The Centrifuge team would like to present the following proposal for feedback from the Frax community.
WIth the upcoming launch of FXBs in 2024, we see a huge a opportunity to leverage RWAs to maximum benefit of the protocol. We believe Centrifuge Prime could be a strong complimentary structure to existing RWA efforts through FinRes.
Authors
Centrifuge team
Executive Summary
This is a proposal to onboard the Frax protocol to Centrifuge Prime, for the purposes of contributing to a differentiated and resilient RWA capability within FraxDAO. Onboarding to Centrifuge Prime will create a dedicated pipeline of resources and assets to serve the Frax protocol. If accepted, this proposal will establish a debt ceiling of $20M to be established for the Anemoy LTF, a BVI registered and regulated US Treasury fund.
Centrifuge has a long track record of working with DAOs to bring RWAs on as collateral. Notable firsts include minting MakerDAO’s first real-world asset, structuring the first on chain securitization, launching the RWA Market with Aave, and partnering with BlockTower to bring the first credit fund operations on chain. Centrifuge Prime is built for the needs of large decentralized organizations. It provides the infrastructure and services to quickly and easily onboard and scale a fully diversified portfolio of real-world assets. Through Centrifuge Prime, decentralized organizations can get access to an institutional ecosystem of RWA partners and service providers to curate a portfolio of assets across their desired risk profiles.
Centrifuge is a DAO-governed protocol. k/factory contributes to the Centrifuge protocol by providing development, and infrastructure, and working with users to ensure adoption.
Description
This proposal will:
- Work with FraxDAO to establish a legal conduit for RWA investments
- Allocate to $20M of collateral to the Anemoy Liquid Treasury Fund
- Facilitate diversified and relevant investment opportunities for Frax
The Legal Conduit
Centrifuge Prime utilizes a legal framework to provide an effective and resilient setup for RWA investments. We have collaborated with Frax community members on this framework, and this proposal will seek to use the protocols existing infrastructure for facilitating these investments.
A descriptive diagram of the Centrifuge Prime legal framework is included below for reference.
This framework is based on our extensive experience in MakerDAO setting up similar structures. There, the same structure supports a >$1B in deployed capital.
Anemoy LTF
The Anemoy LTF is a purpose-built onchain offering combining lowest possible credit risk with fast liquidity and low fees. Centrifuge as the tokenization and issuance protocol offers a programmable DeFi-native integration.
The LTF provides an onchain RWA product that offers:
- Real-time transparency: Each position in the portfolio is tokenized and represented onchain, allowing for near real-time transparency into the portfolio’s overall status. Integrations with price oracles, onchain verifications, and programmable execution will allow this to be the most transparent product in the market today.
- Legal recourse and investor protection: The offered token is an actual fund share using the ability to tokenize a fund under BVI law. The token itself represents ownership and not only the accompanying legal framework. Token holders have direct claims to the underlying assets in the fund, (US Treasury bills) and an ability to request a redemption in-kind to receive actual T-Bills. The combination of owning a share of a BVI-regulated fund with all AUM held with a regulated US custodian and traded through a registered US prime broker offers investors the highest-quality recourse and protection. Low fees: Unlike most other offerings, the fund holds T-Bills directly in its own account, saving investors fees charged by the ETF issuers or other intermediaries.
More information on Anemoy and the LTF can be found here.
Diversified Investment Opportunities
Centrifuge Prime also provides dedicated access to the Centrifuge ecosystem and community. As part of this proposal, the Centrifuge team will work directly with the community to ensure that the available RWA portfolio meets Frax’s needs.
The Centrifuge Credit Group, a DAO entity setup to provide risk and credit analysis, can be utilized to provide general-purpose reporting for the assets invested. This provides an additional level of ongoing monitoring and independent analysis that Frax can utilize.
Beyond US treasuries, the Centrifuge Prime setup would also allow the Frax DAO to allocate into the following asset classes:
| Bucket Focus | Description | Targeted Returns | Liquidity Thresholds |
|---|---|---|---|
| Liquidity | Lowest risk while maintaining US Treasuries, MMF, AA+ rated short term bonds | 5-6% | Daily |
| Preservation | Investments in senior secured loans such as real estate, corporate bonds etc. | 6-8% | 3-6 months |
| Acceleration | Trade finance, non-bank originators, emerging markets | 8-20% | 3-24mo |
Pricing and payment
The pricing for this proposal is structured to streamline fees. The usage of FXS as a reward helps to align incentives towards long-term interests versus short-term benefits. The fee structure is as follows:
| Fees | ||
|---|---|---|
| Portfolio Fee | 0.35% p.a. on assets in Prime up to $50M, 0.2% $50-100M, 0.1% >$100M | Paid on an ongoing basis to Centrifuge |
| Frax Rewards | 5000 FXS, paid incrementally over 12 months into the Centrifuge treasury, starting with the first $1M Deployment into Centrifuge Prime | To cover costs of resource and facilitation time. Centrifuge DAO intends for this to create better alignment with strong skin in the game incentives for success. |
Voting
- For: Support for onboarding the Frax protocol to Centrifuge Prime with mentioned fees and rewards.
- Against: Do nothing.