🟦How does f(x) Protocol minimize funding costs or annual interests?

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. The first pegkeeping mechanism for fxUSD is the Stability Pool. If the Stability Pool lacks of USDC to secure a good peg for fxUSD, the cost of borrowing USDC on Aave is charged to thefxMINT and xPOSITIONs. This fee is mostly directed to the Stability Pool and sPOSITIONs until the peg is restored (see Protocol Revenue & Distribution). This fee can be considered as a funding cost or interest temporarily applied to the position. If that is not enough to keep the peg, and if fxUSD trades below the depeg threshold (see Risk parameters), the fee applied is amplified by an order of magnitude defined by governance, until the peg is restored. When too much of the xPOSITION collateral is lent out to sPOSITIONs, a funding/interest may be applied to sPOSITIONS and directed to xPOSITIONs. To summarize in most situations, you don’t pay any funding or interest fee. However, when the peg of fxUSD could be threatened, a variable fee may be temporarily applied to your position. It's important to note that other peg-keeping mechanisms in place should prevent that scenario from happening regularly, providing a sense of reassurance. Learn more 👇

✅Advanced Peg Protection Mechanisms