Discussion for a proposal to convert FXTL points to FXS

This proposal consists of two parts. One initial conversion, then a ongoing FXTL conversion running theoretically forever.

1. Initial conversion.
At the one year mark of the launch of Fraxtal, have a opt-in event to convert the current FXTL points so far to FXS. The conversion will be weighted by amount of FXTL points opted in. Use 5 million FXS for this purpose. This will leave us with a market cap of 93 million FXS after the FPIS merger and the initial conversion is completed.

The reason this event is opt-in is that there might be people who might want to try and game later weekly conversions, adding some game theory to the proposal.

2. Ongoing FXTL conversion
Every year, earmark 1 million of FXS emissions for FXTL points conversion. Every week 19231 FXS is put into a pool. In the next week, people can deposit their FXTL points to redeem a percentage of this pool.

1 million of yearly FXS emissions seems high. But it is important to remember that the FLE system if successful most likely will be able to absorb these emissions in the future. The proposal also gives ample runway (7 years), if the proposal does not prove successful. Hence new governance actions can be taken well before we reach the 100 million hardcap.

3. Extra
Another important discussion point is the introduction of a lock and multiplier system. This is my proposal for such a system.

Min. No lock = 0.5x weight
Max. 4 years lock = 4x weight
Linear scaling between those options.

Locking means that you will get more weight the week you are redeeming your FXTL points. After the week is over and the FXS is distributed, it is staked as veFXS gaining value until the lock is over. The lock can be managed and extended after creation (if technically possible).

Voting options:

  • Approve this solution (with/without a lock and multiplier system is decided from feedback during discussion)
  • Reject

Thanks to all the people contributing to the discussion on especially Discord, but also Telegram.


It’s definitely easy to understand and gives fxtl value. It also might create some new aligned users for those that chose to hold.

My main concern is that it is funded by diluting fxs and I’m not sure how sustainable it will be long term.

How would this system work in 10 years or once we’ve reached a hard cap of 100m?

What impact does the 5m FXS + 1m/yr have on available fxs for liquidity incentives?

If fraxtal gets large, is 1m fxs/yr a sufficient incentive?

  1. This is a part of where governance has to come in and choose in the future. We can decide to either start some burn mechanism, or instead raise the cap for FXS if the FLE insufficient in capturing the value we want. However, I think we should experiment with a solution to see the results.
  2. 5m FXS + 1m/yr should not impact available liquidity incentives in any other ways that their emission schedules might be interrupted if we hit the hard cap and decide to stay there while not having enough revenue. However, I do not think that likely, and the community can propose solutions well ahead of any problems like that
  3. My theory is that if Fraxtal becomes bigger, FXS should appreciate. It will “feed itself” so to speak. Now 1m FXS/yr does not seem like a lot while the price is 2-3 USD. But with a price of 100USD pr. FXS for example. it would be more attractive. Hence, I think 1m FXS/yr should be sufficient. If not, governance can update it in the future.

If we go this route, I think we should include a burn mechanism to ensure FXS supply doesn’t grow in perpetuity. I think the market needs a way to confidently know the max supply at a future date)

I personally think this is something we should implement later, once we have seen the results of the FLOX system and revenue it brings in. It is in theory easy to implement a burn mechanism by taking some of the FLE flows.

i like the idea of a one time 5m FXS pool to get the system started, but feel the rewards going forward from that should be directly related to the profits from fraxtal ecosystem to avoid inflating the FXS supply.

for example, if FXS price goes to $40+ again but fraxtal profits grow at a slower rate we could be paying out more then the ecosystem generates and this could cause issues.

for point 3, i assume you are talking about locked veFXS? if so the idea of giving locked veFXS added weight in the FXTL conversion would be a bit like the boosted APR the liquidity pools get ?

I personally think we should have a guaranteed emissions schedule reserved for Fraxtal. I think it will go a longer way to boost the Frax ecosystem and the Fraxtal chain. Giving developers protocols and users a more guaranteed pot to fight for. I know many people are against any mechanic that inflates FXS supply. In this case I have chosen a solution that might inflate it, but with ample runway so we have time to take a position on how to resolve it once we see the effects of the FXTL system and how it develops. I also have the belief that we have to invest some resources into projects we want to succeed. We might have 2-3 years where Fraxtal is unprofitable like any new start up (from a FXS holders perspective). But we should take a gamble and invest, then we will be able to see the developments and take action if the system is too costly for FXS holders.

Like in your example where we pay our more FXS than we bring in, I think such a scenario will be super solid incentive for other protocols to come on over, as there will arguably be ample rewards to be had. We have to think long term, and how to continuously keep rewarding other protocols and users with the FLOX system. I am sure at some point, some equilibrium will be met.

No, actually this system only had in mind FXTL points. You decide to “lock” your rewards so to say for a higher weight with the points. However, I see how having a mechanic to reward veFXS users as well could be interesting. But at this point, I think keeping it easy and simple is key. However, if there is strong community support for such a mechanic I would love to hear a suggested solution which is not overly complicated. Then I can change it up. One solution is maybe as you infer, to simply let the veFXS decide the weight?

Feel like all these posts (including others) should be labeled as discussions. And proposals are actual proposals with details laid out and in a ready to execute format

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Feedback taken into account, updated the name now. Thank you for your input.