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Absolutely not. All stablecoins issued by f(x) Protocol, including its flagship fxUSD, are fully collateralized with top-tier DeFi assets. Specifically, fxUSD is backed solely by Lido's stETH. The f(x) invariant ensures unparalleled capital efficiency by maintaining the stablecoin's 100% collateralization, while the xPOSITION (v2) and leveraged tokens (v1) manage the protocol's over-collateralization.

Stablecoins can be minted and redeemed at the oracle price, ensuring seamless functionality. For fxUSD, several mechanisms guarantee a perfect peg:

• f(x) Protocol establishes and maintains a deep fxUSD/USDC liquidity pool.
• The fxUSD stability pool offers high and sustainable yields derived from stETH staking, xPOSITION opening fees, and FXN emissions. This stability pool, which accepts both USDC and fxUSD, also acts as a peg keeper by purchasing fxUSD when it trades below peg and selling it back to USDC when it trades above.
• xPOSITION cannot be opened if fxUSD is trading below peg.
• fxUSD can always be redeemed at the oracle price for stETH, safeguarding it against any significant de-peg events.

For all v1 stablecoins (btcUSD, rUSD, cvxUSD, and fETH), the protocol acts as the primary liquidity source, ensuring a perfect peg. Secondary liquidity sources, such as Curve pools, can be arbitraged through f(x) Protocol to maintain price stability.

No, f(x) stablecoins are fundamentally different from Luna. While Luna collateralized its stablecoin with endogenous assets (its own governance token), f(x) stablecoins are backed exclusively by tier-1 DeFi assets.

You cannot be individually liquidated with f(x) Protocol. This means scenarios where a sudden market drop that would normally liquidate your long position just before a rally are unlikely to occur. However, this doesn't eliminate the risk of losing money as leverage amplifies both potential gains and losses.

xTokens (v1): In highly extreme scenarios, leveraged xTokens could potentially lose all of their value. However, the protocol's primary goal is to prevent this. Multiple stability mechanisms are in place to ensure this doesn't happen. Curious about how this works? Check out our documentation for more details.

xPOSITION (v2): If your position reaches a price level that would normally trigger liquidation on a regular perpetual exchange, it will instead be rebalanced to a different leverage level. While this operation incurs a small fee, it keeps you exposed to the market, giving you a chance to recover. In extreme cases where the rebalancing operation fails, liquidation may occur to protect fxUSD's backing and peg. But there is a very small risk of this occurring.

xTokens (v1): In the worst-case scenario, all xTokens could potentially lose their value. Before this happens however, the stability mechanism is designed to trigger and rebalance them. However, if the mechanism becomes exhausted, xTokens could drop to zero. In such extreme cases, the protocol's total collateralization ratio remains at 100% and fxUSD is always backed and pegged to the dollar. If the market continues to decline, fxUSD may temporarily de-peg, with a strong likelihood of recovery if the underlying market (e.g., ETH) rebounds. For more details about the stability mechanism, please refer to our documentation.

xPOSITION (v2): Rebalancing and liquidation thresholds are carefully calibrated to prevent such scenarios. In an unlikely worst-case scenario where both rebalancing and liquidation mechanisms fail, the protocol may incur bad debt. To safeguard users from this, f(x) Protocol allocates 25% of its revenue to a reserve fund specifically for such extreme cases. If the reserve fund is insufficient, the bad debt would be distributed among all xPOSITIONs.

When you visit our dApp, you might need more clarity regarding the variety of stablecoins available. Each stablecoin is backed by different types of collateral, each with unique risk profiles. Here's a breakdown of their key differences:

• fxUSD: Our flagship stablecoin, operating on v2. It is exclusively collateralized by Lido stETH. While governance may introduce additional collateral types, they will always consist of the most liquid and secure assets in DeFi.
• rUSD: A v1 stablecoin backed by Etherfi eETH and Renzo ezETH. Once staked, it not only earns restaking yields but also provides points!
• btcUSD: A v1 stablecoin collateralized by wBTC. Since wBTC is not yield-bearing, a small funding cost is charged to xToken holders and distributed to stable stakers.
• cvxUSD: A v1 stablecoin backed by aCVX, which is an auto-compounding staked CVX created by Concentrator.
• fETH: Our first-ever v1 stablecoin, designed differently. Instead of being pegged to the dollar, it maintains stability by capturing only 10% of ETH's volatility, with its xToken absorbing the rest.

Each of these stablecoins is designed to serve different use cases and risk appetites. For more details, explore our documentation.

From a user perspective, v1 offers variable leverage tokens, providing up to 4.3x leverage on ETH and 5.6x on wBTC. Most leveraged tokens incur no funding costs. With its unique value proposition—leverage without liquidation or funding costs—and a scalable decentralized stablecoin, v1 serves as a robust solution. However, the unpredictability of variable leverage may not suit everyone's needs. This is where v2 steps in, introducing a groundbreaking feature: Fixed Leverage of up to 10x, fully on-chain, without liquidation risk or funding costs.

v2 also offers an exclusive feature through its stability pool, which delivers exceptionally high and sustainable yields derived from PERP trading commissions. These yields are achieved without exposing stakers to market volatility. The pool is USD delta-neutral and avoids counterparty risk, unlike other perpetual exchange protocols.

v1 still remains an excellent option, offering a unique use case by splitting any yield-bearing asset into two tokens: a stablecoin and a leveraged xToken. The stablecoins can harness enhanced yield without market exposure, while xTokens enjoy enhanced market exposure without yield.