fx Protocol

f(x) Protocol splits ETH and WBTC collateral into two tokens: leveraged long or short exposure on one side, and fxUSD, a stablecoin backed by wstETH and WBTC, on the other. At the 2026-08-14 survey, DefiLlama records about $95.8M of protocol TVL and separately reports pool2 liquidity. That near-threshold record does not support the former $72M size-only decision. The leverage side would fail our rules on its own terms; the stablecoin side needs its own review. We reject the combined record because it groups stable fxUSD with leveraged xPOSITION and sPOSITION products whose loss paths differ in material ways.

Review triggers: events that reopen the verdict
• Reopen only after fxUSD, xPOSITION and sPOSITION each have a separate record pinning every proposed chain, token, implementation, oracle, pool manager and privileged role to a current deployment manifest and applicable audit
• A proposed-size fxUSD redemption must complete into the named collateral or stablecoin route within 50 basis points and the written time limit without an unpriced CreditNote or unresolved recapitalization claim
• Each xPOSITION and sPOSITION record must bound maximum leverage, rebalance and liquidation loss under at least a 30% one-day collateral move and identify which product absorbs any resulting bad debt

Watched nightly: a warning on its venues or files, or a cited document that changes, reopens the memo. The first confirmation is due 2026-11-15.

The research file

Mechanism

fxUSD is minted against stETH and WBTC exposure created alongside leveraged xPOSITIONs; sPOSITIONs add lending-based short or yield exposure. Stability-pool capital and automated rebalancing take losses as collateral prices move. Together, they form a two-sided structured market, not one stablecoin claim.

Control and operating evidence

Governance sets collateral, leverage, fee and peg-defense parameters. These choices can raise funding costs or halt new leveraged positions during stress. The protocol publishes a detailed risk framework and an on-chain redemption design. This memo does not treat those controls as proof that every product side is equally suitable.

Deployment and assurance boundary

The official deployment page points to the Ethereum V2 address list and separately lists V1 and related contracts. The audit index includes Secbit V2 and V2.1 reviews, an OpenZeppelin V2 review, oracle updates, fxSAVE and the January 2026 omnichain fxUSD review. That is useful review evidence, but an audit list is not enough. Each proposed fxUSD, xPOSITION or sPOSITION exposure must match its live chain, contract, implementation, oracle, pool manager and privileged roles to the report that covered them.

Exact V2 identity, authority and incident boundary

The Ethereum V2 list identifies fxUSD proxy `0x085780639CC2cACd35E474e71f4d000e2405d8f6`, PoolManager proxy `0x250893CA4Ba5d05626C785e8da758026928FCD24`, wstETH long pool `0x6Ecfa38FeE8a5277B91eFdA204c235814F0122E8`, FxProxyAdmin `0x9B54B7703551D9d0ced177A78367560a8B2eDDA4`, and CustomProxyAdmin `0xd41d29fc53fE5Ce9f0fB2328E54d35A2a03a324B`. The keeper guide separately identifies ShortPoolManager `0xaCDc0AB51178d0Ae8F70c1EAd7d3cF5421FDd66D`, wstETH short pool `0x25707b9e6690B52C60aE6744d711cf9C1dFC1876`, and WBTC short pool `0xA0cC8162c523998856D59065fAa254F87D20A5b0`. xPOSITION and sPOSITION are non-fungible, pool-specific leveraged positions, not fungible names for fxUSD. The audit index links reviews to V2, V2.1 sPOSITION, oracle, fxSAVE and omnichain components, but neither it nor the deployment list records incidents. We make no claim that the incident history is clean. An allocation record must search governance, upgrade and loss events for its exact pool and implementation, not apply V1 history or one audit to every V2 product.

Exit consequences

fxUSD can redeem at oracle value into stETH or WBTC, subject to a fee and position deleveraging. If system collateralization falls below 100%, openings halt and recapitalization begins. Extreme bad debt can be spread across active positions, and operations can stop. Leveraged holders can be rebalanced or liquidated.

Product-level comparison and decision

fxUSD is the low-volatility side of the invariant. It must be compared with stablecoin or stable-yield claims based on collateral quality, peg defense, redemption and the handling of bad debt. xPOSITION is directional leveraged exposure. It must be compared with clear perpetual or margin positions based on leverage, rebalancing and liquidation loss. sPOSITION borrows collateral through Aave-linked short pools. It must be compared with both short exposure and lending-based structured yield. None of those comparisons supports one approval for the group. A control or exit that protects fxUSD may shift risk to a leveraged side, while a leverage feature has no place in a stable sleeve. Keep the combined record rejected until each named product has a contract-specific record and its own allocation decision.

Sources

The claims above trace to these. Where a number could not be independently verified, the thesis says so.

• f(x) Docs — system risk framework · primary · accessed 2026-08-14
  Supports: loss waterfall, recapitalization, operation halt, bad-debt redistribution
• f(x) Docs — peg and redemption mechanisms · primary · accessed 2026-08-14
  Supports: oracle redemption, collateral assets, stability pool, peg controls
• f(x) Docs — funding and governance controls · primary · accessed 2026-08-14
  Supports: funding fee, governance amplification, sPOSITION exposure, Aave dependency
• f(x) Docs — audit reports and reviewed components · primary · accessed 2026-08-15
  Supports: V2 audit, V2.1 sPOSITION audit, oracle reviews, fxSAVE audit, omnichain fxUSD review
• f(x) Docs — live contracts and deployment manifests · primary · accessed 2026-08-15
  Supports: V2 Ethereum deployment manifest, governance contracts, oracle addresses, pool and token addresses, deprecated contracts
• f(x) V2 Ethereum deployed-address manifest · primary · accessed 2026-08-15
  Supports: fxUSD proxy, PoolManager proxy, long pool, proxy-admin addresses, implementation mapping
• f(x) Docs — keeper contract identifiers for long and short positions · primary · accessed 2026-08-15
  Supports: ShortPoolManager, wstETH and WBTC short pools, long pools, keeper dependency
• DefiLlama — f(x) Protocol survey record · secondary · accessed 2026-08-14
  Supports: survey TVL, Ethereum deployment, dual-token stablecoin category

Inherited controls

The research above describes the protocol layer. Every position also inherits the asset it holds and the chain it settles on. The layer with the most administrative power sets the position’s effective control; that describes control, not quality or suitability.