fx Docs
  • f(x) Protocol Documentation
  • OVERVIEW
    • 📖Abstract
    • ⭐Core Products of f(x) Protocol 2.0
  • f(x) Protocol Mechanisms
    • ⚖️The f(x) Invariant
    • ⚙️Key Functions of f(x) 2.0
    • 🚀Creating a Leveraged Position (xPOSITION)
    • 🪂Rebalancing the Position (Liquidation Brake)
      • Understanding the band system
      • Liquidation process
      • Developers
    • 💰Stability Pool
    • 💵Fees
  • RISK MANAGEMENT
    • 🧘‍♂️Risk framework
    • ✅Advanced Peg Protection Mechanisms
      • Understanding the redemption mechanism
    • 🚨Risk parameters
    • 🧭Oracle
      • stETH
      • WBTC
    • 🛡️Audit Reports
  • Earn with f(x)
    • 💲USD high & sustainable yield
    • 🪙$FXN Tokenomics
      • veFXN
      • FXN Farming and veFXN Boost
    • 🔥Protocol Revenue & Distribution
  • POWER TO THE PEOPLE
    • 🤝Get involved - Community Booster Program
    • 🫂Referral Program
  • FAQ
    • 🟦Is fxUSD an algorithmic stablecoin?
    • 🟦Where does the yield come from?
    • 🟦How do f(x) Protocol stablecoins maintain stability?
    • 🟦Is there any LUNA-like risk?
    • 🟦How does f(x) Protocol minimize liquidations?
    • 🟦How does f(x) Protocol minimize funding costs?
    • 🟦What could go wrong?
    • 🟦Why are there different stablecoins?
    • 🟦What is the difference between f(x) Protocol V1 and V2?
    • 🟦What price drop would it require for my xPOSITION to be rebalanced/liquidated?
  • GUIDES
    • 📈How to open a leverage position (xPOSITION)
    • 📉How to close a leverage position (xPOSITION)
    • 📐How to adjust your leverage / how to reduce your Liquidation Brake
    • ➕How to add/reduce a leverage position?
    • 💰How to stake into the stability pool?
    • 🚶‍♂️How to unstake from the stability pool?
  • MORE
    • 🔡Token Breakdown
    • 1️⃣f(x) Protocol 1.0
      • Leverage
      • Earn
      • Stability Mechanism
      • FX Auto-Compound
      • Oracle
    • 🖥️Resources
      • Contracts
      • Useful links
    • 🪔Aladdin DAO
    • 😎 Brand Assets
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  1. RISK MANAGEMENT

Risk framework

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.

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Last updated 5 months ago

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