# Felix Felix Protocol is the **second largest protocol** on Hyperliquid with over $150M TVL (as of May 21, 2025), trailing only behind Hyperlend. The [protocol's approach](https://x.com/emaverick90/status/1915013107753144542) aligns with Hyperliquid's philosophy, focusing on ecosystem growth and improvement while prioritizing **security, economic stability, and transparency**. Led by founders [@0xBroze](https://x.com/0xBroze) and [@emaverick90](https://x.com/emaverick90), Felix maintains an educational approach through detailed articles and transparent communications about their development process. ### What is Felix Protocol? Felix offers a **suite of on-chain borrowing and lending products** on Hyperliquid L1, designed to provide liquidity and yield opportunities with minimal friction. The protocol consists of **two core primitives**:
PrimitivePurposeTarget Users
CDP Market (feUSD)Mint feUSD stablecoins against collateralTraders seeking high LTV and cost-effective leverage
Vanilla MarketsVariable-rate lending pools for native assetsUsers preferring direct asset exposure with dynamic rates
### Felix CDP Market: Core Mechanics The CDP Market enables users to **deposit collateral** (like HYPE or UBTC) and **mint feUSD stablecoins** against it. This system brings together: * **Borrowers/Minters** who deposit collateral and **set their own interest rates** * **Stability Pool Depositors** who provide feUSD liquidity and earn interest, fees, and liquidation gains #### Two Key Mechanisms Maintain the feUSD $1 Peg: 1. **Liquidations** * Occurs when a position's health falls below the threshold * Example: User deposits $10,000 in HYPE and borrows $5,000 feUSD. If HYPE value falls to $9,000, the LTV rises to \~55%, triggering liquidation * The system burns feUSD from the Stability Pool and transfers the borrower's collateral (plus a small penalty) to SP depositors 2. **Redemptions** * Activates when feUSD trades below $0.995 * Prioritizes positions with the lowest interest rates first * Anyone can swap 1 feUSD for $1 of collateral from these positions * Unlike liquidations, redemptions can be partial rather than full * To avoid redemptions: ensure your interest rate is competitive compared to the median rate **For borrowers:** Maintain adequate position health (1.25-1.50 recommended) and set competitive interest rates to avoid being first in line for redemptions. **For lenders:** Earn from multiple revenue streams: * Borrower interest (75% routed to Stability Pools) * Protocol fees from position openings and rate changes * Liquidation incentives (acquiring discounted collateral) ### Vanilla Markets Felix's Vanilla Markets operate on Morpho's lending stack, providing a **traditional lending model** similar to Hyperlend: * **Deposit collateral** (HYPE, UBTC, ETH) to borrow assets like USDhl or USDC * **Supply idle assets** to earn yield through a floating APY determined by utilization * **No redemption mechanics** - positions are immune to feUSD peg fluctuations The primary risk is **liquidation** when a position's health factor falls below 1.0. ### USDhl: Recycling Value Back to Hyperliquid USDhl is a **fiat-backed stablecoin** native to Hyperliquid, designed specifically to benefit the Hyperliquid ecosystem. **Why USDhl matters:** * Currently, $2.5B of bridged USDC on HyperCore generates \~$107.5M in annual interest revenue flowing to Circle * As Hyperliquid grows 10x, 100x, or 1000x, this opportunity cost only increases **How USDhl works:** * A significant portion of interest revenue is used to **purchase HYPE** in the open market * Similar to the Assistance Fund's automated HYPE buy-backs, but at the stablecoin layer * Purchased HYPE is strategically redeployed to fuel ecosystem growth **USDhl's impact on Builder Codes:** * Helps bootstrap "Hyperliquid hybrids" by subsidizing builder code fees * Allows interfaces to charge higher rates at no cost to users * Example: If Interface XYZ receives 100 USDhl in rebate budget, it could process $100,000 worth of futures volume before users bear any cost * Interface operators can reinvest builder code revenues into user acquisition and retention **USDhl and feUSD synergy:** * USDhl provides deep liquidity for feUSD pairs on Curve StableSwap, improving peg stability * Serves as a lending asset on Felix's Vanilla Markets * Potential future integration as collateral for minting feUSD (similar to USDC's role in DAI's PSM) * Together, they form a complementary stablecoin pair rather than competing alternatives USDhl created as a **public good initiative** by HyperActive and Felix in collaboration with the [@m0foundation](https://x.com/m0foundation). ### Resources * **Getting Started** * [Felix Vanilla vs Felix CDP: Which is Right For You?](https://x.com/0xBroze/status/1922626240919257377) - Comparison to help choose the right product * [CDP Market Quickstart Guide](https://usefelix.gitbook.io/felix-docs/money-market-products/quickstart/quickstart#step-1-connect-wallet) * [Earning feUSD Yield Guide](https://usefelix.gitbook.io/felix-docs/money-market-products/quickstart/earning-feusd-yield#step-1-connect-wallet) * [Position Management Guide](https://usefelix.gitbook.io/felix-docs/money-market-products/quickstart/publish-your-docs) * **Educational Content** * [Understanding Felix Stability Pools](https://x.com/0xBroze/status/1911762191897739707) - Explains yield mechanics, risk dynamics, and market impact * [Understanding Redemptions and Liquidations](https://x.com/0xBroze/status/1907395802449780931) - Guide to optimizing capital efficiency * [What does it mean to be a Hyperliquid-aligned fiat stable?](https://x.com/husd_fiat/status/1923017204045406416) - Explains USDhl's role in the ecosystem * [The Role of USDhl in the Felix Ecosystem](https://x.com/0xBroze/status/1917551086979932574) - How USDhl and feUSD work together * **Official Documentation** * [Felix Protocol Documentation](https://usefelix.gitbook.io/felix-docs/) --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. 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