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.

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.

Where Does the Yield Come From?

The f(x) Protocol provides multiple opportunities to earn yields through Earn Pools and FX Auto-Compound mechanisms. These tools leverage BaseTokens, Liquid Staking Derivatives (LSDs), and FXN emissions to generate returns.

Earn Pools

Stable holders can stake their fTokens into Earn Pools (also known as Stability Pools) to earn yields generated by BaseTokens, plus FXN emissions. Each Earn Pool is tailored to the specific characteristics of its collateral.

fxUSD Earn Pools

• Collateral: wstETH and frxETH.

• Yield: Earn wstETH and frxETH rewards.

• Details:

  • fxUSD Earn Pools are segregated by reserve LSD, allowing for variations in yield and leverage across stability pools.

  • Pools reflect the different risks, base yields, and reserve backing of their respective LSDs.

btcUSD Earn Pools

• Collateral: WBTC.

• Yield: Earn WBTC rewards.

• Details:

  • Unlike other BaseTokens, WBTC has no built-in yield.

  • xWBTC holders pay competitive funding rates for leveraged price exposure.

  • btcUSD holders share these funding rates without additional costs, with xWBTC’s funding rate tracking the crvUSD borrowing rate against WBTC.

rUSD Earn Pools

• Collateral: eETH and ezETH (ETH Liquid Restaking Tokens).

• Yield: Earn restaking rewards, including points, without ETH price exposure.

• Details:

  • 100% of reserve points flow to the rUSD Stability Pool, along with 50% of LST yields.

  • This makes the rUSD Stability Pool’s point accrual rate significantly higher than directly holding the LST.

cvxUSD Earn Pools

• Collateral: CVX.

• Yield: Earn staking rewards from Convex Finance.

• Details:

  • Users can stake cvxUSD in Earn Pools to earn CVX staking yields while maintaining the stablecoin’s dollar peg.

fETH Earn Pools

• Collateral: stETH.

• Yield: Earn native LSD rewards from stETH, plus FXN emissions.

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:

• 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.

Here is a breakdown of the key features and mechanisms of the oracle solution.

Enhanced collateral price feeds: In addition to the original TWAP, spot prices are incorporated, with additional price feeds from Curve, Uniswap V3, and Balancer.

Arbitrage prevention: Minting and redeeming transactions are conducted at different prices to eliminate arbitrage trades. This helps to protect the collateral held by the protocol.

• fToken can be minted at the minimum price

• fToken can be redeemed at the maximum price

• xToken can be minted at the maximum price

• xToken can be redeemed at the minimum price

Risk management

The collateralization ratio is calculated at the maximum price as well as stability pool liquidations. This ensures that risk is managed effectively and liquidations occur at appropriate levels to maintain system stability.

Net Asset Value

The NAV is calculated based on TWAP during the non-transacting periods. This NAV calculation can serve as an oracle price feed for various DeFi applications integrating f(x) assets.

Additional protection measures for xTokens

To prevent arbitrage trades, xTokens cannot be both minted and redeemed within the same block. Additionally, a transfer of xTokens cannot occur within a specified timeframe of thirty minutes after minting. These measures help in mitigating potential exploits and maintaining price integrity.

[ETH/USD Spot] has 4 price sources, which are:

1. https://data.chain.link/feeds/ethereum/mainnet/eth-usd

2. https://info.uniswap.org/#/pools/0x88e6a0c2ddd26feeb64f039a2c41296fcb3f5640

3. https://info.uniswap.org/#/pools/0x8ad599c3a0ff1de082011efddc58f1908eb6e6d8

4. https://v2.info.uniswap.org/pair/0xb4e16d0168e52d35cacd2c6185b44281ec28c9dc

stETH New oracle:

1. [stETH/ETH Curve EMA ]*[ETH/USD Chainlink TWAP]

2. [stETH/ETH Curve Spot] * [ETH/USD Spot ]

3. [stETH/ETH Univ3 Spot] *[ ETH/USD Spot ]

4. [stETH/ETH Balancer Spot] * [ETH/USD Spot ]

5. [stETH/ETH Curve2 Spot] * [ETH/USD Spot ]

frxETH New oracle:

1. [Curve frxETH/WETH EMA] * [Chainlink ETH/USD TWAP]

2. [Curve frxETH/WETH Spot] * [ETH/USD Spot ]

3. [Curve frxeth Spot] * [ETH/USD Spot ]

4. [Curve stETH/frxETH Spot] * [Curve steth Spot] * [ETH/USD Spot ]

weETH New oracle:

1. [RedStone weETH/ETH Twap] * [Chainlink ETH/USD TWAP]

2. [Uniswap V3 ETH/weETH 0.05%] * [ETH/USD Spot ]/weETH.getRate()

3. [Uniswap V3 wstETH/weETH 0.05%] *[wstETH/stETH rate] * [ Curve steth-ng]* [ETH/USD Spot ]

4. [Curve weETH/ETH] * [ETH/USD Spot ]

ezETH New oracle:

1. [RedStone ezETH/ETH Twap] * [Chainlink ETH/USD TWAP]

2. [Curve ezETH/ETH] * [ETH/USD Spot ]

3. [Balancer V2 Stable] * [ETH/USD Spot ]

WBTC New oracle:

1. [Chainlink WBTC/BTC Twap] * [Chainlink BTC/USD Twap]

2. [WBTC/USDC spot price of Curve TriCryptoUSDC]

3. [Uniswap V3 WBTC/USDC 0.3% Spot ]

4. [Uniswap V3 WBTC/ETH 0.3% Spot] * [Uniswap V3 USDC/ETH 0.05% Spot]

CVX oracle:

1. [Chainlink CVX/USD Twap]

2. [Chainlink CVX/USD Spot]

3. [Curve CVX/ETH] * [ETH/USD Spot ]

Code: https://github.com/AladdinDAO/aladdin-v3-contracts/pull/198​