[FIP -185] Add Sentiment FRAX Lending Pool to FXS gauge controller

Governance Proposals Gauges
1

Summary:

This proposal is a request to add Sentiment’s FRAX Lending Pool (LFRAX) to FXS gauge controller

Background:

Sentiment is an undercollateralized credit protocol on Arbitrum, allowing borrowers to access up to 5x capital on their collateral value. (Put up whitelisted collateral → borrow assets from lending pools, up to 5x collateral value)

Arch chart.jpg
Arch chart.jpg2000×1108 124 KB

Borrowers are “confined” within a Sentiment “account”, but users have the ability to deploy borrowed capital within Sentiment-whitelisted yield strategies — such as a variety of Convex & Balancer LP tokens (FRAX/USDC for example), lending on Aave, wstETH, etc. (thus cannot run away with debt & account simply fully liquidated when health factor < 1.2 ((debt + collateral value)/debt owed). An example of a strategy users can deploy using Sentiment is:

  1. Deposit 100 $FRAX as collateral
  2. Borrow 500 $FRAX as debt
  3. Deploy into FRAX/USDC Curve Pool
  4. Earn 5x rewards APY from Curve pool and Gauge

Motivation:

While using Sentiment for various strategies has worked in an extremely robust fashion (over $8mm in volume since inception, with the majority coming from stablecoin borrowing → depositing in Convex stable LPs), it’s definitely been tougher to attract lenders due to inherent risk/yield misalignment at the moment, especially given lenders on Sentiment currently cannot borrow against their lent assets, and Sentiment currently does not have a protocol token, thus no direct liquidity mining. As such, we’re pursuing a veFXS gauge for our FRAX lending market (LFRAX) in order to bolster more liquidity (already have an OTC bribe set up). Having a Frax gauge can allow us to incentivize more liquidity, which would create more available FRAX to borrow at a lower interest rate than other stables on our platform. Borrowers will then be able to deposit FRAX in FRAXBP and other FRAX-native yield strategies we hope to integrate in the future. This could create net deeper FRAX liquidity on Arbitrum!

Proposal

We would live for Sentiment to have a veFXS gauge for our FRAX lending pool. We believe with Sentiment’s user demand for borrowing capital and attractive FRAX yield strategies that exist on Arbitrum a Frax gauge could increase FRAX liquidity and distribution on Arbitrum, while increasing Lending liquidity on Sentiment.

LFRAX Address = https://arbiscan.io/address/0x2E9963ae673A885b6bfeDa2f80132CE28b784C40

Voting:

For: Add LFRAX to FXS gauge controller
Against: Do nothing.

7 Likes
2

This looks very interesting, but I am not sure if I understand the proposal yet. Could you format it into few more parts so there is some structure?

If I understand correctly you would want to add the FRAX Deposit address of Sentiment lending (e.g. the deposit here Lending) as a votable pool on the FRAX Gauge Controller?

Then veFXS owners would be able to vote or be bribed to vote so as to add FXS emissions as rewards for supplying FRAX to the lending pool?

I think that would make a lot of sense, and would ensure a lot more FRAX gets looped into circulation!

3 Likes
3

Yes - this is precisely the case! :slight_smile:

4

this is precisely what we need

5

This proposal is up for voting here: Snapshot