One article teaches you how to play ETH graded leverage agreement f (x)

Summary of f (x) protocol in one sentenceThe f (x) protocol divides ETH into a series of low volatility "floating stable coins" (referred to as fETH) and high volatility "leveraged ETH" tokens (referred to as xETH). Users can provide ETH or stETH to cast one of them (pure ETH will be converted to stETH before depositing)Basic information of the agreement and my personal interpretationFETH: fETH is a 10% stable currency that anchors ETH fluctuations (not the US dollar stable currency of other LSD projects, but a low volatility stable currency that anchors ETH)XETH: xETH is an ETH with variable leverage, no liquidation, and no holding costs

Summary of f (x) protocol in one sentence

The f (x) protocol divides ETH into a series of low volatility "floating stable coins" (referred to as fETH) and high volatility "leveraged ETH" tokens (referred to as xETH). Users can provide ETH or stETH to cast one of them (pure ETH will be converted to stETH before depositing)

Basic information of the agreement and my personal interpretation

FETH: fETH is a 10% stable currency that anchors ETH fluctuations (not the US dollar stable currency of other LSD projects, but a low volatility stable currency that anchors ETH)

XETH: xETH is an ETH with variable leverage, no liquidation, and no holding costs. (It can be simply understood as the ETH3L product provided by partially centralized exchanges, but xETH does not have a holding cost, and generally ETH3L has a relatively high holding loss)

What does the agreement specifically do

The protocol calculates the real-time prices of fETH and xETH in real-time through changes in ETHPrice (ETH30min TWAP) and the issuance of fETH and xETH. The identity equation is

Total assets of the agreement (TVL)=NAV (fETH) * TotalSupply (fETH)+NAV (xETH) * TotalSupply (xETH)

Simply put, the protocol decomposes a relatively high volatility ETH into low volatility fETH and high risk xETH to meet different investors/investment strategies in the market. Additionally, if the ETH price fluctuates excessively (TVL/TV (fETH)

Income and expenses of the agreement:

income

• Pledge income generated by STETH.
• MintFee and RedeemFee. (0.25% forfETH, 1% forxETH)

Expenses (updated with the latest updates)

• 50%-100% income rebalance pool fETH xETH rebalance pool
• Liquidity incentives for pools such as FXN/ETH, fETH/crvUSD, fETH/FRAX, xETH/ETH (currently supported by AladdinDao and other partners, which may need to be disbursed from the agreement in the future)
• 75% of the profits from the entire agreement will be distributed to FXN holders

How to Play with the f (x) Protocol

Borrow this image from @ hawiwang, and then I will expand it appropriately and explain it with practical examples

Low risk stable currency investment methods

Method 1 leans towards stETH with higher certainty of returns:

• From the official website mintfETH
• Deposit fETH into rebalancepool (with returns of around 5-7%, which will continue to grow after the implementation of the new strategy)
• It can be understood as using low volatility fETH to dig for stETH, and the returns are higher than simply holding stETH (stacking returns are only allocated to fETH)
• Compared to a typical stable US dollar, a low volatility fETH can also yield dividends of 10% ETH increase
• You can refer to the specific page operations https://docs.aladdin.club/f-x-protocol/tutorial

Method 2 leans towards Curve ecological liquidity providers with higher relative returns:

• From the official website mintfETH
• On the Concentrator, depositing fETH/crvUSD or fETH/FRAXBP into these two pools yields a stable return of around 12%
• The gas feed of the concentrator is a bit expensive, so it needs to be done when the gas is low. The advantage is that it can be done once, and then there is no need to worry about it. Wait for the cow to return
• The working principle of the Concentrator is that the protocol will periodically help you deposit your liquidity gains into an automatic reinsurance safe.

High risk Ethereum investment methods

Method 1: Long term holding of xETH

• Purchase xETH from the official website mintxETH or from the aggregator website
• Long term holding to your expected ETH high point and selling directly from the protocol Redeem or through aggregators

Method 2: Provide xETH/ETH liquidity providers

• Purchase xETH from the official website mintxETH or from the aggregator website
• On the Concentrator, depositing into the xETH/ETH pool yields a stable return of around 22%
• Compared to simply holding xETH, this method can bring stable returns during long-term sideways trading, and of course, there will also be some free losses when rising unilaterally. However, xETH/ETH is still leveraged LongETH

Method 3 Mix and match (personal choice)

Based on market expectations, holding xETH to overcome unilateral upward trends, trading xETH/ETH to overcome volatile markets, trading fETH to overcome downward trends, and buying xETH at a relative bottom

The specific practice can be seen in this example

• 12/12 Exchange 20000USDT for 31094xETH ($0.64)
• On 12/24, replace 23694xETH ($0.84) with 20176fETH and deposit it into Concentrator to dig low risk stable currency
• Equivalent to buying leveraged xETH at a low point and switching to fETH after a rapid rise to gain some profit, understanding and maintaining mining returns at low risk higher than regular RWA and LSD products

Merger arbitrage

The principle is:

The prices of fETH and xETH for protocol mint are calculated in real-time based on Chainlink's ETH30min TWAP quotation, so when ETH prices fluctuate significantly in a short period of time, there is arbitrage space in Curve's LP pool.

Specific examples

https://explorer.phalcon.xyz/tx/eth/0x928adc5445183a1694a6f6cc8bdb4f55f97fc5cb22727b7499d07cc1061ad581

Through arbitrage contracts, users first use stETH to trade out ETH from protocol mintxETH, then trade out ETH in xETH/ETH of curve, and then trade out more stETH to complete arbitrage. Of course, it can also be arbitrage in the opposite direction

How to Play f (x) Tokens

Protocol Direct Lockout

• https://fx.aladdin.club/lock/ Lock the warehouse and you will receive a stETH reward

Change to ConvexcvxFXN

• If there is a price difference between cvxFXN and FXN, it can be converted to cvxFXN through curveswap
• If there is no price difference between cvxFXN and FXN, you can https://fx.convexfinance.com/ Directly convert and pledge. Now the stable APR is 65%, and CVX is being given, so it is digging for highly liquid assets. In addition, veFXN can also receive rewards from stETH after distributing it
• In addition to pledging, it can also serve as a liquidity provider for FXN+cvxFXN. It can be done on Convex or on Concentrator

Change to staceDaostFXN

• If there is a price difference between stFXN and FXN, it can be converted to stFXN through curveswap
• If there is no price difference between stFXN and FXN, you can https://beta.stakedao.org/lockers/fxn Directly convert to stFXN and pledge. The current stable APR is 79% (if you haven't locked the SDT), and the SDT is provided, so it can also be directly dug and sold
• In addition to pledging, it can also serve as a liquidity provider for FXN+sdFXN. It can be done on Convex or on Concentrator.

Some personal summaries

The design of the entire agreement is still very clever, avoiding many potential risks. Compared to the various LSDFi projects that were popular in the first half of the year, it reduces the risk of collateral liquidation and avoids the high cost of the agreement to keep the stable currency issued from falling off anchor. The profits of the agreement are very clear, both from the proceeds of the pledge and from the proceeds of mint/redeem. Compared to continuing to increase various types of US dollar stable currencies, the entire market actually needs a low volatility stable currency that truly anchors pure on chain assets (ETH, followed by BTC).

The RebalancePool change this time is mainly reflected in faster withdrawals (withdrawals the next day) and higher returns (50% -100% of the pledged income for the entire agreement). So why did the agreement make this change. I think the team wants to turn Rebalancepool into a blockbuster in the Yu'ebao category on the chain. The fETH craze driven by rebalancepool brings xETH a relatively higher leverage ratio to meet different game demands on the chain.

Using fETH to do rebalancepool is better than buying a type of stable US dollar currency with US bond yields:

• Clear returns (from the most stable stETH pledge returns)
• The income is higher (50% -100% of the pledged income from the entire agreement, equivalent to subsidizing the income pledged by xETH users)
• Less policy risk (no KYC required, no online or offline legal identification)
• The whole process is more transparent (no need to trust additional entities to save treasury bond, etc.)
• More native encryption (ETH, ETH, ETH)

In addition, xETH has always been my ideal leverage weapon, with no holding cost (even negative cost can be achieved by doing LP), no liquidation risk (not afraid of pin insertion), and using xETH to bargain hunting, especially when there is arbitrage space, the cost is lower and the earning effect is better. Looking forward to more new gameplay from fETH and xETH to Layer2.