What is flexUSD?

FlexUSD is a US-dollar pegged stablecoin. It is unique among stablecoins in that it pays holders interest automatically. Interest rates vary, but are often as high as 20% APY.

Table of Contents

  1. What is flexUSD backed by?
  2. Why not hold USDC instead of flexUSD?
  3. What blockchains does flexUSD live on?
  4. How can I get flexUSD?
  5. How much interest can I earn by holding flexUSD?
  6. Where does the yield for flexUSD come from?
  7. What are repo markets?
  8. How does the Bitcoin.com Exchange’s repo market work?
  9. What does a Bitcoin.com Exchange repo trade look like?
  10. Why was flexUSD created?
  11. Why does the flexUSD interest rate fluctuate?

What is flexUSD backed by?

FlexUSD is collateralized by USDC, which is itself a stablecoin. USDC is one of the most popular stablecoins in the world due to its stricter adherence to and compliance with US regulators, making holders of USDC much more confident that it is, in fact, backed 1:1 by “real” US dollars.

Why not hold USDC instead of flexUSD?

The main reason is that you can earn compounding interest automatically just by holding flexUSD. Additionally, you can use flexUSD as collateral to trade on the Bitcoin.com Exchange, meaning you can earn yield and trade at the same time.

By contrast, to earn interest with USDC and other stablecoins, you’ll need to actively put them to work by lending them directly to a third-party platform, using them as collateral to trade derivatives products, or deploying them in the smart contracts of DeFi protocols.

What blockchains does flexUSD live on?

FlexUSD lives on Ethereum as an ERC-20 token, and on SmartBCH (SEP-20).

How can I get flexUSD?

You can trade crypto for flexUSD on the Bitcoin.com Exchange’s spot market. Additionally, you can “mint” flexUSD using USDC here.

How much interest can I earn by holding flexUSD?

Interest rates vary but are often as high as 20% APY. You can track the historical rate of interest paid to flexUSD holders here. The following chart compares flexUSD’s interest rate, which averaged 11.09% APY in 2021, to that offered by cash deposits at Bank of America:

FlexUSD offered an average interest rate of 11.09% APY in 2021.

A holder of $1000 of flexUSD for all of 2021 would have earned an additional $109 in flexUSD by the end of the year.

Where does the yield for flexUSD come from?

Yield for flexUSD is generated by interest paid on short-term lend/borrow markets (repo) on the Bitcoin.com Exchange and CoinFLEX exchange. When participants in these repo markets borrow USDC, they have to pay a small amount of interest, 90% of which is repaid to flexUSD holders. Holders of flexUSD automatically receive these payments every eight hours, assuming there was funding collected via the repo market during that time. To better understand how this works, let’s briefly examine repo markets.

What are repo markets?

Short for “repurchase agreements,” the traditional finance repo markets (which are not open to retail participants) account for $2-4 trillion dollars in volume/day. Here’s how tradfi repo markets work in the US:

One party sells Treasury securities to another and agrees to purchase back those securities for a slightly higher price in the near future (typically the next day). This repurchase agreement is essentially a short-term collateralized loan. The difference between the original price and the second, higher price, can be considered the “interest” paid on the loan. It’s also known as the “repo rate.”

How does the Bitcoin.com Exchange’s repo market work?

Anyone can participate in the market every hour, on the hour by either lending or borrowing. Lenders earn yield (interest) on their short-term loans. Borrowers are able to use their crypto holdings as collateral for a short term loan without going through the lengthy process of applying via a bank.

What does a Bitcoin.com Exchange repo trade look like?

  • A “buy repo” (lender) trade automatically buys spot and sells perp (perpetual futures).
  • A “sell repo” (borrower) trade automatically sells spot and buys perp.

You can participate in the Bitcoin.com Exchange repo market here.

Why was flexUSD created?

CoinFLEX was the first crypto exchange to create a repo market that’s available to anyone. In December 2021, the Bitcoin.com Exchange partnered with CoinFLEX, bringing additional depth to the market.

In the early days of CoinFLEX repo trading, it was typical for traders to manually arbitrage between the different repo pairs. FlexUSD was created as a way to automate the process. FlexUSD effectively tokenized the buy repo trade (i.e “buy spot, sell perp” basis trading) to act like a “smart trader” by looking for the best yield opportunities from every repo order book.

Why does the flexUSD interest rate fluctuate?

Yield for flexUSD captures the basis difference between perps and spot markets. In downtrending markets, there is generally decreased demand for perps This decreases the funding rate, which lowers the yield paid to flexUSD holders. However, regardless of market direction, flexUSD holders will continue to earn yield since it is only when the funding rate in the perps market is 0% that no yield is generated for flexUSD.

If you have further questions or concerns about flexUSD, don’t hesitate to reach out to our support team here.

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