Should we give up on Decentralized Stablecoins?

Transcript

[Music] Hey, good morning everyone. I'm Sir for FovX Protocol. Should we give up on decentralized stable coin? What do you think? First, I'd like to thank you all for being here today, especially after the RAV and this morning. When we look at the stable coin market, uh we can obviously think that it's just booming. But when we look a little more in details, what about decentralized stable coin? Well, you'd probably be surprised. Decentralized stable coin are only.3% of all stable coins. So, there's more and more stable coins being emitted every day. Maybe not every day, but like

every weeks or so, there's over 200 stable coins around. And most of them just do pretty much the same thing which is basically when you look at the stable coin dilemma they just uh make a compromise on decentralization so that they can deliver very stable stable coin and scalable stable coin that can on board massive capital almost instantly. But did we really create uh the most decentralized layer to onboard decentralized uh stable coins?

All of them rely on one simple thing which is trust. So we created blockchain and Ethereum to abstract trust from financial transactions and most of what we're doing with stable coins is just trusting people again and uh the past spoke already on different trusted uh stable coin designs and most people at some point were disappointed. So in a nutshell all these real world asset uh tok to tokenized real world assets stable coins tables tokenized tables and so on are delivering higher risk by putting them onchain for pretty much the same rewards. That means probably most of these new projects are not going to make

it. But in a blue ocean there's FXUSD. FXUSD is F ofX protocols decentralized stablecoin and I'll dive a little deeper into the model because we believe to be uh a great um stable coin trillemma um I I guess the most balanced approach of the stable coin trilema that will that less uh scale while delivering way lower risk being 100% onchain decentralized So to understand how FXUSD is emitted.

Um let me explain what FX is. Basically F ofX protocol is a new uh approach of the CDP model. Some kind of an evolved CDP model. So if you're familiar with the CDP maker was probably in the first days the most famous one. Liquid is did an amazing job as well as creating a decentralized stable coin. and we took a different approach to make it more uh scalable and reliable. So to understand how FXUSD is emitted uh I may I have to explain the the leverage offering which is called the expositions. So X positions gives up to 7x leverage on BTC and E while offering a very low liquidation uh

risk. the way I I'll dive deeper in in how we mitigate the liquidation impact. Um, you don't have to pay any borrowing cost or funding cost when leveraging ETH or BTC, but instead you just pay a onetime fee when you open and close your position, making the price of your leverage position very predictable. So, in a way, it's a zero stress leveraged offering. There is no stress of hard liquidations and no uncertainty of funding costs raising fund funding cost uh as you could face on a per exchange for instance and again it's 100% onchain and trustless

and we recently so expositions have been live since January 25 and running pretty well and helped us scale FXUSD to over $72 million market cap. And we just announced the upcoming release of S positions that will basically offer the same value proposition but for shorting ETH and BTC. So you will soon be and when I say soon it's probably in the next 10 days be able to short ETH and BTC while staying onchain with just a one-time fee and benefiting from this unique liquidation protection mechanism.

Let me explain how exposition works. So let's say you're that little guy on the left and you want to take a 5x leverage on if you only have $200 of Steiff and you will put them into the F ofX protocols reserve. To deliver that 5x leverage, the protocol will need an extra $800. So to do so, the protocol will flash borrow $800 of thief and add them to the reserve. So now the reserve is made of of $1,000 of Steve and the protocol will be able to open your X position worth $200 and to emit and mint FXUSD, $800 of FXUSD in order to repay the flash loan. So at

that very moment, the protocol has $1,000 of Stef in the reserve. You have an exposition worth $300 and $800 of FXUSD are on the market. So your exposition is worth $300 but gets the market exposure of the whole reserve and this is how you get that 5x leverage. So if the price of ETH raises by 10%. The value of the reserve goes by $1,100 the value of all FXUSD stays $800 because obviously it's a stable coin.

And if you calculate the difference, the value of your expositions exposition is now worth $300, delivering a 50% uh profit raise when the market raised by 10%. So that's a 5x leverage. Now let's look at the S positions, which is the brand new product we're about to release. It's pretty much the same mechanism except instead of backing it with Steve, we back it with FXUSD. Let me explain it in details. So, you're that little guy again and your market bias changed. You now want to short Eve.

Woo. Let's say you want to take a 5x short uh on if you again only have $200. So, you will pledge your 200 FXUSD to the protocol and the protocol in order to open your position will need an extra $1,000. To do so, the protocol will flash borrow $1,000 of Steve and instantly sell them for FXUSD, thus creating the short position. These $1,000 are added to the reserve and the protocol is now able to open your S position worth $200.

In order to repay the flash loan, the protocol will take Steve out of the X position reserve so that the flash loan in is instantly repaid. And again, now if the price of Eve decreases by 10%, the value of your depth is now only worth $900, which means by closing your position, you can make a $100 profit, which is a 5x. This is the way we are able to uh offer S positions which lets you open a short with just a one-time fee and with the liquidation protection mechanism. I'm going to explain in a couple of minutes.

So you may ask about FXUSD spec. What's what's better in in our approach of the CDP? We have a very strong peg keeping design. The first one is the X position and S position themselves because you may have understood that when you're you open an X position you're um creating selling pressure on FXUSD because FXUSD is sold to repay the flash loan. In the same way when you close your X position you brings buying pressure on FXUSD and the S positions are actually doing the opposite effect. So whenever you open an S position, you're creating a buying pressure on FXUSD and and when you close it, you're creating a selling pressure.

So the very fact that we add the S positions will bring a natural uh balancing effect on FXUSD spec. But the first layer of actual peg keeping mechanism is called the stability pool on FX protocol. The stability pool acts as a peg keeper by taking both FXUSD and USDC and this is the main stable yield strategy on FOX protocol. The stability pool will uh capture most of the protocol fees and and get a very attractive and sustainable yield.

Whenever FXUSD is traded below 0.997 on the main liquidity pool which is on curve uh the USDC from the stability pool will buy FXUSD to rep it and whenever FXUSD is traded above one the stability pool will sell them. And so this is the first layer of peeping but you know when you create a D5 protocol you always have to anticipate what could go wrong. So whenever FXUSD oh first there's a new a new stuff coming with the S positions whenever that uh stability pool starts lacking of USDC the um exposition will start paying a small funding cost which probably will be the USDC borrowing cost on RV and this

funding cost will be directed to the stability pool thus attracting new USDC by delivering a very attractive uh organic killed and repegging FXUSD. So this is the first the let's say the second layer of peg keeping that works with the first with the stability pool. And if that's not enough and if FXUSD starts to to dep for too long as a matter of fact it's when the EMA 42 minutes crosses 998. So that's a small DPEG but long enough to be noticeable. At that point, we trigger what I call the DPEG mode and the uh X positions can not no longer be open to prevent further uh FXUSD selling pressure. And at that

point the funding level two is applied to leverage to X positions to create a very big incentive to close the leverage position and also distribute a crazy yield to the stability pool to attract new USDC to repable coin. So when you open a leverage position, you will very unlikely pay any funding cost and if you do most of the time it's just for a very brief moment because the like the instant APR distributed to the stability pool is in double digits and should attract very quickly new fresh USDC to help reping FXUSD and the worst result is redemption

mechanism if FXUSD is still depected. So if it's the protocol is still in what I call the DPEG mode, you can buy FXUSD the market and redeem it against the collateral paying a 0.5% redeeming fee. So the worst case scenario of FXUSD SEG is 0.995. And this is how we managed to scale FXUSD so far with a very reliable peg. So I told you we have this liquidation protection mechanism which is very unique on FFX protocol. We call this the liquidation break and the way it works is actually very simple. The idea is that it's made to prevent any hard liquidation as you could face on uh per

exchange or other CDPs that most of the time will liquidate 50 to 100% of your position at at a time. The idea is that whenever your loan to value crosses 88% so that means your true leverage basically and your position may start to be at risk. The protocol will put it back at 88% LTV so that your position never reaches the 95% hard liquidation LTV. I hope this is not like too barbar in terms but I'm happy to take any questions in the end. So the idea is that it's a very very progressive liquidation and we the protocol can even liquidate just a single dollar of your debt and to do to do this in a

profitable and efficient way we aggregate the liquidity of all leverage positions instead of taking them individually. I will show you a small example so maybe it's easier to understand. The idea of the liquidation break is to uh is that you you are able to keep the maximal exposure while keeping the the protocol uh solvent and so that you can benefit from a market recovery uh if if any. Let me show you that uh that animation. So you can see in blue the this is if price decreasing in yellow this is the rebalancing line. So where the liquidation br starts and in red this is the hard liquidation line. So you see that the hard liquidation line goes down

with the price decreasing and whenever the price recovers you can recover with it without actually hitting the whole liquidation line. Yeah, that's it. And you can even make profit after. Um so I told you also about the stability pool. So the stability pool is the main uh yield strategy on F ofX and as I told you it harness uh it earns most of the protocols fees. Uh we recently tokenized it under the ticker FXA. So FXAVE is the yieldbearing strategy of of FX protocol. So since it's it's based on the stability pool, it's uh backed by FXUSD and USDC. But if you understood the pekeeping mechanism,

you understood that USDC is not backing FXUSD at any time. It's just here to act as uh liquidity to to help keeping the peg. So FXA is fully on chain and FXUSD is backed only by LO ste and red bitcoin at the moment. It's at least 100% collateralized. So this is not algorithmic stable coin. If you may you ask yourselves. This is the first question I usually hear when I I say we work on on a decentralized stable coin. Is it algorithmic? Is it Luna? No.

and it has a perfect pegback design. As I just explained, there's already 12 audits made. So um and the 13 is being made by open open zeppelin and the previous were made by segbit and trail of bits. So there's not a single line of code into production which hasn't been audited. It may sound normal, but in most cases when there is a problem, it's because the team figured, oh, it doesn't really need an audit. It's simple stuff. But not that simple. So we don't publish, we don't put anything into production without being audited. And this is how uh Aladinda which is the DAO behind FX protocol built three protocols over the past four years without any major incident.

So since FXA gets most of the protocol fees coming from the opening and closing fees from the collateral yield mostly it's 100% organic and sustainable yields. That means there's no token inflation involved into FX saves yield. There is no point BS and stuff like that. This is just organic onchain yield which means since it's 100% onchain, you can monitor your risk at all times. So we deliver lower risk to compare with all these real world asset stuff for better rewards. And don't trust me, just look at the numbers. If you look at that dashboard from stables.info, info which is a great dashboard actually you you should check it out it's been built by

the inverse finance you can compare all the yield bearing strate stable coin strategies in D5 since we released FX a couple of months ago FX it's the beautiful orange line here and has always always been delivering the best yields uh over DeFi while doesn't imply without implying any human execution risk so a couple of achievements uh of over the past few months. There was no hard liquidations on FOVX protocol. FXUSD recently crossed $72 million market cap while growing absolutely organically.

The protocol is almost $230 million TVL and it generates over $5 million of fees per year. I'll let you check the No, I'm not talking about this now, but I'll let you dive a little deeper in FL. Um, yeah, that's it. I think I believe as I have a little time for questions. Oh, just a little word about the road map. So, as I told you, we're about to release the short positions in a couple of days. So, it should also bring some some more fees because we have like a very nice user base uh longing. So now they will also be able to short without leaving F ofX. So it will so it will

help also power FXUSD by uh gathering fees in every market conditions in in a way. Then we'll soon release the limit orders and stop losses. The idea is to deliver a complete suite for traders and and and yeah traders mostly. And while the current way to take leverage is mostly directional leverage since we abstract the looping of the CDP, we'll also release FX mint in a couple of weeks that would let users have a CDP um UX to for instance to just get better capital efficiency or even to get PTC denominated yield for instance. So yeah, that's it. And we also have um some good stuff coming on on Laria 2's.

Well, thank you very much. Uh, F ofX protocol, trade smart, earn more, sleep well. If you want to learn more, feel free to scan this QR code. You'll find the link tree with all the relevant links. Please join us on the Alladind discord. This is a very friendly community. We uh FX FX has no VC backing. There's no team allocation. This is a community protocol. We all started by reaching uh joining the discord. So feel free to to join, ask questions, contribute. You're more than welcome. Uh if you I don't know. Do I have a little time? We have two minutes.

Two minutes. If there's any question, feel free to. Otherwise, I'll be around. Happy to grab a coffee with you guys. Thank you very much. [Music]