F(x) Protocol’s Tokenomics & Offer: A Calculated Journey towards Success
The f(x) Protocol is a DeFi solution that addresses the need for a stable asset in the cryptocurrency space while mitigating centralization risks and capital efficiency issues. It was conceived by Aladdin DAO; the banking crisis in March, combined with the depegging of USDC, highlighted the need for a new type of stable asset.
Unlike traditional stablecoins that are pegged to a specific value such as $1, f(x) Protocol introduces a new concept called “floating stablecoin” or fETH. fETH is not pegged to a fixed value, but rather gains or loses a fraction of the price movements of native Ethereum (ETH). This allows fETH to hold its value well in any market condition.
To achieve this stability, the f(x) Protocol creates a complementary asset called xETH, which acts as a zero-cost leveraged long ETH position. xETH absorbs the majority of the volatility of ETH price movements, thereby stabilizing the value of fETH. By having xETH as a protective layer, fETH experiences only small changes in value.
The protocol aims to shift the DeFi landscape away from traditional USD stablecoins and towards assets that are more anchored in the Ethereum economy. With f(x) Protocol, users can mint and redeem fETH directly against pure ETH, eliminating the need for a USD reference.
Making f(x) operational involves the creation of fETH-ETH and xETH-ETH liquidity pools, and incentivization of these pools will be based on f(X) Protocol’s token: FX. FX will be an ETH producing #RealYield machine — vote-locked FX and FX 80/20 lp tokens will earn 50% of the f(X) platform’s fee revenue — more details about the locking mechanisms will be released in a future article.
The f(x) Protocol token, FX, is a crucial element in the ecosystem as it serves as the governance token, enabling holders who ve-lock their tokens to participate in the protocol’s decision-making process. The protocol also incorporates revenue-sharing, which creates a collaborative and mutually beneficial environment by aligning the interests of users with ve-token holders. This incentivizes active engagement in governance and fosters long-term involvement with the protocol. Just like other Aladdin DAO projects, The FX token combines governance and revenue-sharing features to promote engagement, align interests, and enhance the sustainability and decentralization of the f(x) Protocol ecosystem.
Initially, f(X) Protocol will go live with a limited beta mode to give the community a sneak peek, and a chance to play around with the system before full launch. Users will be able to mint/ redeem fETH and xETH. Liquidity will be added only after beta mode ends (planned duration for the beta mode is 2–4 weeks).
It is finally time to reveal the details for FX’s planned tokenomic structure! Similar to CTR & CLEV, FX tokens will be ve-lockable for governance power and revenue sharing. In addition to that, users will be able to ve-lock FX-ETH 80–20 LPs (an LP composed 80% from FX and 20% from ETH). Locking FX and/or FX LP will follow the typical ve-approach developed by Curve, namely 1 FX token or FX LP equivalent token locked for 4 years gives 1 veFX voting power. Users will have the option to choose the locking duration from 1 day to 4 years. As time goes on and the time remaining on the lock drops, so too does the ve power so at any time users may extend the lock on their tokens to maintain the maximum ve-power. In addition to ETH #RealYield, holders of veFX tokens will also be entitled to a boost on their LP earning rate.
As you might expect from an Aladdin project, there is NO team allocation, NO presale or VC involvement, and we will be issuing tokens through a mechanism similar to CLEV: a “capped elastic token offering”. f(X) will raise ETH by selling FX tokens in 2 rounds:
- First round will happen before the beta protocol launch. There will be a maximum of 60,000.00 FX tokens for sale at a fixed price of 1 FX = 0.005ETH. The total supply will be elastic: however much FX is purchased within the offer period (planned to be one week) will represent 3% of the total issuance. During the offer period, as long as the cap has not been reached users may deposit ETH to reserve their FX.
- Second round will take place at the completion of the beta phase of f(x) Protocol; Assuming the first round will sell out, there will be 40,000.00 FX tokens for sale at a price determined in the future. If the first round won’t sell out, we will adjust the second round token supply so that the total sale will account for 5% of FX total supply. During the offer period, as long as the cap has not been reached users may deposit ETH to reserve their FX.
The Token Generation Event (TGE) for FX will take place after beta mode ends and tokens acquired in both rounds will be distributed then.
Understanding FX Vesting: Circulating Market Cap vs FDV
The vesting details play a crucial role in the token allocation and liquidity bootstrap plan. It’s important to note that there is a vesting period associated with each allocation in the schedule, except for the offering and initial liquidity. At the end of the offering period, the circulating market cap will primarily consist of tokens bought by offering participants, along with some liquidity owned by the protocol. This means that during the early stages, the number of FX tokens available for ve-locking and earning protocol fees will be limited.
Throughout the first year, each class of tokens will vest partially, but not all vested tokens will enter circulation. At the end of the first year, less than 33% of the total tokens will have vested. However, the treasury will reserve its share, and Aladdin will fully lock their allocation. Therefore, the maximum number of circulating tokens after one year will be approximately 15% of the total supply. Among these circulating tokens, a fraction may also be ve-locked.
Our beloved Boosters — Community Contributors
During the early stages of Concentrator and CLever, we introduced a community booster program as a way to involve and reward individuals who actively amplify our message and support the community. This program allows participants to earn tokens by contributing to public awareness, education, and community support. We have been fortunate to witness the incredible efforts of research contributors, thread creators, YouTube content creators, and other talented individuals from our community who have stepped up to help with great effectiveness.
The community loved the program, so it will be implemented on f(x) protocol too! This time the program will last 3 years and each month veFX and veFX LP holders will decide the rewards distribution. Any member of the f(x) Protocol community can create content and request to be included on the ballot for a given month.
Building Bridges to Success
Similar to our previous fundraising initiatives, this token offering serves a greater purpose beyond simply acquiring treasury assets for operational needs and growth. In the context of f(x) Protocol, the raised ETH will be utilized to seed liquidity in the fETH-ETH and xETH-ETH pools. This strategic step aims to kickstart the availability of these pools, enabling volatility enthusiasts and those seeking stability to leverage their positions without incurring additional minting and redeeming fees.
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