Are RWAs the Only Way to Achieve Capital-efficient Stablecoins? by Cyrille

hey good evening everyone thanks for staying that late for the this last uh talk so I'm seral uh I'm contributor to the F ofx protocol and today um I'm going to talk try to answer the question are realen World assets the only way to achieve Capital efficient stable coins so um yeah that's it so you may be aware that uh stable coins reach its ath at $225 billion do but what distribution of these stable coins is truly decentralized I looked at it and you'll be surpris it's only 3% and last time I checked it was last July it was .5% that means there's more and more stab coins being emitted every day that choose the path of centralization and why are there so many real well backed table coins the reason is very simple it's actually probably the most easiest path to distribute the stable coin because real wall assets are very very liquid real assets stable coins are profitable they have perfect Pay By Design but what's the single point of failure of all these uh real world assets stable coins it's just trust and trust is the oldw mechanism of Finance we built blockchains to actually abstract trust and we now now realized that 9 99.7% of all stable coins rely on that allward mechanism so now let's take a look at how FX USD which is stable coin emitted by F ofx prole managed to reach the top 30 stab Co in just six weeks while being totally decentralized so FX USD is a reserve back stable coin it's collateralized by L Ste and it's fully onchain it's uh 100% collateralized reaching unseen Capital efficiency and it has reliable Peg by Design it's fully audited with 12 audits conducted by trail of bits and seg bit FX USD is actually a byproduct of the expositions exposition is a new way to take responsible leverage on E it delivers up to 7x leverage on E while having minimal liquidation risks uh offering no funding costs it's it's only uh onetime opening fees and closing fees and it is also 100% Unchained and fully coll collateralized by L St so the way it works it's pretty simple is it's let's imagine you want to take a 5x 5x leverage on E you pledge 200 bucks to the protocol you you will put this 200 bucks into the reserve so to reach uh five 5x you need you you actually want a thousand bucks exposure on if correct so the prol will need to borrow the difference which is 800 bucks of Steve and it will use a flash loan to do so so it will put uh 800 800 bucks of Steve into the reserve to be able to Mint your Exposition worth 200 bucks and $800 of FX USD in order to repay the flash loan and this is how we achiev to Mint FX USD as byproduct of the expositions so now the protocol has $1,000 of Ste into the reserve your position is worth $200 but you get the exposure of the whole Reserve while there is aund $800 of FX USD on the market when if prices raises by 10% you the the value of the reserve goes to $1,100 $1,100 while f USD value uh is still worth $800 because it's a stable coin right and then now we use the uh FX inv variant that says that the value of the whole Reserve is always equal to the value of all fxu in the market and the value of all expositions to calculate the value of your Exposition after the the price raise and your Exposition is now worth $300 and this is how we achieve to deliver 5x leverage because your Exposition RIS by 50% while by the price of of the underlaying only raised by 10% uh pretty simple but you may wonder how FX USD remain pegged while uh having such a selling pressure when you open the exposition right there's different uh pegging mechanism the first one is the stability pool and that's another product of f ofx protocol because the stability pool accepts both both FX USD and usdc and delivers three different uh yield sources the first one is the exposition fees so as I told you there's no funding cost in most cases but there's an opening fee and a closing fee and most of these fees are distributed to that specific stable strategy the expositions on FX USD are catalized by Li Ste that generate 2.8 uh% APR a year and all this yeld yield is distributed to the stable strategy as well and then there is fxn or governance token emissions that are also distributed to the stable strateg and this is how we manag to to distribute a very sustainable and attractive attractive yield on over 36 million right now it's there's 22% APR and there's only 1% APR distributed in effects and Emissions the rest being um U native yield uh distributed to the stability pool and that stability pool acts as a paye keeper so uh each time FX us is traded below uh 997 the usdc will be used to ARB the peg of uh FX USD but if that's not enough uh the EMA of FX USD on 42 minutes could uh reach 998 and in that uh case we trigger the dpeg mode in that case you cannot open any more Exposition there's not you not don't create more selling pressure on FX USD and in that specific case there can be a borrowing cost charged to the expositions which is what you would pay if you could get that amount of Leverage on RV but it's uh totally distributed to the stability pool in order to attract more usdc to up the pay so it's very temporary uh uh mechanism and the worst case scenario is if uh FX us if if it's that not if it's not enough there's the Redemption mechanism that protects the peg you can always redeem FX USD against WAP Steve um and there is a 0.5 redeeming feed creating like a hot floor of 9954 FX USD so I told you earlier there's a liquidation protection mechanism on the expositions this is uh what we call the liquidation break and that's unique feature of f ofx protocol the way it works is very simple it basically prevents hard liquidations uh as you would get on a or other cdps by simply um triggering when your Exposition crosses 88% LTV it will always put you back to 88% LTV instead of liquidating he of your depth or even the the the enti position and it prevents you to reach the 95% liquidation LTV so to give you an example let's imagine you want to take that 5x leverage on E with uh a starting price of 2,500 the liquidation break the 88% LTV would trigger at $2,273 and the liquidation LTV would be 200105 if the rebalancing mechanism uh the liquidation break mechanism doesn't doesn't work uh we have an amazing Community member that created a simulation Tool uh I'll just show you it in a just a couple of seconds so you can see how it actually works so in in Green in blue sorry you will see the the e price going down and the yellow line is the liquidation line uh liquidation break line and the as you see when you reach it if you the price keeps going down your liqu liquidation line in in red also goes down so it only uh Cuts what's necessary to uh Remain the keep the protocol safe so that you can benefit from a market rebound after the liquidation break mechanism keep the maximum exposure as possible so what we achieved so far is that FX as I told you FX us managed to reach the 13th uh place in uh in the uh all stable coins on ethereum in just six weeks there is over uh 18 million 18,000 wraps teeth in V2 that's uh over 6% of of all Lio uh tvl again it's just six weeks and we deliver actually more than 20% % APR on$ 36 million dollar and most of it as I told you is is organic yield and that's unseen and moreover there was Zero Liquidations in the last volatility event of of that week of this week like on the 24th and even today um a quick word about the road map before we go all go get that delicious dinner H we're about to toonize that crazy stability strategy to build FX Save which is going to be a 4626 able to be uh on boarded to all the rest of of defi we're about to add WRA Bitcoin as collateral as well so you be able to get um pretty nice leverage on BTC uh being fully onchain and with minable liquidation risk and no funding costs there is a base deployment coming in about a month as well as to yeah to deliver even probably higher leverage and and and cheaper transaction fees limit orders are coming as well to to give even better trading ux and short positions as well so yeah that was it for today thanks for staying that late was a pleasure to be here with you feel free to to scan that your code if you want to learn more and to to uh grab me at the dinner later thanks