Frax Finance Weekly Report #07 | September 2021
A round-up of Frax Finance updates in a few minutes.
1)[Development]: Frax finance oracle mechanism was upgraded to Chainlink to secure the minting and redeeming functions of its fractional-algorithmic stablecoin protocol. Chainlink’s high-quality, tamper-proof price data ensures FRAX consistently maintains its USD peg.
2)[Farming]: The FRAX-WETH pool was unlocked as per governance. The extra FXS reward was migrated to the gauge system. After the reward migration, the gauge system now gives out 25,000 FXS per day. It means all the pools have increased in APY for anyone that wants to move their FRAX-WETH TVL to any of the other gauge enabled pairs. It was quite lucrative. Some of the gauges like FRAX-DAI and FRAX-USDC increased their base APR to ~50%! Which was over 250% APR for fully boosted on a stable-stable pair.
3)[Achievement]: FRAX was ranked highest on the parsec finance among other stablecoins.
4)[Marketing]: Mechanism Capital wrote a detailed article on FRAX which goes into detail about FRAX’s AMOs, revenue models, FXS valuation estimates, and the full FRAX vision. They explained why Frax is so much more than that: a modular, next-generation on-chain money market and a cash flow machine.
5)[Improvement]: 🌊 FraxPoolV3: A proposal to improve the current Frax Pool implementation’s mint, redeem, and swap features was submitted and approved. The new pool only allows minting of FRAX when the price is above the peg window, and redeeming when the price is below the peg window. Chainlink is used for pricing FRAX and FXS, instead of UniV2 oracles as before. It also adds in buyback/recollat limits per hour to smoothen these functions and limit unnecessarily huge arbitrages during FXS price movements, it also has the future ability to accept DAI, FEI, LUSD, sUSD, USDP as collateral, in addition to USDC. Currently, only USDC is enabled. The purpose of this was to limit centralization / regulatory risk in the future, as those additional stablecoins have less risk (either overcollateralized, backed fully/partially by ETH, etc).
6)[Collaboration]: Pangolin and Frax Finance collaborated to bring the FRAX stablecoin to Avalanche, With the collaboration, Pangolin hopes to boost the availability of stablecoins on the Avalanche network for users of Pangolin, and provide sufficient liquidity in innovative stablecoins like Frax, They added reward pools for the AVAX-FRAX pair and the AVAX-FXS pair to support liquidity.
7)[Marketing]: Crypto.com launched an exclusive campaign for Frax Share (FXS). Users can trade $FXS to stand a chance to win, A reward pool of 50,000 USD worth of FXS was provided, The campaign will end on 15th September.
8)[Farming]: $AVAX / $FRAX and $AVAX / $FXS pool on Pangolin was added for auto-compounding on Snowball.
9)[Farming]: $FRAX/$AVAX at 1x was added on Trader Joe, Users can add FRAX/AVAX at 1x on Trader Joe and earn great yields.
10)[Voting]: A StakeDAO Gauge vote was submitted, The expected benefits from the Gauge are;
- It essentially incentivizes more FRAX Curve liquidity since Stake DAO takes FRAX3CRV LP as deposits similar to Curve/Convex.
- Stake DAO is a whitelisted protocol that can stake veFXS so it will be in Stake DAO’s interest to build up the gauge weight for this in the future.
- Expand on our already successful partnership which has gotten FRAX a lot of veCRV votes and Stake DAO $50m+ of TVL.
- Stake DAO can further incentivize this gauge with SDT rewards, doubling the token rewards for users.
11)[Voting]: A vote to allow Comptrollers to partake in variant Curve AMO strategies such as depositing idle USDC in other Curve pools like Iron Bank to earn additional AMO profits was submitted.
12)[Proposal]: The veFXS yields dropped as a result of the FXS price appreciation, which caused less FXS buyback. A proposal to redirect more FXS1559 buybacks towards subsidizing the veFXS yields rather than burning the FXS was submitted.
The proposal aimed to support the veFXS APR, while also helping the protocol not burn through its accumulated collateral from the Investor AMO.
13)[Farming]: $FRAX and $FXS was added on dHEDGE. Users can add their FRAX-FXS LP and FRAX-USDC LP on SushiSwap.
14)[Integration]: FRAX became the first algorithmic stablecoin to be added on Aave after the vote to deploy an AMO on Aave was passed. The Frax protocol will be able to mint FRAX to be borrowed by lenders of Aave, and thus offer an active and competitive alternative to other stablecoins such as USDC, USDT, and DAI. By allowing for responsive stablecoin liquidity, we aim to benefit lenders and the Aave ecosystem as a whole. Additionally, With no collateral factor, there is 0 risk for Aave’s money market in terms of the FRAX peg. Furthermore, if the FRAX peg broke and fell below $1, Aave borrowers would have less debt in dollar terms.
15)[AMO]: Uniswap V3 Liquidity AMO was implemented. Uniswap V3 allows LPs to earn trading fees by supplying Uniswap V3 liquidity. It is currently mainly FRAX/USDT and FRAX/sUSD.
16)[Partnership]: Enya.ai and Bobo network partnered with Frax Finance to build a more efficient, economical, and inclusive Ethereum ecosystem. The partnership with Frax expands the offering of stablecoins to Boba Network.
18)[Next steps]: Expansion and liquidity seeding on other chains / L2, this Includes Arbitrum.
About Frax Finance
Frax is the first and only stablecoin with parts of its supply backed by collateral and parts of the supply algorithmic. The stablecoin (FRAX) is named after the “fractional-algorithmic” stability mechanism. The ratio of collateralized and algorithmic depends on the market’s pricing of the FRAX stablecoin. If FRAX is trading at above $1, the protocol decreases the collateral ratio. If FRAX is trading at under $1, the protocol increases the collateral ratio.
FRAX: is the stablecoin targeting a tight band around $1/coin.
Frax Shares (FXS): is the governance token which accrues fees, seigniorage revenue, and excess collateral value.