# Leverage

### **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

**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**

#### Depositing BaseTokens:

* Users deposit BaseTokens (e.g., wBTC for btcUSD and xwBTC) into the protocol.

#### 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:

* This split enables users to diversify BaseToken exposure by balancing between stability (fTokens) and leverage (xTokens).

#### 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.


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