Summary
This publication presents the community with the opportunity to add Liquid Vaults to Frax Finance.
The proposal suggests that Entangle will develop composable Liquid Vaults (Liquid Staked Derivatives) consisting of yield-bearing LP tokens made up of Frax assets, like frxETH/ETH or frax/USDC. These could subsequently be utilized as collateral for lending and borrowing within Fraxlend.
The proposal also suggests the integration of Liquid Vaults of different LPs from various DEXs as a collateral for Lending & Borrowing within Fraxlend.
This proposal aims to enhance Frax Finance’s Total Value Locked (TVL) and product offering by incorporating new collateral assets and improving the utility of LP Tokens consisting of Frax assets. It also seeks to improve capital efficiency within the Frax Finance’s community.
Abstract
Entangle’s native application, Liquid Vaults. optimizes liquidity by enabling wider utility of yield-bearing assets such as LP Tokens, achieved through 1:1 Asset Backed Liquid Staking Derivatives (LSDs).
Examples are Lending & Borrowing and Derivatives Protocols, where users may deposit Liquid Vaults as collateral to borrow assets or supercharge yield, enabled by Entangle Data Feeds. To secure the integration from malicious actions such as re-entrancy attacks, Entangle provides TWAP/VWAP normalized data feeds.
Motivation
This publication seeks to list composable LSDs of various LP Tokens which are based on underlying FRAX assets including those on Fraxswap within Fraxlend.
The Challenge
At the current stance, Fraxswap’s LP tokens do not have a secondary utility, while having all parameters of a yield-bearing asset. In other words, users provide liquidity, receive their LP Tokens, wait for the reward distribution and that’s the end of the journey.
Fraxlend doesn’t support LSDs as collateral, limiting the potential for augmenting the TVL and offering new value-generating instruments.
The Solution
In the essence of the product, the user journey would be illustrated as follows:
- User X provides liquidity to a Decentralised Exchanges and in exchange receives an LP token as a warrant of his staked assets.
- User X then stakes his LP token via Entangle and receives a 1 - 1 asset backed Liquid Vault - a Liquid Staked Derivative token as a receipt.
- User X then uses this Liquid Vault as a collateral in a Lending and Borrowing protocol or as a liquidity provisioning source to Derivatives protocols to increase the capital efficiency of his LP token, prospecting the strategies built on top of User X’s LP tokens.
For an illustrative example of the aforementioned steps, please see the illustrations below.
With Entangle’s Liquid Vaults, Fraxswap users can effectively create Liquid Staked Derivatives (LSDs). These LSDs can then be used to refinance yield-bearing assets, giving users the ability to optimize their returns while maintaining control over their underlying liquidity positions, i.e. used as collateral on Fraxlend.
Ultimately, Entangle’s Liquid Vaults empower users to enhance their capital efficiency by enabling the creation of LSDs, thereby offering a unique approach to maximizing utility of yield-bearing assets while maintaining flexibility.
LSD can be redeemed for underlying LP token at any time.
The Proposal
This proposal suggests that Frax Finance within Fraxlend will accept Entangle’s Liquid Vaults as collateral for lending and borrowing. The proposal suggests that Entangle will integrate Fraxswap’s LP Tokens into the Liquid Vaults dApp to be able to create LSDs of these, which will later will also be used as a collateral for lending and borrowing on Fraxlend.
List of Chains and DEXs:
Ethereum
Curve
Fraxswap (to be integrated)
Arbitrum
Stargate
Fraxswap (to be integrated)
Polygon
Stargate
Fraxswap (to be integrated)
Avalanche
TraderJoe
Fraxswap (to be integrated)
Fantom
SpookySwap
Stargate
Fraxswap (to be integrated)
BNB
Pancakeswap
Wombat
Fraxswap (to be integrated)
Liquid Vaults of the LP tokens of the aforementioned DEXs will be available for usage as collateral on Fraxlend - Frax Finance’s lending and borrowing protocol.
Voting:
For: Support the integration of Entangle’s Liquid Vaults, LSDs of Fraxswap’s and other DEXs’ LP tokens into Fraxlend.
Against: Do nothing
Specification:
The parameters shown below are the recommendation of Entangle.
Liquid Vault Token specifications.
Ticker: sSGUC
Underlying LP Token: Stargate: USDC
Liquid Vault Token address: 0xD08dE86f934a774bC6771AADB764E801fC8518ec
Price feed:
Category: LP Token (tarb)
Asset 1: STARGATE-USDC Asset 2: USDC
Network: Arbitrum (tarb) localized fork
RPC: https://nodes.test.entangle.fi/rpc/arbitrum
ChainID: 42161
Contract address:: 0x76a504F9c351BbB9319a496f76119Bfb982F903d
| Parameter | Value |
|---|---|
| MAX LTV | 75.00% |
| LIQUIDATION FEE | 10.00% |
| MATURITY | 0.00 |
| RATE TYPE | Variable V2 |
| RATE NAME | Variable Rate V2 [0.5 0.2@.875 5-10k] 2 days (.75-.85) |
| MAX FULL UTILIZATION RATE | 9,987.79% |
| MIN FULL UTILIZATION RATE | 4.99% |
| ZERO UTILIZATION RATE | 0.50% |
| RATE HALF LIFE (DAYS) | 2 |
| MAX TARGET UTILIZATION | 85.00% |
| MIN TARGET UTILIZATION | 75.00% |
| VERTEX UTILIZATION | 87.50% |
NOTE: Please be advised that the aforementioned specifications are related to the tokens and their respective networks based on the testnet of their respective localised forks. It is advised and recommended that Entangle and Frax Finance complete the testnet integration, follow all and every stress-tests, pentests and other quality assurance procedures before launching the product on mainnet. The aforesaid is advised but not mandatory and is subject to a mutual agreement between Entangle and Frax Finance.