How Does FxDAO Work?
FxDAO is the first decentralized stablecoin protocol on the Stellar blockchain. It works like MakerDAO but on Stellar — users lock XLM (Stellar Lumens) as collateral in vaults and mint stablecoins in multiple denominations including USD, EUR, and GBP. The protocol offers low flat-rate borrowing fees, open liquidations for undercollateralized vaults, and face-value redemption of stablecoins against vault collateral at any time. FxDAO is governed by its token holders and is non-custodial and permissionless. Being the first CDP on Stellar means it brings familiar DeFi primitives to a new ecosystem, but also means the liquidation infrastructure is less mature than on Ethereum.
TVL
$46,000
Sector
CDP
Risk Grade
C
Value Grade
D
Core Mechanisms
6.1.1
NovelXLM-collateralized vaults for multi-denomination stablecoin minting on Stellar
Users lock XLM into vaults and mint stablecoins denominated in USD, EUR, GBP, or other currencies. First CDP-style protocol on Stellar. Minimum collateral ratio enforced with liquidation.
6.3.2
Open liquidation of undercollateralized vaults with fixed spread incentive
Vaults falling below minimum collateral ratio are open for liquidation by any network participant. Liquidators burn stablecoins to claim collateral at a discount. Standard CDP liquidation pattern.
6.4.1
External oracle feeds for XLM/USD, XLM/EUR, XLM/GBP price pairs
Multiple oracle feeds required for multi-denomination stablecoin support. Each denomination needs its own reliable XLM/fiat price feed for vault health assessment.
6.2.4
Low flat interest rate on vault borrowing
Vaults charge a low, flat interest rate on borrowed stablecoin amounts. Revenue flows to protocol treasury and governance token holders.
5.1.1
Governance token-weighted voting for protocol parameter management
FxDAO governance token holders vote on protocol parameters including collateral ratios, interest rates, and supported denominations. Standard DAO governance model.
2.4.1
NovelFace-value stablecoin redemption against vault collateral
Stablecoins redeemable at face value against vault collateral at any time. This creates hard peg floor but allows arbitrage against the riskiest vaults, maintaining system health. Novel on Stellar.
How the Pieces Interact
XLM crash affects all denominations simultaneously since they share the same collateral. A EUR-denominated vault and USD vault both become undercollateralized from the same XLM price movement, creating correlated liquidation cascades across denominations.
Stellar network congestion or issues during market stress could delay liquidation execution, allowing bad debt to accumulate. Limited DeFi tooling on Stellar means fewer automated liquidation bots.
Each denomination requires separate oracle feed. Oracle divergence between feeds or stale data for less-liquid currency pairs could create arbitrage opportunities at the expense of vault owners.
Redemption against riskiest vaults first creates adverse selection — vault owners closest to liquidation face surprise collateral reduction, potentially pushing them into liquidation.
What Could Go Wrong
- No public updates since Q1 2024 — the protocol appears in maintenance/zombie mode with no active development or community engagement. TVL dropped 94% (from ~$949K to ~$57K) as XLM's 68% price decline since early 2025 deflated collateral USD values and triggered user vault closures.
- Single-asset collateral (Stellar Lumens / XLM) with extreme volatility creates concentrated risk for all minted stablecoins; the XLM bear market demonstrates this risk in practice.
- First and only decentralized stablecoin on Stellar means no precedent for how liquidations perform under Stellar network stress; with stagnant development, protocol may not be maintained if vulnerabilities emerge.
XLM Crash with Stellar Liquidation Failure
ModerateTrigger: XLM price drops more than 50% rapidly while Stellar network experiences congestion preventing timely liquidations
- 1.XLM price crashes severely in a broad crypto market downturn — Multiple vaults across all denominations fall below minimum collateral ratio simultaneously
- 2.Stellar network congestion delays liquidation transactions — Bad debt accumulates as undercollateralized vaults cannot be liquidated in time
- 3.Liquidators observe accumulating bad debt and reduce participation — Remaining vaults bear socialized losses; stablecoin backing deteriorates
- 4.Stablecoins trade below face value on secondary markets — User confidence erodes; vault owners abandon positions; protocol TVL collapses
Risk Profile at a Glance
Overall: C (44/100)
Lower score = safer