FEUSD

Felix feUSD is "The People's Stablecoin," a crypto backed digital asset operating within the HyperEVM Ecosystem. It primarily functions by allowing users to borrow feUSD against deposited blue-chip collateral at an affordable interest rate. Beyond borrowing, users can also earn native yield. This includes depositing feUSD into a Stability Pool vault to gain borrower interest and liquidated collateral, or lending other assets via Morpho Vaults to earn additional interest. Felix feUSD combines borrowing and yield generation capabilities for a comprehensive DeFi experience.

The feusd token offers several core use cases for participants within the Felix feUSD ecosystem. Firstly, it can be borrowed by users who deposit blue-chip collateral, providing access to stable liquidity without needing to sell their crypto holdings. Secondly, feUSD holders can deposit their tokens into the Stability Pool vault to earn native yield, which includes borrower interest and proceeds from liquidated collateral. This mechanism incentivizes stability and active participation. Lastly, while feUSD is a stablecoin, the platform also supports lending other assets via Morpho Vaults to earn interest, broadening the utility for yield generation.

Felix feUSD addresses the need for a capital efficient stablecoin borrowing solution and accessible yield generation within the cryptocurrency space. It solves the problem of needing stable assets without liquidating existing crypto holdings by enabling borrowing against blue-chip collateral at affordable rates. Furthermore, it provides avenues for stablecoin holders to earn passive income through its Stability Pool, capitalizing on borrower interest and liquidations. For those seeking diversified yield, the integration with Morpho Vaults offers additional lending opportunities, positioning Felix feUSD as a versatile platform for managing digital assets.

The protocol employs a multi-faceted stabilization mechanism combining redemption arbitrage incentives, dynamic interest rates, and collateral ratio adjustments. During peg deviations, users can profit by redeeming feUSD for underlying collateral at face value, creating market-driven buy pressure. Simultaneously, the protocol automatically increases borrowing costs for new feUSD issuance when below peg, reducing supply. The global collateral ratio tightens during high volatility, requiring more collateral per minted feUSD to withstand market swings.

Collateral security involves three protection layers: 1) Smart contract audits and formal verification of core mathematical functions, 2) Circuit breakers that freeze operations during oracle failures or extreme market movements, and 3) Overcollateralization requirements averaging 200-300% across positions. The stability pool acts as a first-loss capital buffer, with liquidation proceeds distributed to depositors. Emergency shutdown mechanisms enable orderly collateral return if global collateralization falls below critical thresholds.

Yield originates from two protocol-native sources: 1) Liquidation penalties from undercollateralized positions, distributed to stability pool depositors, and 2) Borrowing fees charged during feUSD minting, distributed to collateral providers. This endogenous yield generation eliminates reliance on external protocols, maintaining yield even during market downturns. Yield distribution occurs automatically through rebasing mechanisms and direct token transfers within smart contract operations.

Yes, feUSD integrates with major DeFi lending platforms as borrowable collateral. Its overcollateralized backing and price stability mechanisms make it acceptable collateral at conservative loan-to-value ratios on Compound, Aave, and MakerDAO. The protocol actively develops wrapped token standards for cross-protocol compatibility and partners with lending platforms for direct vault integrations, enabling feUSD holders to leverage stablecoin positions for additional yield generation.

Felix implements a two-stage liquidation process: 1) Stability pool depositors automatically cover undercollateralized debt in exchange for discounted collateral, and 2) Remaining positions enter public auctions with gradual price discovery. This system prevents mass liquidations during flash crashes and eliminates dependency on external keepers. The protocol also features collateral-specific liquidation bonuses that adjust based on market depth and volatility, optimizing recovery rates during market stress.