Exposure Finance
TESTNET

Exposure Finance Documentation

Table of Contents

  1. Introduction
  2. Protocol Architecture
  3. Understanding Leverage Tokens
  4. The Stability Pool
  5. User Guides

Introduction

What is Exposure?

Exposure lets you trade leveraged ETH positions without liquidations or borrowing.

Deposit ETH, choose your leverage level, and get tokens that amplify price movements:

  • USDEX - Stable token pegged to $1 USD
  • 5X-ETH - Leverage token with ~5x leverage at 80% protocol utilization
  • 10X-ETH - Leverage token with ~10x leverage at 80% protocol utilization
  • 20X-ETH - Leverage token with ~20x leverage at 80% protocol utilization

How it works: Leverage is achieved through a virtual exposure allocation system on shared collateral. Each leverage token receives a proportional share of the residual pool based on its virtual exposure. All leverage tokens share the same residual pool and hit zero NAV at the same price point, but higher leverage tokens lose value faster in absolute terms along the way. No borrowing occurs; liabilities are limited to issued senior claims.

No liquidations: Your position never gets forcibly closed. Tokens can go to zero, but you're never liquidated. If prices recover, your tokens recover too.

No borrowing: This isn't a loan. You own tokens that represent leveraged claims on a shared ETH pool. No debt, no interest, no funding rates.

Zero fees: All minting, holding, and redeeming is free. Protocol takes 10% of staking yield; 90% goes to Stability Pool depositors.

Capital Stack
═══════════════════════════════════════════════════
│ Collateral: ETH → ERC4626 Vault Shares (stETH)  │
═══════════════════════════════════════════════════
                    ↓
        ┌───────────┴───────────┐
        ↓                       ↓
┌──────────────┐      ┌─────────────────────────┐
│ USDEX (80%)  │      │ Junior Residual (20%)   │
│ Senior       │      │ Shared by all leverage  │
│ USD parity   │      │ tokens proportionally   │
│ First claim  │      │ via virtual exposure    │
└──────────────┘      └─────────────────────────┘

Protocol Architecture

Exposure uses two smart contracts:

ExposurePool - Holds collateral, mints/burns tokens, harvests yield

StabilityPool - Accepts USDEX deposits, earns yield, provides deleveraging

Understanding Leverage Tokens

How Leverage Tokens Work

All leverage tokens mint 1:1 with your collateral. Deposit 10 ETH → receive 10 tokens. All tokens start with equal value (1.0 ETH per token).

Leverage emerges from price amplification: As ETH price moves, your token value amplifies those movements. 10X tokens move twice as much as 5X tokens. 20X tokens move four times as much.

Net Asset Value (NAV)

What is NAV? NAV is the value per token.

USDEX NAV: Always $1.00. Simple stable token pegged to USD.

Leverage Token NAV: Starts at 1.0 ETH per token, then changes based on market conditions.

What makes NAV change:

  • ETH price movements: As ETH goes up or down, your token value amplifies that movement
  • Staking yield: Protocol earns yield on deposited ETH, which increases token value over time
  • Protocol utilization: Higher utilization means more leverage, so bigger price swings
  • Deleveraging events: When USDEX gets redeemed, more value goes to leverage tokens

Key insight: All leverage tokens start at the same NAV (1.0), but they diverge as prices move. Higher leverage tokens move faster.

When Tokens Hit Zero

Different tokens hit zero at different price drops:

  • 20X-ETH: Goes to zero fastest (smallest ETH drop needed)
  • 10X-ETH: Goes to zero at moderate drops
  • 5X-ETH: Goes to zero last (needs largest ETH drop)

What happens at zero: You can't mint or redeem that token anymore. But positions aren't liquidated—you still hold the tokens.

Can tokens recover? Yes! If ETH price recovers, USDEX gets redeemed, or yield accumulates, tokens can come back from zero. Higher leverage tokens recover faster (they hit zero faster and recover faster).

Key insight: This is different from liquidation. Your tokens don't get forcibly sold. They just become worthless at current prices, but retain option-like recovery potential.

Leverage Changes With Utilization

Your leverage isn't fixed—it increases as more people mint USDEX.

When protocol utilization is low (50%):

  • 5X acts more like 2x leverage
  • 10X acts more like 4x leverage
  • 20X acts more like 8x leverage

When utilization hits the target (80%):

  • 5X acts like true 5x leverage
  • 10X acts like true 10x leverage
  • 20X acts like true 20x leverage

Why? As more USDEX gets minted, the "junior pool" becomes a smaller slice of total collateral. This concentrates gains and losses, creating higher effective leverage.

Monitor utilization to understand your actual leverage exposure. The protocol targets 80% utilization, where token names match their actual leverage.

The Stability Pool

What It Does

Deposit USDEX to earn concentrated yield from protocol operations. In exchange, you provide deleveraging liquidity when utilization exceeds 80%.

Why yield is concentrated: Protocol earns yield on 100% of collateral but distributes to Stability Pool depositors only. If the pool is $2M but protocol TVL is $10M, you earn yield on the full $10M.

The tradeoff: When utilization > 80%, your USDEX gets converted to stETH to rebalance the protocol. You maintain USD value but shift from stable to ETH exposure.

How to Use It

Deposit: Mint or buy USDEX, deposit into Stability Pool, start earning immediately.

Withdraw: Request unlock → wait 7 days → claim within 1-day window. Funds stay earning during the wait.

Claim Yield: Get rewards as stETH, ETH, USDEX, or compound back into the pool.

User Guides

For USDEX Holders: Stable Value

Your Goal: Hold USD-denominated value while earning from underlying stETH yield (indirectly through protocol).

Minting USDEX

What you need: ETH or stETH

Process:

  1. Deposit your ETH into ExposurePool
  2. Protocol uses Chainlink oracle to price ETH in USD
  3. You receive USDEX at 1:1 USD value

Example:

You deposit: 10 ETH
ETH price: $2000
You receive: 20,000 USDEX

Constraints:

  • Only works if utilization stays below 80%
  • If protocol hits 80%, minting is blocked until deleveraging reduces it

Redeeming USDEX

You can redeem USDEX for:

  • stETH vault shares (most efficient)
  • ETH (automatically unwrapped)

Redemption value: Based on current ETH price from oracle

Example:

You redeem: 20,000 USDEX
ETH price: $2000
You receive: 10 ETH (or equivalent stETH)

Insolvency haircut: In extreme scenarios where collateral < USDEX supply (very rare), redemptions are pro-rated.

For Leverage Token Holders: Amplified Exposure

Your Goal: Get leveraged ETH exposure without borrowing or liquidation risk.

How to choose: Match leverage to your conviction. Very bullish on ETH short-term? Consider 20X. Want leveraged exposure but worried about volatility? Start with 5X. Looking for balance? 10X splits the difference.

Minting Leverage Tokens

What you need: ETH or stETH

How it works: Deposit ETH, receive tokens. Simple as that.

Every leverage token mints 1:1: Deposit 10 ETH → receive 10 tokens. Doesn't matter if you choose 5X, 10X, or 20X—you always get the same number of tokens for your collateral.

All tokens start at equal value: Each token begins worth 1.0 ETH. Your 10 ETH deposit gives you tokens worth exactly 10 ETH.

Leverage appears after you mint: As prices move, your tokens amplify those movements based on your chosen multiplier.

Redeeming Leverage Tokens

You can redeem for:

  • stETH vault shares
  • ETH
  • USDEX (if utilization allows)

Redemption formula: value_out = tokens_in × current_NAV

Example:

You hold: 5 10X-ETH tokens
Current NAV: 2.5 ETH per token
You receive: 12.5 ETH (or equivalent)

Monitoring Your Position

Check your NAV: Token value changes as ETH price moves. Higher leverage = bigger swings.

Watch utilization: Higher utilization = higher effective leverage = more risk.

For Stability Pool Depositors

Depositing USDEX

What you need: USDEX (mint it first or buy it)

Process:

  1. Approve StabilityPool to spend your USDEX
  2. Call deposit with your amount
  3. Start earning yield immediately

Example:

You deposit: 10,000 USDEX
Yield APY: 18% (concentrated from protocol operations)
After 1 year: ~11,800 USDEX + stETH from any deleveraging

Withdrawing USDEX

Two-step process:

Step 1: Request Unlock

  • Signal intent to withdraw specific amount
  • Funds stay in pool earning yield
  • Cannot have multiple pending requests

Step 2: Claim After 7 Days

  • Wait 7 days from request
  • Claim within 1-day window
  • Receive your USDEX (minus any deleveraging losses)

Check status: The interface displays when your unlock becomes claimable and when it expires.

Cancel anytime: You can cancel pending requests before the claim window opens.

Deleveraging Impact

When utilization exceeds 80%, your deposits are automatically consumed to reduce protocol leverage. Your USDEX balance decreases proportionally while you receive stETH compensation of equivalent USD value. Multiple deleveraging events compound, potentially reducing or depleting your position over time. The epoch/scale accounting system ensures precise loss tracking across unlimited events.

Claiming Your Yield

Four options:

1. Claim as stETH → Direct vault shares 2. Claim as ETH → Automatically unwrapped 3. Claim as USDEX → Stay in stable (if utilization allows) 4. Compound → Reinvest for growth

Choose based on whether you want to maintain stable exposure or take ETH exposure.