DFX V1 Launch

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DFX is a new automated market maker (AMM) optimized for forex trading.

The goal of DFX is to provide a decentralized protocol to enable movement of funds via different currencies at the best prices.

DFX initially launched a liquidity mining program using Balancer Smart Pools. This was called the v0 release and allowed early DFX adopters to provide liquidity into three different pools: CADC/USDC, EURS/USDC and XSGD/USDC.

Recently, the DFX v0.5 release was deployed as a guarded launch of the new smart contracts. This was to minimize potential risks to the system while bugs were ironed out.

The successful completion of v0.5 leads us to what we now call DFX v1.

AMM

DFX v1 is a set of contracts that leverage an oracle powered by Chainlink to optimize forex prices on-chain. The oracle does not dictate the price of the AMM, but it serves as a reference point for the bonding curve.

In a traditional AMM, the price only changes when someone trades on the AMM. With DFX v1, the price changes based on the oracle price AND when swaps are done to move the pool ratios.

As the general shape of the curve will remain consistent, there will be several parameters that may change as different currencies have different characteristics. There is a region on the bonding curve that is considered the “flat region” thus remaining at a constant price to the oracle.

At launch, this represents anywhere from 25–75% of the pool. Once the ratio exceeds this range, the rates start increasing as the fee component of the bonding curve increases to incentivize arbitrage and rebalancing of the pool.

Image for visual representation only

DFX engaged Trail of Bits to audit the DFX smart contracts beginning on April 12, 2021 and we received the final report draft on May 3, 2021. The three week engagement resulted in 16 total issues, where 2 were considered high-severity. These were:

1. The CurveMath.calculateTrade function uses an equality check. The concern is that a future version of Solidity can change the order and semantics around this equality check such that it produces a different result.
2. The contract converts raw values to numeraire values for arithmetic. There may be a scenario where raw values are used instead of numeraire values resulting in disproportionate tokens received.

Both fixes were quite simple and promptly implemented. As the equality check has been defined more implicitly and the raw values are converted to numeraire values prior to doing any arithmetic operations.

The full Trail of Bits audit report can be found here.

Bug Bounty Program

DFX has a Bug Bounty program to encourage security researchers to spend time studying the protocol in order to uncover vulnerabilities. We believe these researchers should get fairly compensated for their time and effort, and acknowledged for their valuable contributions.

The following is a brief summary of the program.

Classifications

• Severe: Highly likely to have a material impact on availability, integrity, and/or loss of funds.
• High: Likely to have impact on availability, integrity, and/or loss of funds.
• Medium: Possible to have an impact on availability, integrity, and/or loss of funds.
• Low: Unlikely to have a meaningful impact on availability, integrity, and/or loss of funds.

Rewards

• Severe: 20,000–50,000 USDC
• High: 5,000–20,000 USDC
• Medium: 1,000–5,000 USDC
• Low: 100–1,000 USDC

Details of the Bug Bounty program can be found here.

Governance

Initially the DFX protocol will be using a snapshot instance for voting. You can find the governance portal here: https://vote.dfx.finance/

This portal enables DFX holders to initiate proposals and vote on updates to the protocol. As the protocol matures and governance requirements change, the protocol may transition over to another platform for governance.

New Stablecoins

In the past few months, we have been engaging with various stablecoin issuers around the world that can provide a high quality fiat-backed stablecoin into the DFX ecosystem.

The protocol is very motivated to add additional stablecoins to the protocol after the v1 launch. We’re in discussion to onboard several new stablecoins in the next month or two. This will greatly increase the value of the network and protocol as we help bring additional stablecoins online.

Scaling

Scaling is one of the major items we will be working on after the v1 launch. Currently we are evaluating scaling solutions that are L2, sidechains, and other blockchains.

There will be an emphasis on EVM compatibility to reduce dev work and rewriting the contracts. No immediate timeline for this right now, but it is in development and considered high priority.

DEX Aggregators

Integration with DEX aggregators will be important as they will enable swapping of different DFX stablecoins to/from different tokens.

Want to buy ETH with XSGD? You will be able to do that with our DEX aggregator partners as they will source the best rates on the market and help you execute the trade. DEX aggregation will also help with arbitrage opportunities and foster greater adoption of the assets available on DFX.

Partnerships & Integrations with other DeFi Projects

There is strong momentum to get DFX and DFX related assets integrated with different DeFi protocols. We are in the process of working with various partners to use high quality DFX enabled stablecoins and DFX LP tokens as collateral in other protocols.

These assets are unique such that they don’t move with the crypto markets and provide a significantly lower liquidation risk. Having assets that do not directly correlate in price movement of crypto assets will be very important to the safety and security of the entire ecosystem.

We owe a large part of our success due to strong and reliable partners, including Chainlink and USDC.

Final Note

DFX is well positioned to capture a significant size of the stablecoin market. The protocol aims to become a catalyst and marketplace for stablecoins of every currency available. DeFi cannot become a global financial ecosystem if everything is only denominated in USD.

DFX will be a cornerstone protocol in the DeFi ecosystem that will onboard billions of users into financial freedom. This is just the beginning.