv=2) ![](https://fxprotocol.gitbook.io/~gitbook/image?url=https%3A%2F%2Flh7-rt.googleusercontent.com%2Fdocsz%2FAD_4nXcBj1aKjTd-0vKRw_o2XjN1e1tA7TZcc2pmEltj0TqVVFvowotyuNk7jrOixaOay1vG07fukskGcQAfbKOGjN6OKzuBSzK1IFOIS3Vp8Q68NmGDEA7VGrAf8WgjqKk_9I7JPOa_NA%3Fkey%3DGA1o45aLKYw_edI6IcXZgMv2&width=300&dpr=4&quality=100&sign=9b01fde5&sv=2) --- # Why are there different stablecoins? | fx Docs When you visit our V1 dApp, you might need more clarity regarding the variety of stablecoins available. Each stablecoin is backed by different types of collateral, each with unique risk profiles. Here's a breakdown of their key differences: Each of these stablecoins is designed to serve different use cases and risk appetites. For more details, explore our [Token Breakdown](/fx-docs/more/token-breakdown) . [PreviousWhat could go wrong?](/fx-docs/faq/what-could-go-wrong) [NextWhat is the difference between f(x) Protocol V1 and V2?](/fx-docs/faq/what-is-the-difference-between-f-x-protocol-v1-and-v2) Last updated 1 month ago --- # Token Breakdown | fx Docs Since the launch of the first iteration of the protocol, several tokens have been launched. Please find a breakdown below to help you navigate along them. [](#stablecoins) Stablecoins --------------------------------- * fxUSD: Our flagship stablecoin, operating on v2. It is exclusively collateralized by Lido stETH. While governance may introduce additional collateral types, they will always consist of the most liquid and secure assets in DeFi. * rUSD: A v1 stablecoin backed by Etherfi eETH and Renzo ezETH. Once staked, it not only earns restaking yields but also provides points! * btcUSD: A v1 stablecoin collateralized by wBTC. Since wBTC is not yield-bearing, a small funding cost is charged to xToken holders and distributed to stable stakers. * cvxUSD: A v1 stablecoin backed by aCVX, an auto-compounding staked CVX created by [Concentrator](https://concentrator.aladdin.club/) . * fETH: Our first-ever v1 stablecoin, designed differently. Instead of being pegged to the dollar, it maintains stability by capturing only 10% of ETH's volatility, with its xToken absorbing the rest. [](#leveraged-tokens-v1) Leveraged tokens (V1) --------------------------------------------------- * xETH: a perpetual leveraged token providing up to 4x long exposure to ETH price movements, backed by Lido stETH exclusively. * xstETH / xfrxETH: ETH leverage tokens offering up to 4.3x exposure. Respectively backed by Lido stETH and frxETH. * xeETH / xezETH: ETH leverage tokens with up to 4.3x exposure. Respectively backed by Lido eETH and ezETH. * xwBTC: A Bitcoin leverage token offers up to 5.6x exposure, enabling traders to capitalize on market movements precisely. * xCVX: A CVX leverage token offering up to 3x exposure, designed to enhance trading efficiency and excitement. [PreviousHow to unstake from the stability pool?](/fx-docs/guides/how-to-unstake-from-the-stability-pool) [Nextf(x) Protocol 1.0](/fx-docs/more/f-x-protocol-1.0) Last updated 1 month ago --- # How to adjust your leverage / how to reduce your Liquidation Brake | fx Docs [PreviousHow to close a leverage position (xPOSITION)](/fx-docs/guides/how-to-close-a-leverage-position-xposition) [NextHow to add/reduce a leverage position?](/fx-docs/guides/how-to-add-reduce-a-leverage-position) Last updated 11 days ago Adjusting your leverage, suppose you already have an opened xPOSITION. You should see your xPOSITION on the Trade page in the middle left section called “My xPOSITION”. Ensure the correct wallet is connected to the dApp if you don't see it. There are two ways of adjusting the leverage of an xPOSITION. You can modify it without changing its nominal value or top up to your position with a different leverage. > To lower your Liquidation Brake threshold, simply reduce your leverage using one of the two options below. You can reduce it by adding to your position with a lower leverage. [](#adjusting-the-leverage-without-changing-the-xpositions-nominal-value) Adjusting the leverage without changing the xPOSITION’s nominal value. ----------------------------------------------------------------------------------------------------------------------------------------------------- * Once you are correctly connected on the [Trade](https://fx.aladdin.club/v2/trade) page, you should see a button labeled “Adjust Leverage.” Click it. * Slide the leverage bar to reach your desired leverage. * Hit the “Preview” button. * Review your trade and the evolution of your xPOSITION, then click the “Submit Transaction” button when ready. * Confirm the transaction using your wallet. [](#adjusting-the-leverage-of-the-xposition-by-adding-to-it) Adjusting the leverage of the xPOSITION by adding to it. -------------------------------------------------------------------------------------------------------------------------- You can also top up your position or create a new one with a different leverage. Your xPOSITIONs are aggregated into a single one with an average leverage. Please follow that tutorial to learn how to add or reduce a position. [➕How to add/reduce a leverage position?](/fx-docs/guides/how-to-add-reduce-a-leverage-position) --- # How to close a leverage position (xPOSITION) | fx Docs [PreviousHow to open a leverage position (xPOSITION)](/fx-docs/guides/how-to-open-a-leverage-position-xposition) [NextHow to adjust your leverage / how to reduce your Liquidation Brake](/fx-docs/guides/how-to-adjust-your-leverage-how-to-reduce-your-liquidation-brake) Last updated 23 days ago To close an xPOSITION: * Head over to the [Trade](https://fx.aladdin.club/v2/trade) page. * Connect your wallet using the upper right “Connect Wallet” button. * Click on the “Sell / Close” tab of the order box. * Hit the “MAX” link / Slide the bar to 100% / Type “100%” in the text box to close your entire position. * Hit the Preview button to review your trade. * Review your trade and the evolution of your xPOSITION, and once ready, hit the “Submit Transaction” button. * Confirm the transaction using your wallet. --- # Leverage | fx Docs ### [](#where-does-the-leverage-come-from) **Where Does the Leverage Come From?** Leverage in f(x) Protocol originates from the innovative design of fTokens and xTokens, which split the price volatility of BaseTokens into stable and leveraged components. This allows users to balance between stability and risk, creating flexible investment strategies. ### [](#key-features) Key Features **fTokens (e.g., fETH, fxUSD, btcUSD):** * Fully decentralized and native to Ethereum, Bitcoin, and Convex ecosystems. * Minimize volatility while maintaining slight market exposure (0% volatility for most fTokens, except fETH at 10%). * Support instant creation and trading to meet stablecoin demands. **xTokens (e.g., xETH, xeETH, xwBTC):** * Perpetual long tokens for ETH, BTC, and CVX with built-in leverage. * Fully on-chain, composable, and highly liquid. * Offer low liquidation risk, providing a safer alternative for leveraged positions. ### [](#how-it-works) **How It Works** #### [](#depositing-basetokens) Depositing BaseTokens: * Users deposit BaseTokens (e.g., wBTC for btcUSD and xwBTC) into the protocol. #### [](#splitting-price-volatility) Splitting Price Volatility: The protocol splits the price volatility of collateral into two components: * fTokens: Absorb no market volatility (0% allocation, except 10% for fETH). * xTokens: Amplify leverage (100% allocation, except 90% for xETH). #### [](#diversified-exposure) Diversified Exposure: * This split enables users to diversify BaseToken exposure by balancing between stability (fTokens) and leverage (xTokens). #### [](#minting-and-redemption-fees) Minting and Redemption Fees: * fTokens: 0–0.25% fee. * xTokens: 1.5–2.5% fee. * Users can avoid these fees by trading tokens on secondary markets. [Previousf(x) Protocol 1.0](/fx-docs/more/f-x-protocol-1.0) [NextEarn](/fx-docs/more/f-x-protocol-1.0/earn) Last updated 1 month ago 1️⃣ * [Where Does the Leverage Come From?](#where-does-the-leverage-come-from) * [Key Features](#key-features) * [How It Works](#how-it-works) --- # FX Auto-Compound | fx Docs ### [](#afxn) **aFXN:** * **Description:** aFXN is an auto-compounding asset derived from **cvxFXN**. * **Yield:** Staking cvxFXN earns: * Rewards from **veFXN**. * A share of boosted FXN earnings and CVX tokens from Convex LPs. * **Important:** * Converting FXN to cvxFXN is **irreversible**. * You can stake and unstake cvxFXN tokens but cannot revert them to FXN. * Secondary markets allow trading cvxFXN for FXN at market rates. * **Addresses:** * **FXN Token Address**: 0x365AccFCa291e7D3914637ABf1F7635dB165Bb09 * **cvxFXN Token Address**: 0x183395DbD0B5e93323a7286D1973150697FFFCB3 * **Deposit Contract Address**: 0x56B3c8eF8A095f8637B6A84942aA898326B82b91 * **Stake Contract Address**: 0xEC60Cd4a5866fb3B0DD317A46d3B474a24e06beF ### [](#arusd) **arUSD:** * **Description**: arUSD is an auto-compounding asset based on rUSD staked in Earn Pools. * **Yield**: Earn up to ~6x ether.fi loyalty points and ~2x EigenLayer points. * **Collateral**: rUSD. [PreviousStability Mechanism](/fx-docs/more/f-x-protocol-1.0/stability-mechanism) [NextOracle](/fx-docs/more/f-x-protocol-1.0/oracle) Last updated 1 month ago --- # How to open a leverage position (xPOSITION) | fx Docs [PreviousWhat price drop would it require for my xPOSITION to be rebalanced/liquidated?](/fx-docs/faq/what-price-drop-would-it-require-for-my-xposition-to-be-rebalanced-liquidated) [NextHow to close a leverage position (xPOSITION)](/fx-docs/guides/how-to-close-a-leverage-position-xposition) Last updated 23 days ago xPOSITIONS offer up to 10x leverage on ETH. To open a position: * Head over to the [Trade](https://fx.aladdin.club/v2/trade) page. * Connect your wallet using the upper right “Connect Wallet” button. * Input the amount you would like to leverage. The default asset is USDC; you can pledge other assets by clicking the down arrow. * Set the requested leverage using the slider bar and wait for the preview to load. * Hit the Preview button to review your trade. * Review your trade and the evolution of your xPOSITION, and once you are ready, click the “Submit Transaction” button. * Confirm the transaction using your wallet. You’re all set. You can now track your position on your Dashboard on the “[Trade](https://fx.aladdin.club/v2/trade) ” page. ![](https://fxprotocol.gitbook.io/~gitbook/image?url=https%3A%2F%2Flh7-rt.googleusercontent.com%2Fdocsz%2FAD_4nXcBj1aKjTd-0vKRw_o2XjN1e1tA7TZcc2pmEltj0TqVVFvowotyuNk7jrOixaOay1vG07fukskGcQAfbKOGjN6OKzuBSzK1IFOIS3Vp8Q68NmGDEA7VGrAf8WgjqKk_9I7JPOa_NA%3Fkey%3DGA1o45aLKYw_edI6IcXZgMv2&width=300&dpr=4&quality=100&sign=9b01fde5&sv=2) --- # How to unstake from the stability pool? | fx Docs Understand that withdrawing from the stability pool gauge to fxUSD & USDC is a two-step process. You first need to unstake from the $FXN gauge, then withdraw this stability pool token for USDC and fxUSD. There is a redemption period (see [Risk parameters](/fx-docs/risk-management/risk-parameters) ) from the stability pool to prevent unhealthy arbitrage operations. * Head over to the “[Earn](https://fx.aladdin.club/v2/earn) ” page. * Connect your wallet using the upper right “Connect Wallet” button. * Look for the “fxUSD Stability Pool Gauge” strategy. * If not already, expand the strategy by clicking the down arrow button on the right of the box ![](https://fxprotocol.gitbook.io/~gitbook/image?url=https%3A%2F%2Flh7-rt.googleusercontent.com%2Fdocsz%2FAD_4nXeel5Y3gyRJDAyc5pEFP327A6__bfoSMc8ypj2M4cf-aypIR_7T4Wv_pWl7hO5cux1l0XvbdQES0k8QVTtTQuhz7J1Uvwrr0sd_xlis-1dK_RQG3Bri9x8a1wXNKSbcMizvb3kK3w%3Fkey%3DGA1o45aLKYw_edI6IcXZgMv2&width=300&dpr=4&quality=100&sign=4d7af05&sv=2) * Hit the “Withdraw” button to see a withdraw popup. If all your tokens are staked in the FXN gauge: * Type the desired amount to be withdrawn. * Click the “Approve & Unstake & Withdraw” button (if already approved, it will be a simple “Unstake & Withdraw” button”) * Confirm the transactions in your wallet. * Wait for the redemption period to be completed. You can track the remaining time on the [Earn](https://fx.aladdin.club/v2/earn) page. * Follow the instructions below to withdraw your Stability Pool tokens to fxUSD and USDC. If you have some unstaked stability pool tokens: * Click on the FXN Gauge dropdown menu and select “fxUSD Stability Pool” * Type the desired amount to be withdrawn. * Click the “Approve & Withdraw” button (if already approved, it will be a simple “Withdraw” button”) * Confirm the transactions in your wallet. [PreviousHow to stake into the stability pool?](/fx-docs/guides/how-to-stake-into-the-stability-pool) [NextToken Breakdown](/fx-docs/more/token-breakdown) Last updated 1 month ago --- # veFXN | fx Docs $FXN runs under the ve tokenomics popularized by Curve. Locking FXN gets you veFXN. The longer the lock time, the more veFXN received. * 1 FXN locked for 4 years = 1 veFXN * 1 FXN locked for 3 years = 0.75 veFXN * 1 FXN locked for 2 years = 0.5 veFXN * 1 FXN locked for 1 year = 0.25 veFXN [Previous$FXN Tokenomics](/fx-docs/earn-with-f-x/usdfxn-tokenomics) [NextFXN Farming and veFXN Boost](/fx-docs/earn-with-f-x/usdfxn-tokenomics/fxn-farming-and-vefxn-boost) Last updated 1 month ago 🪙 --- # Get involved - Community Booster Program | fx Docs [PreviousProtocol Revenue & Distribution](/fx-docs/earn-with-f-x/protocol-revenue-and-distribution) [NextReferral Program](/fx-docs/power-to-the-people/referral-program) Last updated 23 days ago Aladdin DAO has always been a community-oriented project. Anyone can contribute to the protocol's growth and be rewarded. There is no limit to the ways one can contribute. Here are a couple of examples: * Creating online content about f(x) * Getting intros to the team with DeFi Funds and large LPs * Getting intros with qualitative KoLs * Building relevant DeFi integrations with other protocols * ... Anything that helps bring awareness, TVL, and volume to the protocol is beneficial. Currently, 500FXN are distributed every month among the Community Boosters. The rewards are linearly vested over 12 months. Still, they can be converted into cvxFXN or sdFXN, respectively, Convex or StakeDAO's liquid lockers to let boosters earn the veFXN yields during the vesting period. **How to get started?** Join the Aladdin DAO's [Discord](https://discord.gg/D8znPnRqZ6) and post your contribution to the #contribute-fx channel. Each month, the rewards distribution will be announced in Discord and on X. ![](https://fxprotocol.gitbook.io/~gitbook/image?url=https%3A%2F%2F3804711989-files.gitbook.io%2F%7E%2Ffiles%2Fv0%2Fb%2Fgitbook-x-prod.appspot.com%2Fo%2Fspaces%252FYUipYKknBzY0ljM5ssnI%252Fuploads%252FeerejkDYkvMFBSJMJBab%252Fimage.png%3Falt%3Dmedia%26token%3D50fd7e48-7221-49ec-850c-3e3ffcaaca21&width=300&dpr=4&quality=100&sign=88ed0e92&sv=2) --- # How do f(x) Protocol stablecoins maintain stability? | fx Docs Stablecoins can be minted and redeemed at the oracle price, ensuring seamless functionality. For fxUSD, several mechanisms guarantee a perfect peg: * f(x) Protocol establishes and maintains a deep fxUSD/USDC liquidity pool. * The fxUSD stability pool offers high and sustainable yields derived from stETH staking, xPOSITION opening fees, and FXN emissions. This stability pool, which accepts both USDC and fxUSD, also acts as a peg keeper by purchasing fxUSD when it trades below peg and selling it back to USDC when it trades above. * xPOSITION cannot be opened if fxUSD is trading below peg. * fxUSD can always be redeemed at the oracle price for stETH, safeguarding it against any significant de-peg events. Learn more here. [✅Advanced Peg Protection Mechanisms](/fx-docs/risk-management/advanced-peg-protection-mechanisms) [PreviousIs fxUSD an algorithmic stablecoin?](/fx-docs/faq/is-fxusd-an-algorithmic-stablecoin) [NextIs there any LUNA-like risk?](/fx-docs/faq/is-there-any-luna-like-risk) Last updated 1 month ago --- # Oracle | fx Docs The f(x) 2.0 price oracle mechanism for stETH/USD combines multiple data sources, including Chainlink, Uniswap, Curve, and Balancer, to calculate spot prices and anchor prices. It defines Max and Min Price for stETH/USD based on these sources and uses a governance-adjustable threshold (default 1%) to decide whether to rely on the Anchor Price or the Max/Min Price for operations like rebalancing, minting, or redeeming. This ensures accurate and stable pricing while accommodating market fluctuations. Below is the detailed breakdown of the stETH Spot Price Oracle Mechanism: ### [](#eth-usd-spot-oracle) ETH/USD Spot oracle: 1. [https://data.chain.link/feeds/ethereum/mainnet/eth-usd](https://data.chain.link/feeds/ethereum/mainnet/eth-usd) 2. [https://info.uniswap.org/#/pools/0x88e6a0c2ddd26feeb64f039a2c41296fcb3f5640](https://info.uniswap.org/#/pools/0x88e6a0c2ddd26feeb64f039a2c41296fcb3f5640) 3. [https://info.uniswap.org/#/pools/0x8ad599c3a0ff1de082011efddc58f1908eb6e6d8](https://info.uniswap.org/#/pools/0x8ad599c3a0ff1de082011efddc58f1908eb6e6d8) 4. [https://v2.info.uniswap.org/pair/0xb4e16d0168e52d35cacd2c6185b44281ec28c9dc](https://v2.info.uniswap.org/pair/0xb4e16d0168e52d35cacd2c6185b44281ec28c9dc) ### [](#steth-eth-spot-oracle) stETH/ETH Spot oracle: 1. \[[stETH/ETH Curve Spot](https://curve.fi/#/ethereum/pools/factory-v2-303/deposit)\ \] 2. \[[stETH/ETH Univ3 Spot](https://info.uniswap.org/#/pools/0x109830a1aaad605bbf02a9dfa7b0b92ec2fb7daa)\ \] 3. \[[stETH/ETH Balancer Spot](https://app.balancer.fi/#/ethereum/pool/0x93d199263632a4ef4bb438f1feb99e57b4b5f0bd0000000000000000000005c2)\ \] 4. \[[stETH/ETH Curve2 Spot\]](https://curve.fi/#/ethereum/pools/steth/deposit) ### [](#steth-usd-anchor-price-oracle) stETH/USD Anchor Price oracle: * \[[stETH/ETH Curve EMA](https://curve.fi/#/ethereum/pools/factory-v2-303/deposit)\ \]\*\[[ETH/USD Chainlink Spot](https://data.chain.link/feeds/ethereum/mainnet/eth-usd)\ \] ### [](#the-algorithm-of-steth-usd-max-and-min-price) The Algorithm of stETH/USD Max and Min Price: * **Max**: stETH/USD Price=Max(Anchor Price, \[stETH/ETH Spot Max Price \]\* \[ETH/USD Spot Max Price \]) * **Min**: stETH/USD Price=Min(Anchor Price, \[stETH/ETH Spot Min Price \]\* \[ETH/USD Spot Min Price \]) ### [](#price-checking-mechanism) Price Checking Mechanism: * Anchor Price is used, while the price difference between Anchor Price and Max/Min Price exceeds the threshold * The threshold is a governed parameter, 1% in default ### [](#conclusion) Conclusion: * Min stETH/USD Price is used for Open/Close of xPOSITION risk control, Rebalance and Liquidation if the price difference between Anchor Price and Min Price doesn’t exceed the threshold. Anchor Price is used otherwise. * Max stETH/USD Price is used for Redeeming fxUSD if the price difference between Anchor Price and Max Price doesn’t exceed the threshold. Anchor Price is used otherwise. [PreviousRisk parameters](/fx-docs/risk-management/risk-parameters) [NextAudit Reports](/fx-docs/risk-management/audit-reports) Last updated 29 days ago 🧭 * [ETH/USD Spot oracle:](#eth-usd-spot-oracle) * [stETH/ETH Spot oracle:](#steth-eth-spot-oracle) * [stETH/USD Anchor Price oracle:](#steth-usd-anchor-price-oracle) * [The Algorithm of stETH/USD Max and Min Price:](#the-algorithm-of-steth-usd-max-and-min-price) * [Price Checking Mechanism:](#price-checking-mechanism) * [Conclusion:](#conclusion) --- # Is there any LUNA-like risk? | fx Docs No, f(x) stablecoins are fundamentally different from Luna. While Luna collateralized its stablecoin with endogenous assets (its own governance token), f(x) stablecoins are backed exclusively by tier-1 exogenous DeFi assets. [PreviousHow do f(x) Protocol stablecoins maintain stability?](/fx-docs/faq/how-do-f-x-protocol-stablecoins-maintain-stability) [NextHow does f(x) Protocol minimize liquidations?](/fx-docs/faq/how-does-f-x-protocol-minimize-liquidations) Last updated 1 month ago ---