Davide
@0xdavide
š(š½) Today's focus is on an experimental DeFi protocol called F(x) that runs 2 ETH derivatives: a low volatility one (a kind of stablecoin) and a leveraged ETH perp. FXN is the Governance token.What are they for? Basically, by choosing one of the two products you can expose yourself: 1) Lower volatility of ETH (fETH) 2) In 2x leverage (xETH) without the risk of being liquidated (it could only happen with a flash crash of ETH that goes almost to 0. The collateralization ratio should be at least 130%) Imagine ETH is split into 2 components: 1) fETH with Beta=10% (pegged 1/10 to ETH volatility): if ETH increases by +20%, fETH increases by +2%; if ETH makes a -10%, fETH makes -1%) 2) xETH in 2x leverage on ETH (represented by the formula "100% + 1- beta fETH": usually it is 190% if the beta is 10%. The liquidation risks are almost absent)
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Davide
@0xdavide
Imagine depositing 1 ETH ($4000) on F(x) and that fETH and xETH are worth $1 so in the initial situation I will have: āS1 --> 2000 fETH and 2000 xETH=$2000 + $2000=$4000 Imagine that ETH makes +50% ($6000) and that the Beta of fETH is 10%, I will have: āS2 --> 2000 fETH (in this case with a beta of 10%: I will have +5% increase, or 1/10 of the +50% of ETH volatility. fETH will go from 1$ to 1.05$=2100$) and 2000 xETH (I will have a +190% increase, or 1 xETH=1.95$ i.e. 3900$) The sum is always 1ETH (2100$+3900$=6000$) so the sum of the 2 components (derivatives) is respected. FXN instead is the Governance token that allows exposure to the protocol's earnings. Obviously it can perform well if the protocol increases TVL.
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