Are decentralized stablecoins really doomed to be unscalable? by Cyrille

Transcript

Thank you. Good morning everyone. This is from FX Oracle and today I'm going to try to answer the question art decentralized stable cocoon doomed to be and scalable. The current stone uh market is at its peak. It's about $234 billion right now. But what distribution of this market is actually decentralized? will probably be surprised it's only.3%. All the rest is exposed to centralized expo uh centralized assets such as USDC most of the time. And why is that?

Well, the first reason in my opinion is that while we built the most uh trustless network with Ethereum, most of the market still relies on the old trust model. That means people need someone to sue if anything goes south. But isn't it weird to wait for things to go south to be able to sue while you could just prevent anything bad to happen using a trustless network, right?

So this paradigm is probably about to change and the other reason is probably the failure of every uh decentralized sin model so far. Whether they just vanished and went down to zero or simply just failed to be um convenient to use to keep their peg and to be scalable. Now let me introduce you FXUSD. FX uses F ofX protocols decentralized stable coin. It's a reserve back stable coin making it very capital efficient but I'll dive deeper into that in a couple of minutes. It's 100% onchain. Yeah, I said it's a decentralized stable coin. It's 100%

onchain. You don't have to trust anyone and it's backed only by legacy and rapid time. It's 100% collateralized making it very very capital efficient and it has a perfect peg by design and I explain why and how different it is from any other previous models. There is has been 12 connected so far by segment and trail bits making it very very resilient. FXUSB FXD wasn't wouldn't be possible without the expositions.

Exposition is a new way to take smart leverage on ETH or BTC. It's powered by FOX oracle and the FOX environment I'm going to explain in a couple of minutes. It has minimal liquidity risk and there is zero interest leverage. That means you only pay one time opening fee and one time closing fee. You can hold your leverage as long as you want without paying any recurring fees. And again, just like the stable coin, it's 100% unchained and trustless. Let me explain how the exposition works. So, let's say you want to take a 5x leverage on ETH. So, you're that little guy on the left. You only

have $200 of ETH or CE, whatever. It's going to be converted to CE and put it to the FX reserve. So, you only have 200 bucks, but you want to take 5x. So, that means you want $1,000 exposure, right? So the protocol will need to find the 800 bucks missing. It's to do so it's going to do a flash on and borrow $800 of ste to put them in the reserve as collateral. So now there's $100 of collateral and the protocol will be able to mint and open your x position worth $300 and to mint $800 worth of fxus to instantly repay the flash. So now the protocol has $100 worth of ste in the

reserve. You have the next position worth $200, but that will give you the exposure of the whole reserve, meaning $1,000. And there's $800 of FXUSD on the market. So now if the price of ETH raises by 10%. The reserve value is now worth $1,100, the value of the FXUSD is still 800 obviously because that's a stable car, right? And if you use the f of x invariant, you can just calculate the difference to find the value of your exposition, which is now worth $300.

That means when the price of it raised by 10%. The price your exposition value raised by 50% giving you a 5x leverage. But you may think, okay, so if FXUSD is solved the process, how can FXUSD keep its peg? Did you ask yourself this question? Yeah, I'm sure you did. Good. and I'm going to answer it. So, how do we handle FXUSD spec? There's four different stability mechanisms. The first one is what we call the stability pool. That's the the first spec keeping mechanism. The stability pool is the main FX protocol stable strategy. It will accept both FXUSD and USDC and will harness different uh yield sources. The

first one is the exposition fees. Remember it's zero interest loans but it has onetime opening and closing fees and most of these fees goes to the stability pool and the e positions are backed by red state if it generates almost 3% APR most of these yield also goes to the stability pool and you can you can also opt for effects and emissions which is our governance token which is also revenue share if you prefer but if you think of it this stable strategy is a strategy that earn earns wrap stake ETH with stable coins because even the BTC fees are converted to RAS state ETH. So it's a good way to accumulate EH if you want to with your stable coins and the

role of the stability pool is to peg keep FXUSD. So each time FXUSD is trading below 0.997, the USDC from the stability pool will arability pool could lack of USDC. So there's a second mechanism. Each time the EMA 42 minutes of FXUSD reaches.998, that means there's a small TEX starts to be a little too long. The proctor is what I call the deep mode and at that moment no one can open new expositions. That means there's no further selling pressure on

FX3 and in that specific condition every exposition gets a funding applied but it's very temporary. At that point every exposition start paying the USDC borrowing cost on AR and this fee goes straight to the sav. So it instantly brings some something like 15 to 20% APR in rap state e to the stability pool thus attracting you and fresh USDC to our pay. But if it's not enough because you know in defi you always have to to to prevent anything that could happen and if it's not enough if and if FXUSD is still deb you can redeem it against the collateral at one oracle price minus

a.5% redeeming fee. Thus having a hard floor price for FXUSD of 995 and this is how FXUSD stays perfectly pegged to the dollar. Now let me introduce FXA. So you may have understood that the stability pool is is a pretty attractive strategy to form if grid stable coins and we very recently tokenized it. Uh so that's an auto compounding stability pool. FX said is kind of a yieldbearing stable coin in a way and we launched it like three two to three weeks ago and it quickly became the first yield bearing stable coins according to stable yields.info and it actually yield

something like 9% papery or something like that and it captured 22 millions in just a couple of weeks. Again it's 100% organic yield. There's no points or token emissions involved into FXA. It's purely yield generated by the protocol and it's already integrated pretty pretty much everywhere. It's a reliable panel. It's live on morpho. The volt the morpho volt was launched 4 days ago and crossed uh 1.2 million USD supply yesterday. And it's also live on spectra if you want to speculate uh on the white for instance because you could see like the FXA strategy is a bet on volatility.

The more volatility there is on the market the more fees FX protocol generates and the more yield for the stable strategy. So if you want to bet on volatility you can look at the panel writing for instance. Uh I told you earlier that X positions protects you from liquidations. we have this mechanisms called called the liquidation break. Let me explain you uh quickly how how it works. So the liquidation break is is absolutely unique in DeFi. It prevents any hard liquidation on your leverage position. And the way it works is that it will trigger when your position reaches 88% LTV. Whenever your position crosses 88% FTV, the liquidation break

will just sell the lowest portion of your position to put it back at 88% FTV so that you never reach the whole liquidation of 95%. Let's take an example. Uh let's say you take your 5x 5x position when is worth 2,500. I did this a little while ago. uh the liquidation break would trigger at 2273 and the hard liquidation would happen at uh 2,105. I'll show you um simulation tool developed by a community member actually that's very uh helpful to understand how liquidation break works. In blue you can see the price of ETH decreasing

unfortunately in yellow that's the liquidation break line and in red that's the hard liquidation and you see when the price reached the liquidation break the hard liquidation also goes down. So yeah so that you never reach the hard liquidation and you can recover with the price recovery as well. This is the liquidation break and this is this unique feature allowed us to have uh decentralized stable coin with up to 95% LTV which is absolutely unseen on Ethereum mainet.

So, so far we achieved as I told you to be uh the best yielding um uh yielding stable coin while being 100% organic nonchain and we gathered 22 millions in just two weeks into effect safe. Um yeah, that's what I did. So, best thing around DeFi 100% organic, no trust assumption. And I'm very proud to say that there was zero liquidation on FOX protocol over the past 90 days despite having uh 60 million TP. So let me tell you a little bit about the road map. So we're about to release FX Mint which is going to be like more of a CVP experience that will not only let you take directional

leverage but also just simply mint FXUS against your Bitcoin and Steve. Um, we're about to deploy the protocol on base as well to bring higher leverage and lower transaction fees. Limiters are in the pipeline as well to to give a better trading experience on the S positions as well as short positions with the same value proposition of one-time fee and minimal liquidation risks. And finally, we're working on price ex to enhance the price execution of expositions to give a similar to sex experience while staying in consent on chain. That's it. Fobex protocol transm sleep

well. And if you have any question, feel free to reach out in the room. I stay around or maybe I don't know if I still have a little time for questions here. I don't know there's some someone can tell me. Yeah, go for it. Hello. Uh, so uh could you please clarify what exactly the role of USDC is in this protocol because USDC is not a trustless uh uh coin and if you introduce it as a critical component the whole trustlessness comes into question. Thank you very much. That's and now our question. Thank you very much. the the role of USDC here is just to ar the peg of FXUS. It's not

that's that's correct because USDC is the kind of the the I don't know the word but if you want a stable coin to be pegged to USD on chain that's with USDC today USDC is the most liquid uh stable coin on chain. So if you want it to be back to the dollar, you have to you have to you have to pair it. If you want to exchange it on chain, you have to pair it with USDC. Hopefully at some point FXUSD is going to be liquid enough to replace USDC. And that's our goal here to bring FXUSD into the top five of onchain stable coins. But you have when you build a stable coin, you have to pair it with something, right? And USDC is the most liquid one. So it's just

uses just here to help FXUSD to to to save basically but it's not backing FXUSD at any point. Did I correct answer your question? So uh well first of all uh so basically it means that US uh FXUSD is packed to USDC. So you're using USDC as a price or for the US dollar and uh I think it's a bit risky. So USDC has already unpacked once. So it was in March 2023 I believe when the uh uh Silicon Valley bank uh collapsed with 7% of their reserves in it and um also as far as I know the most

liquid stable coin is USDT but not USC. Yeah good good point. uh USDT is the most liquid stable coin uh but not on chain onchain on Ethereum that's USDC but actually FXUSD spec to the dollar at the oracle price that means you when you mint FXUSD it's minted at the dollar price of the oracle against E or Bitcoin not the USDC price but if you want to exchange USDC you have to build onchain liquidity for it and the the most liquid stable coin to pair with to build that onchain equity so that people can buy and sell FXUSD is USDC. This is why we used it so far. At some point, we hope

to become the alternative to USDC. Is there any other question? Otherwise, I'll be around and grab a coffee. Feel free to reach out. Thank you very much. Have a good day.