Authors
Frax Core Team
Summary
This proposal aims to authorize a maximum annual budget of 9,000,000 FRAX for Frax Finance. This budget is intended to cover five key categories: development and operation, Security, Grant, Reserve Emergency Fund, and Legal & Compliance. Please note that this is a maximum cap, and it is highly likely that not all of it will be used.
Background and motivation
At this stage in Frax Finance’s growth trajectory, the destructive impact of capital limitations cannot be overstated. We focus on stimulating growth, driving innovation, and addressing potential legal and security challenges. The proposed maximum annual budget reflects these priorities, having been informed by carefully analyzing our past financial strategies and those of other successful protocols. Our goal is to create a robust financial system that allows us to respond to changes swiftly, seize opportunities, and ensure the continued growth and resilience of our protocol.
Details
Budget Categories
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Development and Operation: This budget will be used to cover the costs associated with the development and operation of the Frax Finance protocol. This could include salaries for developers, costs of new feature development, maintenance costs, infrastructure costs, and other operational expenses.
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Security (Audits and Bug Bounty): This budget is allocated to maintaining the security of the Frax Finance protocol. This includes the costs of regular security audits by external firms, running a bug bounty program to incentivize the discovery and reporting of vulnerabilities and other measures to ensure the safety and trust of our community.
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Grants: This budget will fund grants for projects or initiatives that contribute to the Frax Finance ecosystem. This could include funding for independent developers or teams building on Frax, research initiatives, educational content, community events, and more (e.g., Frax Ecosystem Educational Incentives).
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Reserve Emergency Fund: This budget is a financial safety net for unforeseen circumstances. It can respond to unexpected events, such as sudden market changes, emergency protocol upgrades, or other contingencies that require immediate financial resources.
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Legal and Compliance: This budget covers legal and compliance costs to ensure that Frax Finance operates within the legal framework. This could include fees for legal counsel, regulatory compliance costs, potential legal disputes, and other related expenses.
Budget Allocation
| Proposed Budget Share Percentage | Proposed Annual Max Caps | Latest Annual Allocations (2022 - 2023) |
|
|---|---|---|---|
| Development and Operation | 33.30% | 3,000,000 FRAX | - |
| Security | 15.60% | 1,400,000 FRAX | 1,200,000 FRAX |
| Grants | 6.70% | 600,000 FRAX | 544,000 FRAX |
| Reserve Emergency Fund | 11.10% | 1,000,000 FRAX | - |
| Legal and Compliance | 33.30% | 3,000,000 FRAX | - |
Benchmark:
| Frax Proposed Annual Max Caps | Lido DAO Budget (2022) | Maker DAO Budget (2022) | Aave DAO Budget (2023) | |
|---|---|---|---|---|
| Development and Operation | 3,000,000 FRAX | $11,200,000 | $24,608,019 | $10,120,000 |
| Security | 1,400,000 FRAX | $2,500,000 | $2,044,300 | $3,200,000 |
| Grants | 600,000 FRAX | $2,000,000 | $1,115,869 | $5,300,000 |
| Reserve Emergency Fund | 1,000,000 FRAX | $800,000 | - | - |
| Legal and Compliance | 3,000,000 FRAX | $620,000 | - | - |
| Total | 9,000,000 FRAX | $17,120,000 | $27,768,188 | $18,620,000 |
Additional Notes
- This proposal represents the maximum caps for each category, not necessarily the exact amounts that will be used.
- This proposal does not cover the costs of liquidity incentivization. Kindly refer to the Votium and WETHR proposals for budget allocations related to liquidity incentivization.
- All previously approved budgets are still in effect and considered in our ongoing operations. This proposal is designed to supplement and build upon the existing financial strategies.
- This proposal does not account for FXS. The team plans to continue utilizing their current treasury allotment of FXS for core development compensation. If more FXS resources become necessary in the future, a specific governance proposal will be initiated.
Vote
- For: Authorize a maximum annual budget cap of 9M FRAX (2023 - 2024)
- Against: Do nothing.
References
[FIP - 111] Participate in Gitcoin Funding Round. (2022, September 8). Frax Finance Governance.
[FIP - 178] Flywheel Grant Renewal For 2023. (2023, January 20). Frax Finance Governance.
[FIP - 182] frxETHBP & WETHR Program. (2023, January 27). Frax Finance Governance.
[FIP - 208] Frax Ecosystem Educational Incentives. (2023, March 23). Frax Finance Governance.
[FIP - 218] Fraxbuild Hackathon Funding. (2023, April 9). Frax Finance Governance.
Compensate work done on the Dune dashboard. (2021, December 21). Frax Finance Governance.
FIP - 64 - Growth and Development Grant. (2022, May 10). Frax Finance Governance.
FIP 78 - Annual Security Budget Allocation. (2022, June 8). Frax Finance Governance.
FIP 80- Podcast and Media Grant. (2022, June 10). Frax Finance Governance.
FIP 99 - Flywheel Sponsorship Proposal. (2022, July 31). Frax Finance Governance.
FIP-85-Protocol Research Unit Grant Proposal. (2022, June 14). Frax Finance Governance.
Frax analytics and protocol expansion grant. (2022, February 1). Frax Finance Governance.
Frax.Pro Website. (2022, January 1). Frax Finance Governance.
LEGO Report: Q1 2023. (2023, April 7). Lido Governance.
Lido Ecosystem Grants Organisation - LEGO. (n.d.).
Proposal to form reWARDS Committee. (2021, December 2). Lido Governance.
[PUBLIC] Lido Budget Draft - Provisional - 07/11/2022. (n.d.). Google Docs.
[RCC-1] Apr 1, 2022 - June 30, 2022 Budget Request. (2022, April 4). Lido Governance.
[RCC-2] July 1, 2022 - September 30, 2022 Budget Request. (2022, August 2). Lido Governance.
[reWARDS] April ’23 Budget. (2023, March 27). Lido Governance.