[FIP - 326] Proposal for Implementing a 10% Protocol Fee on Fraxlend


Frax Core Team


This proposal suggests the introduction of a 10% protocol fee on Fraxlend, Frax Finance’s lending platform. This initiative is aimed at aligning Fraxlend more closely with industry standards, particularly mirroring practices of major players like Aave, and leveraging its value to support our goal of achieving a 100% Collateralization Ratio (CR) for the FRAX stablecoin.

Background and Motivation

Since its inception, Fraxlend has operated without a protocol fee, focusing on growth and user acquisition. However, as we evolve and aim to fortify our financial stability and service quality, introducing an protocol fee becomes essential. Setting an protocol fee at 10% positions Fraxlend competitively in the DeFi lending market and generates revenue that can be reinvested into the platform and the FRAX ecosystem.

Proposal Details

  • Smart Contract Compatibility: Our existing Fraxlend smart contracts are already equipped to support this fee structure, allowing for a smooth implementation process. Protocol fee is a percentage of interest which goes to Frax Finance DAO.
  • Fee Implementation: Introduce a 10% protocol fee across all lending pairs on Fraxlend.
  • Revenue Utilization: The revenue generated from this fee will contribute to the stability and growth of the FRAX stablecoin, aiding our pursuit of a 100% Collateralization Ratio.


  • For: Implementing a 10% protocol fee on Fraxlend.

  • Against: Do nothing.

Snapshot Vote: [FIP - 326] Proposal for Implementing a 10% Protocol Fee on Fraxlend



Fraxlend Pairs Interests in last 30 days:

Fraxlend Pair Address Collateral/Symbol Earned Interest in the last 30 days
0x1fff4a418471a7b44efa023320e02dcdb486ed77 crvFRAX $0.16
0x21e354da5d929a4da55428f6bfd71ed9ffd5001f sfrxETH $5,194.77
0x281e6cb341a552e4faccc6b4eef1a6fcc523682d frxETHCRV $877.47
0x32467a5fc2d72d21e8dce990906547a2b012f382 WBTC $34,478.96
0x3835a58ca93cdb5f912519ad366826ac9a752510 CRV $459,756.58
0x3a25b9ab8c07ffefee614531c75905e810d8a239 APE $0.60
0x66bf36dba79d4606039f04b32946a260bcd3ff52 gOHM $3,197.61
0x74f82bd9d0390a4180daaec92d64cf0708751759 FPI $2,680.15
0x78bb3aec3d855431bd9289fd98da13f9ebb7ef15 sfrxETH $209,178.84
0x794f6b13fbd7eb7ef10d1ed205c9a416910207ff WETH $8,171.30
0x82ec28636b77661a95f021090f6be0c8d379dd5d MKR $2,172.49
0xa1d100a5bf6bfd2736837c97248853d989a9ed84 CVX $39,056.82
0xc6cada314389430d396c7b0c70c6281e99ca7fe8 UNI $37.06
0xc779fee076eb04b9f8ea424ec19de27efd17a68d AAVE $377.88
0xdbe88dbac39263c47629ebba02b3ef4cf0752a72 FXS $100,133.74
Total $865,314.49

Happy to see proposals for getting to 100%CR and a sustainable protocol.

Just to be clear about the current fees that go to the protocol for any of us who are unsure:

We have an AMO that mints Frax that has generated 63,142 in the last 7 days in earnings or $3.2 million annualized currently. Is that correct?



Aside from the AMO, there is also a lending rate spread?

Where in facts.frax.finance would we find what this spread works out to weekly?

For example on the CRV pair the lender receives ~25% APR but borrower pays 43% APY.

If fraxlend captures this spread where can we track the earnings?

image image

Would be good to show total combined earnings in the last 7 days:

  • AMO fees
  • Interest spread fees
  • Liquidations fees
  • potential 10% new fee

I’m not sure Aave has an AMO for earnings similar to Frax so it may not be an apples to apples comparison.

I propose or request in addition to showing protocol fees above that we also make the net rates to borrowers and lenders clear if this proposal is passed.

ie if a lender deposits 100k frax and gets 10% APR minus 10% fee they should see the net APR they get.

If loans are auto-compounded then they should be displayed as APY otherwise they should be displayed as APR. This is standard practice in fairness of all parties.

1 Like

Hey, Thanks a lot for your active participation and questions. So, before I start answering your questions, I should note that FraxlendAMO is playing the role of a lender in the Fraxlend markets, and it earns exactly the same as other lenders from these markets. This earning is totally separate from the Fraxlend fee structure. So, after applying protocol fees, Fraxlend AMO will also earn 10% less than its current earnings, assuming everything else remains constant.

Yes, its correct.

The difference between Lend APR and Borrow APR is caused by ratio between total amount of borrowed and total amount of lent, since each market is isolated. so there is no hidden fee or yield here that is being captured by protocol.

So to be clear, all Protocol earnings are:

  • AMO fees : Its not fee and as I noted at the beginning, its lending interest, which can be tracked on frax facts AMO page
  • Interest spread fees: there is no spread fee
  • Liquidations fees: There are 0% - 2% liquidation fees at the moment depending on the market
  • Potential 10% new fee (Protocol fee): The protocol fee is a percentage of interest that goes to Frax Finance DAO. and in your example, lender will earn 9% after the deduction of the fee (10% fee * 10% APR = 1% APR will go to DAO)

Please let me know if there are any other questions about Fraxlend Fee structure.


Thank you for the detailed reply :slight_smile:

Look forward to 100% CR!

Still request team to have front end reflect the after-fee earnings lenders would get.

Easy update after proposal passes would be to show the after-fee rate in the lender apy column at facts.frax.finance/fraxlend/pairs


The AMO earning lending interest is akin to a fee.

If i understand it correctly, the role of the AMO is to mint Frax then deposit it into a lending pair pool.

This lowers the utilization ratio → reduces the interest rate paid to lenders.

In absence of the AMO, the utilization rate would be higher → APR to lenders would be higher.

The difference in the two rates: rate with Frax AMO in lending pair vs rate without AMO is the effective fee charged by the protocol

1 Like

This proposal was posted for voting on snapshot : Snapshot