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 weighted gains distribution system on shared collateral. When the residual pool (collateral minus USDEX liabilities) changes in value, gains and losses are distributed proportionally based on each tier's weighted stake. The weights are 1:2:4 for 5X:10X:20X, meaning 20X tokens gain or lose value 4x faster than 5X tokens. Higher leverage tokens can reach zero NAV before lower leverage tokens during price drops. 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       │      │ Weighted distribution:  │
│ USD parity   │      │ 5X=1x, 10X=2x, 20X=4x   │
│ First claim  │      │ (gains/losses × weight) │
└──────────────┘      └─────────────────────────┘

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

Leverage tokens mint based on current NAV (Net Asset Value). The number of tokens you receive depends on the current price per token. When NAV is 1.0 ETH, you get 1 token per ETH deposited. When NAV is 0.5 ETH, you get 2 tokens per ETH deposited.

Leverage emerges from weighted gains distribution: As ETH price moves, your token value amplifies those movements based on tier weights. The weights are 1:2:4 for 5X:10X:20X. This means 10X tokens gain/lose value twice as fast as 5X tokens, and 20X tokens gain/lose value four times as fast.

Net Asset Value (NAV)

What is NAV? NAV is the value per token, calculated as tierValue / tokenSupply.

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

Leverage Token NAV: Calculated using weighted gains distribution:

tierValue = tierBase + (gains × tierWeighted / totalWeightedBase)
NAV = tierValue / supply

Where:

  • tierBase = total ETH deposited into that tier
  • gains = current residual - baseline residual (can be negative for losses)
  • tierWeighted = tierBase × weight (weights: 5X=1, 10X=2, 20X=4)
  • totalWeightedBase = sum of all tiers' weighted bases

What makes NAV change:

  • ETH price movements: Residual value changes, distributed by tier weights
  • Staking yield: Protocol earns yield on deposited ETH, increasing residual
  • Protocol utilization: Higher utilization means smaller residual, amplifying movements
  • New mints/redemptions: Changes tier base values and token supplies

Key insight: Higher leverage tokens move faster because they receive a larger share of gains/losses relative to their base value. A 10% residual gain gives 5X tokens +X%, 10X tokens +2X%, and 20X tokens +4X%.

Weighted Gains Distribution

The protocol uses a unified model for distributing both gains and losses across leverage tiers.

The weights: 5X=1, 10X=2, 20X=4

These weights determine how gains and losses are allocated. Each tier receives:

tierShare = totalGains × (tierBase × weight) / totalWeightedBase

Example with $100 gain:

Suppose three users each deposited 10 ETH into different tiers:

  • 5X tier: 10 ETH base × 1 weight = 10 weighted
  • 10X tier: 10 ETH base × 2 weight = 20 weighted
  • 20X tier: 10 ETH base × 4 weight = 40 weighted
  • Total weighted: 70

Distribution of $100 gain:

  • 5X gets: $100 × 10/70 = $14.29 (+1.43% on 10 ETH)
  • 10X gets: $100 × 20/70 = $28.57 (+2.86% on 10 ETH)
  • 20X gets: $100 × 40/70 = $57.14 (+5.71% on 10 ETH)

Note the ratios: 20X gained 4x as much as 5X, and 10X gained 2x as much as 5X. This matches the weight ratios.

Losses work the same way: If the residual dropped by $100, the same distribution applies but in reverse. 20X loses value 4x faster than 5X.

When Tokens Hit Zero

Different tokens hit zero at different price drops:

  • 20X-ETH: Goes to zero fastest (loses value 4x faster than 5X)
  • 10X-ETH: Goes to zero at moderate drops (loses value 2x faster than 5X)
  • 5X-ETH: Goes to zero last (most protected tier)

Why sequential wipeout? Because of weighted gains distribution, higher leverage tiers absorb losses faster. When 20X's tier value reaches zero, it stops participating in further losses. The remaining losses flow to 10X and 5X.

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. The same weighted distribution that caused the wipeout will drive recovery. 20X recovers fastest because it receives the largest share of gains.

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 based on current NAV.

NAV-based minting: The number of tokens you receive depends on the current NAV:

tokensOut = depositAmount / currentNAV

Example at different NAVs:

Scenario 1: NAV = 1.0 ETH (genesis or neutral market)
You deposit: 10 ETH
You receive: 10 tokens (worth 10 ETH)

Scenario 2: NAV = 2.0 ETH (after gains)
You deposit: 10 ETH  
You receive: 5 tokens (worth 10 ETH)

Scenario 3: NAV = 0.5 ETH (after losses)
You deposit: 10 ETH
You receive: 20 tokens (worth 10 ETH)

Key insight: You always receive tokens worth your deposit amount. NAV-based minting ensures no arbitrage. New minters can't extract value from existing holders.

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.