f(x) Protocol: How to Prevent Get Liquidated and Leverage Liquidation Protection? Comprehensive Analysis on Asset Splitting for Profit!

Recently, many friends have asked me how to prevent getting liquidated and protect against margin liquidation for f(x). In this article, I will clarify these two issues once and for all.

Split the income assets into low-risk fxUSD stablecoins and high-risk xPOSITION leverage tokens, automatically and dynamically balance risks and returns, protect the stable layer, and optimize neutral and conservative strategy allocations.

Our positioning: Income asset splitting protocol (fxUSD stablecoin + leveraged tokens)

Core advantages: The stablecoin part has low volatility and sustainable returns. Clear risk layering with robust design. Suitable for neutral or conservative asset allocation.

f(x) Protocol splits a yield-bearing asset (such as stETH) into two types of tokens:

fxUSD (Stablecoin Layer, Low Risk)

The system adjusts the value ratio of the two in real-time through algorithms, automatically buffering liquidation risks during market downturns, achieving "layered income assets + dynamic risk control."

1: Risk Tranching User's collateral assets are divided into two layers:

Senior Tranche (Stabilization Layer) → fxUSD Junior Tranche (Leverage Layer) → xPOSITION/xETH When the market declines, losses are primarily borne by the Junior layer. fxUSD holders will not Get Liquidated. Leverage risk is absorbed in the lower layer, similar to the "Senior Debt + Subordinated Debt" structure in traditional finance. The risk layering is clearly defined, allowing low-risk investors to hold their positions with peace of mind.

Two: Dynamic Price Auto-Rebalancing

Real-time tracking of underlying asset prices (e.g., ETH) Automatic rebalancing when price fluctuations exceed the threshold: ETH falls → xETH leverage ratio automatically decreases ETH rises → the system gradually increases leverage exposure Avoid the risk of liquidation on a single liquidation line Smooth distribution of profits and losses, similar to the MakerDAO + AMM fusion mechanism.

Three: Built-in liquidation protection threshold (Soft Liquidation / Elastic Liquidation)

No instant liquidation mechanism When the xPOSITION net value approaches the collateral threshold: The system partially liquidates or reissues fxUSD to restore balance with xPOSITION Advantage: Avoids severe losses caused by one-time liquidation The liquidation process is completed across multiple price ranges.

Four Keeper + AMM Collateral Pool Protection

The Keeper monitors the status of the pool, triggering rebalancing or arbitrage AMM mechanisms to ensure sustainable liquidity for fxUSD ↔ xPOSITION. In extreme market conditions (such as a 40% drop in ETH), priority is given to managing risk positions to avoid chain Get Liquidated.

For example: Assume ETH drops by 20%, xETH opens with 3x leverage. If the price approaches liquidation, the system automatically reduces the leverage. fxUSD maintains a 1:1 dollar peg for stability. Profits/losses are automatically distributed, with no chain reaction.

f(x) Protocol provides stable returns and leverage gains while reducing overall system risk through asset splitting + dynamic risk control + flexible liquidation. It balances the needs for neutral and conservative strategy allocation, ensuring safety for stablecoin holders and allowing leveraged investors to pursue returns flexibly.
#fxusd FXN #xETH DeFi