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 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:

btcUSD Earn Pools

• Collateral: WBTC.

• Yield: Earn WBTC rewards.

• Details:

rUSD Earn Pools

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

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

• Details:

cvxUSD Earn Pools

• Collateral: CVX.

• Yield: Earn staking rewards from Convex Finance.

• Details:

fETH Earn Pools

• Collateral: stETH.

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

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

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.

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.

• Addresses:

  • FXN Token Address: 0x365AccFCa291e7D3914637ABf1F7635dB165Bb09

  • cvxFXN Token Address: 0x183395DbD0B5e93323a7286D1973150697FFFCB3

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.