Migrate Temple/Frax gauge LP tokens currently locked directly on the Frax gauge to STAX Convex Staking Contract.
Background and Motivation
Temple/Frax LP farmers who locked directly on the Frax gauge prior to the launch of STAX Finance would like to migrate their locked positions to the new STAX vault contract built in conjunction with Convex which applies both the time lock boost and the veFXS boost.
TempleDAO is a strong believer in the Frax ecosystem and the first gauge on the STAX Finance platform reflects that belief. STAX works by taking a user’s FRAX/TEMPLE LP tokens and sending up to 85% of the deposited tokens to the Frax gauge. The remaining 15% gets sent to the Curve factory pool to provide exit liquidity. In exchange, the user receives xLP tokens which can be staked for rewards, or swapped and liquidated back to LP tokens on Curve. Combined with the veFXS boost through the new staking vault collaboration with Convex, STAX is able to offer depositors ~4X boost (before fees) for users who choose to stake on the STAX platform.
When we approached the Frax Team about unlocking, we expressed our desire to move our pre-Convex vault TVL (~436K LP tokens) to the new Convex vault. The reason STAX only locks for 540 days (1.5 years) through our contract instead of the full maximum of 3 years is to mitigate Frax gauge migration risk. While we would like to see our pre-Convex TVL transferred to the new Convex vault for the same duration, we cannot accept migrated LP tokens from NON-STAX USERS who chose to lock for even longer durations of their own accord.
We understand that the Frax gauge is designed to incentivize locked FRAX liquidity. In our view, it is an ideal outcome for Frax Finance if TempleDAO is willing to hold FRAX LP tokens through STAX and not liquidate even if the APY for the gauge is 0%. This is a win for the Frax community because then it doesn’t cost FXS emissions to create permanent Temple Protocol-owned FRAX liquidity even if it’s technically unlocked. However, if these migrated non-STAX LP tokens are locked for 2-3 years, or any extended period, then STAX cannot accept these tokens because we would be unable to maintain the peg in our Curve pool if these external farmers all decide to exit at once, which is a likely scenario given FIP -112.
In the interest of cooperation and promoting the Frax ecosystem, we hereby propose the migration of locked LP tokens from non-STAX users to the new STAX x Convex vault as FRAX/TEMPLE LP tokens locked for 3 months. Furthermore, we propose to transfer the pre-Convex vault STAX TVL (~436K LP tokens) to the new contract and relocked for the same duration as existing STAX tranches (~1.5 years).
STAX pre-Convex Vault staking address: 0xb48fe4055481b52729210DB0f49DA10388930de0
STAX Convex Vault staking address: 0xe0635af6aae7c1e5ef43d4148ac30bf5c1b83a8c
Migrate existing non-STAX owned locked LP tokens to the STAX Convex Vault staking contract and lock those tokens for 3 months.
Migrate existing pre-Convex Vault STAX owned locked LP tokens to the STAX Convex Vault staking contract and maintain the then-current lock duration.
Thanks Lux for your proposal and for making clear what the position of TempleDAO/Stax is regarding the migration of users that locked Temple/FRAX LP for up to 3 years and that would like to migrate to Stax.
I understand that Stax does not want to take over the 3 year locked LP tokens, because that could lead the xLP token to unpeg in the event a large portion on the migrators dump the xLP token in the Curve pool. Stax will then need to wait for the LP tokens to unlock before they can restore the peg.
Waiting 3 months for restoring the peg would be fine, waiting for 3 years not.
Unfortunately it is not acceptable from a Frax perspective to reduce the lock time of most LP tokens from more than 30 months to 3 months. This proposal is effectively the same as FIP-112 except with a 3 month delay. We can only accept a migration when the lock period will not be reduced.
Thank you for your reply, Denett. You say that this revised proposal is effectively the same as the original FIP-112 but there are important differences:
1/ FIP-112 [original] unlocks everyone and each user takes possession of their own LP tokens and they will likely exit through the Curve pool sooner rather than later and liquidate their LP tokens.
2/ FIP-112 [revised] transfers locked LP tokens from their current locks to a 3-month lock and at the end of 3 months, if those users have exited by trading in their xLP tokens, TempleDAO will take possession of their LP tokens at which point we will restore the Curve pool peg if necessary. We have no intention of liquidating the LP tokens.
Every migrator can sell the xLP token in the Curve pool and gets unlocked LP tokens in return. They will then liquidate those LP tokens to exit. After 3 month Stax will restore the peg with LP tokens that are unlocked. Net effect is that all migrators have exited and have liquidated their LP tokens.
The depth of the Curve pool is off course limited, so some might wait till Stax has restored the peg after 3 months to get a better price. After 3 months Stax has enough unlocked LP to allow every migrator to exit via the Curve pool.
Yes and again, the key difference between original FIP-112 and FIP-112 [revised] is that TempleDAO looks at FRAX/TEMPLE LP as PoL and not necessarily as a farming position. We won’t liquidate or try to migrate as soon as APY drops.
The FIP code for the title of this proposal is changed from [FIP - 114] to [FIP - 112] [Revised], because this proposal is a revision of [FIP - 112] and [FIP - 114] was already taken.
Readers, please consider this change when you read the comments above this reply.
No need to discuss the difference between FIP-112 and this revised proposal, because FIP-112 did not make sense they way it was proposed.
I understand that Temple wants to keep POL and does not want to liquidate it and I appreciate that. But as you wrote in your proposal , the migrators likely will exit asap. They will sell in the Curve pool. You wrote that you wanted to use the LP token that are unlocked in three months to buy back xLP tokens in the Curve pool to restore the peg. This means that the net effect is that the migrators can exit in 3 months.
Overall result after three months:
- TempleDAO/Stax will keep locked as before.
- Migrators can exit at a small discount via the Curve pool.
- TempleDAO/Stax does the repegging so takes a small profit.
- Frax loses $8M of locked liquidity, that would have been locked for more than 30 months.
This is clearly not a good proposal for Frax.
Yes, this is a very fair summary. From Frax POV, it would be exchanging $8M of liquidity that is currently locked for up to 30 months for $8M of liquidity held by TempleDAO some portion of which will be held in the Curve pool to re-peg, and remaining portion re-staked on the Frax gauge with a somewhat shorter lock.
What would be a fair proposal in your view for all involved?
I do not have a proposal that changes the status quo that could be accepted by all parties involved.