USDx: The Synthetix Native Stablecoin on Arbitrum

What is USDx?

USDx is the native stablecoin of the Synthetix protocol on Arbitrum. Depositors (aka LPs) use it as a loan against their collateral, and traders use it to trade Synthetix Perps.

How USDx is Supported

USDx is backed by collateral provided by users who generate it. This collateral serves a dual purpose:

1. It supports the value of USDx, ensuring its stability.

2. It underwrites Synthetix Perpetual Futures (Perps), providing liquidity to the derivatives market that traders utilize.

The full list of collateral types can be found on the V3 Liquidity App.

Generating USDx

Users can generate USDx against their collateral through the Synthetix protocol. Here's how it works:

1. Deposit collateral into Synthetix V3 on Arbitrum.

2. Mint USDx against this collateral. (optional - users earn rewards regardless of borrowing/minting)

3. Your collateral automatically supports Synthetix Perps trading.

The maximum collateralization ratio (c-ratio) for each collateral type is governed by the SCCP process, which sets collateralization ratio variables for each vault. The collateralization ratios in effect today (September 16, 2024) are:

• USDC: 200%

• ARB: 350%

• WETH: 300%

• USDe: 200%

• weETH: 350%

• wstETH: 350%

As an example, this means that for every $3.50 of wstETH collateral a user has, they can mint a maximum of $1 of USDx.

0% Interest

Synthetix allows users to generate USDx at 0% interest. This aims to:

• Encourage adoption of USDx

• Increase liquidity in the Synthetix ecosystem to support derivative products

• Provide users with a cost-effective way to access stablecoin liquidity

Synthetix has a track record of offering 0% interest loans against SNX collateral on Optimism and Ethereum. Over the past five years, sUSD (Synthetix's previous stablecoin) has consistently maintained its peg. We expect similar stability for USDx, given the inherent demand for trading within the Synthetix ecosystem.

Note: This 0% interest rate is subject to change based on market conditions and protocol governance decisions.

Providing Liquidity with USDx

Once you have USDx, you can earn additional rewards by providing liquidity. Two main options are available:

1. Ramses USDe/USDx pool

2. Curve USDe/USDx pool

By participating in these liquidity pools, you can earn:

• Trading fees from the pool

• SATs from the Ethena Liquidity Campaign

Using USDx

USDx is designed to be utilized within the Synthetix ecosystem. Current use cases will include:

1. Trading Synthetix Perps on Kwenta

   • Use USDx as collateral for leveraged trading

   • Settle profits/losses in USDx

2. Future Integrations

   • Synthetix is working on partnerships to expand USDx usage across various DeFi platforms and applications.

Liquidation Risks

Minting USDx against your LP collateral does not come without the risk of liquidation, and operates similar to other CDPs by applying a liquidation ratio to each vault. The liquidation ratios in effect today (September 16, 2024) are:

• USDC: 105%

• ARB: 150%

• WETH: 125%

• USDe: 105%

• weETH: 150%

• wstETH: 135%

Users who open USDx loans against their LP collateral should be mindful of their c-ratios as the value of their collateral changes to prevent liquidations.