Introducing f(x) v2: High Yields and Non Liquidatable Leverage

This is a guest post written by the f(x) protocol team

A quick note from The Edge Newsletter:

Over a year ago, we hosted the f(x) protocol team on our podcast (links below) as they introduced a groundbreaking new primitive to DeFi with the launch of their first protocol iteration (V1). What stood out to us was that it was not just another copy or fork. It was an entirely original concept crafted by their brilliant team. True innovation in DeFi is surprisingly rare, as much of the space involves iterations or tweaks on existing ideas. That is why, when we encounter something truly novel and exciting, we make it a priority to spotlight those bold builders.

Now, with the launch of V2, we are just as excited. If it delivers on its promise, it could represent another major leap forward for DeFi.

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The DeFi landscape is entering a new era of capital efficiency and accessibility. With the upcoming launch of f(x) Protocol v2, users will gain access to a platform designed to optimize returns, minimize risks, and enhance the overall user experience. As the next generation of DeFi protocol design unfolds, f(x) v2 stands at the forefront, delivering unparalleled benefits through its unique features.

Breaking the Mold of Conventional CDPs

Traditional CDPs have long been a cornerstone of DeFi lending and borrowing. While these structures have paved the way for the rise of stablecoins and trustless money markets, they often come with capital inefficiencies and cumbersome liquidation processes. With f(x) Protocol these barriers are shattered. Unlike CDPs, which require users to over-collateralize and manage complex liquidation thresholds, f(x) achieves 100% capital efficiency, ensuring users can get more mileage from their ETH collateral. This means the protocol allows for a more direct and effective utilization of your ETH, maximizing your exposure and returns in ways that conventional CDPs cannot match.

A USD-Denominated Delta Neutral Stability Pool

At the heart of f(x) v2 lies its innovative USD-denominated Delta Neutral Stability Pool. This pool is designed to keep volatility at bay and preserve the value of users' principal in a stable, dollar-based environment. By employing a delta-neutral strategy, the protocol effectively shields users from the market's unpredictable swings while still generating attractive yields from ETH staking rewards, perpetual trading fees and FXN emissions. The result is a safer, more predictable environment—one that puts stability and sustainable returns first.

High Yields for Stability Pool and Stable LPs

In DeFi, yield generation often comes at the expense of stability. With f(x) v2, that trade-off is no longer inevitable. The platform not only secures high yields on its Delta Neutral Stability Pool, but also offers compelling returns on other liquidity pools (LPs), thanks to the FXN gauge system. The USDC-fxUSD pair serves as a prime example, offering yields of over 25%.

No Individual Liquidation Risks, No Funding Fees, and Up to 10x Leverage on ETH

For those looking to amplify their ETH exposure, f(x) v2 offers leveraged positions of up to 10x without the traditional drawbacks of leveraged trading. Through an innovative automated rebalancing mechanism, the protocol eliminates the fear of forced liquidations that plagues other platforms. This system maintains position health automatically, protecting users even during periods of high market volatility.

Perhaps most importantly, f(x) v2 achieves this without charging funding fees. Traditional leveraged trading platforms often burden users with hidden or recurring funding costs that can significantly eat into returns. By eliminating both liquidation risks and funding fees, f(x) v2 creates a more predictable and cost-effective environment for leveraged trading.

Fees Shared with FXN Holders

The protocol's economic model ensures that platform growth directly benefits the community. With 75% of protocol revenue distributed to veFXN holders (the other 25% being kept as a safety-reserve), users who participate in governance also share in the protocol's success. This alignment of incentives creates a sustainable ecosystem where all stakeholders benefit from the platform's adoption and growth.

A Leap Forward in DeFi

As f(x) v2 prepares for its highly anticipated debut, it's clear that this upgrade represents more than just an iteration—it's a fundamental reimagining of what DeFi can achieve. By delivering 100% capital efficiency, stable USD-denominated structures, high sustainable yields, up to 10x leverage without traditional risks, and community-aligned fee distribution, f(x) v2 heralds a future where DeFi is not just accessible, but consistently rewarding.

For a deeper understanding of f(x) protocol, checkout these podcasts we did with them:

That’s all for now, thanks for checking it out!

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