arUSD: The Future of Automated Savings and Compound Interest
In an era where DeFi is rapidly evolving, the concept of saving has transcended traditional bank accounts. Enter arUSD, an innovative autocompounding token designed to revolutionise how DAOs and individual users manage and grow their savings. Much like a high-yield savings account, arUSD offers users the opportunity to earn interest on their holdings. However, it goes a step further by automatically reinvesting earnings to maximise returns.
rUSD is a stablecoin built by f(x) Protocol and backed by EtherFI’s eETH and Renzo’s reETH (you can check the backing here: https://fx.aladdin.club/assets/rUSD/ ). When deposited in the eETH Stability Pool, rUSD earns yield in the form of eETH and FXN. On top of the yield, rUSD also earns 4X EtherFi and 2X Eigen Layer points, without market volatility exposure! The same is true for ezETH Stability Pool, but instead of EtherFi eETH and points, users accrue Renzo’s ezETH and ezPoints. Thanks to the innovative design of rUSD, users can choose collateral exposure while earning yield and points.
arUSD is the tokenized version of rUSD EtherFi Stability Pool vaults from Convex Finance. Why eETH? We believe EtherFi’s eETH is the most liquid and reliable LRT! Why Convex vaults? Boosted yield! Since Convex it’s a big veFXN holder, it provides the highest yield on f(x)’s Stability Pools.
The ETH and FXN yield is swapped for more rUSD, which is reflected in the index growth (same model as with aTokens from Concentrator).
As part of f(x)’s risk management mechanisms, liquidations may occur when rUSD goes into stability mode, redeeming rUSD in the stability pool for weETH at the prevailing liquidation price. The liquidated weETH is held in the vault, and converted back to rUSD only when the value of weETH in the vault is 105% of the redeemed rUSD. That’s also when arUSD index will increase. This allows bullish ETH users to potentially earn 5% more yields from the growth of ETH and its liquid restaking derivative, eETH.
Another way to think of it is that the stability pool structure enables users to effectively sell put options on ETH under attractive terms. Liquidations occur if the system collateralization ratio drops below 130%. Users collect put option premiums as yield and index growth, plus approximately 4X EtherFI points and 2X Eigen Layer points. In a tail risk event where ETH price drops, vault holders can acquire ETH at a low price, benefiting from price rebounds. A 5% rebound translates to an additional 5% yield on rUSD.
What Can You Do with arUSD?
Simple Savings
You can simply hold arUSD in your wallet and treat it like a savings account, enjoying the benefits of automatic compounding interest.
Advanced DeFi Strategies
For more savvy DeFi users, arUSD offers a range of advanced options:
Yield Splitting with Pendle:
arUSD is ideal for use with Pendle, where it can be split into Principal Tokens (PT) and Yield Tokens (YT).
PT holders earn fixed yields to maturity plus LP incentives, while YT holders can earn all the yields along with restaking points.
Collateral on Lending Protocols:
arUSD is an ideal collateral for lending protocols.
As it already earns leveraged points, users can loop borrow against other stablecoins, leveraging up to earn more yields and points without liquidation risks under most circumstances.
Layer 2 Utility:
On Layer 2s, users can earn restaking yields and leveraged points with low transaction costs.
In conclusion, arUSD is not just a token; it represents a generic architecture that can be used to tokenize any f(x) stability pool. This flexibility extends to other assets such as fxUSD or btcUSD, making it a versatile and innovative solution in the DeFi landscape. Whether you are a conservative saver or an experienced DeFi user, arUSD provides a robust platform for maximising returns and optimising your yield strategies.
