How does f(x) Protocol minimize funding costs?
Last updated
Last updated
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 ), 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). 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 👇