Today I would like to talk about a particular protocol called F(x) that manages 2 ETH derivatives: a low volatility one (a kind of stablecoin) and a leveraged ETH perp. Imagine that ETH is split into 2 components. The collateralization ratio should be at least 130%.

Basically we have 3 types of tokens:
1) FXN (Governance token. If blocked you receive veFXN by obtaining the protocol fees)
2) fETH with Beta=10% (pegged 1/10 to the volatility of ETH. If ETH increases by 50%, fETH increases by 5%, if ETH makes a -10%, fETH makes -1%)
3) xETH (represents the "volatility of ETH + 1- beta fETH"; even if it moves in leverage, the risk of liquidation is very low. Usually it is 190% if the beta is 10%)

Imagine depositing 1 ETH ($4000) on F(x) and that fETH and xETH are worth $1 so in the initial situation I will get:
♦ S1 --> 2000 fETH and 2000 xETH=2000$ + 2000$

Imagine that ETH does +50% and that the Beta of fETH is 10%, I will have:
♦ S2 --> 2000 fETH (in this case with a beta of 10%: I will have a +5% increase, or 1/10 of the +50% of the volatility of ETH. fETH will go from 1$ to 1.05$ = 2100$) and 2000 xETH (I will have a +190% increase, or 1 xETH = 1.95$ i.e. 3900$)

The sum is always 1ETH (same thing in dollars) so essentially by choosing one of the two products you can expose yourself to lower volatility of ETH (fETH) or in leverage (xETH) without being liquidated (it could only happen with a flash crash of ETH that goes almost to 0).

What are the advantages?
1) Be exposed to the market with 1/10 of the volatility of ETH (fETH)
2) Be exposed in leverage of approximately 2x on the volatility of ETH (xETH)

Attention, this is not financial advice, DYOR. I only explained how this protocol works.

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