Earning with Flux
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How can I earn with Flux?
The first category of earner with Flux would do so by borrowing. A user can leverage their collateral—Borrow fUSD and sell to gain more exposure to your chosen collateral.
The second category of earner, profits from borrower's interest payments. To profit from these payments, a user can:
Deposit into a Flux Reservoir - A huge chunk of fUSD interest payments is divided over Flux Reservoirs, which are of crucial importance to the health of the protocol.
Provide fUSD DEX Liquidity - Another part of the interest payments are distributed over fUSD liquidity providers on DEXes.
Buying ILIS - A small part of the interest earned is used to buy back and burn ILIS. Hold ILIS to win here!
The exact distribution of fUSD interest payments is as follows:
Flux Reservoirs: 65%
Liquidity Incentivization: 25%
ILIS buybacks: 10%
Flux Reservoirs
What is a Flux Reservoir?
Flux Reservoirs handle liquidations of undercollateralized loan's in a profitable manner. Users can deposit fUSD into Flux Reservoirs to participate and profit from liquidation rewards. To make it even more attractive to deposit fUSD into these Flux Reservoirs, the majority of interest earned by the protocol (65%) is funneled to Flux Reservoirs as well.
Where does Flux Reservoir's yield come from?
The yield comes from two sustainable sources:
Interest payments—a large part of borrower interest goes to Flux Reservoir depositors, paid in fUSD.
Liquidation gains—Your fUSD is used to liquidate under-collateralized loans, earning (staked) XRD at a discount (~10%).
What happens when depositing to a Flux Reservoir?
Flux Reservoirs consist of two tokens: fUSD and the collateral type of the market which liquidations it is responsible for. Most of the time, only fUSD should be within these Flux Reservoirs. Then, fUSD is just deposited straight into the Reservoir, and you receive your fair share of pool tokens to represent this deposit. However, when depositing into a Flux Reservoir that also contains some of the collateral token, fUSD is used to buy a part of the Reservoir's collateral token, so the depositor's fUSD/collateral token ratio is equal to the final Reservoir's fUSD/collateral token ratio.
Can I withdraw my Flux Reservoir contents at any time?
Yes, there is no lockup period. Users are free to withdraw their Flux Reservoir deposits whenever they want. There is no fee tied to it either.
How is it ensure Flux Reservoir depositors are primarily exposed to fUSD?
Collateral contained within Flux Reservoirs can be bought up with a small discount using fUSD. This is almost always profitable, and ensures that all Flux Reservoir contents are converted into fUSD again after a liquidation. The discount is relatively unsubstantial, so liquidation gains still far outweigh it for Flux Reservoir depositors.
Why are there multiple Flux Reservoirs?
Each collateral type (XRD or LSULP) has a separate borrow market and Flux Reservoir to:
Maintain independent interest rates and liquidations for each collateral asset.
Allow depositors to choose their exposure based on risk preference.
How do risks differ between Flux Reservoir?
Risk depends on the pool you choose:
Flux Reservoir depositors only gain exposure to the collateral they choose.
Separate pools compartmentalize risk, preventing failures in one asset from affecting the whole system.
However, all fUSD holders remain exposed to the overall collateral mix—XRD and LSULP, this includes the fUSD you have deposited into the Flux Reservoir!
Incentivized Liquidity
What is Incentivized Liquidity?
fUSD liquidity is extremely important to the success of Flux. Hence, liquidity provision of fUSD on DEXes is incentivized. Provide liquidity, and receive weekly fUSD airdrops.
Where do these Incentives come from?
A substantial part of borrower interest (25%) goes to incentivizing liquidity provision.
Where do I provide liquidity?
The liquidity incentives are distributed over two pools.: 1. fUSD / xUSDC on C9 (Shape Liquidity): 80% of incentives 2. fUSD / XRD on Oci (FlexPool 50/50): 20% of incentives
Can I just provide liquidity at every price?
No, for shape liquidity liquidity provision on CaviarNine, only liquidity between 0.95 and 1.05 fUSD/xUSDC is incentivized at the time of writing. See the Flux Earn page for the current incentivized ranges.
Also, for shape liquidity, rewards are split in half, one side goes towards supplied fUSD liquidity, and the other to supplied xUSDC liquidity. If one of these is non-existent between 0.95 and 1.05 fUSD/xUSDC, rewards are fully allocated to the one that does exist.
ILIS Buy Backs
What are ILIS buy backs?
It is of crucial importance to make sure the ILIS token is valuable, as this is what ensures the safety of the DAO. To make sure there is substantial incentive to hold ILIS, part of the protocol's yield (10%) is funneled into buying back ILIS, and burning it.
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