FIP-36 - Frax x Zigzag Partnership

Subject

FRAX & ZigZag forming a partnership. FRAX providing liquidity for the FRAX-USDC / FRAX-ETH pairs on ZigZag’s L2 DEX.

Summary

Allow Frax to provide liquidity to the Decentralized Exchange ‘‘ZigZag’’ on L2s zkSync & StarkNet by minting FRAX and supplying ETH + USDC for collateral.

Introduction

ZigZag is a decentralised orderbook exchange powered by ZK Rollups. Currently, we are the only live DEX on zkSync 1.0. Besides that, we are launching on StarkNet next month as the first and only DEX and will launch on zkSync 2.0. We are aiming for deep liquidity with thick order books which could be mutually beneficial with Frax.

Government Proposal

We propose for Frax to mint 5M FRAX and bridge over the minted FRAX to L2s zkSync 1.0 and StarkNet. Furthermore, we propose for Frax to provide $2.5M equivalent in ETH and $2.5M equivalent USDC collateral as liquidity to ZigZag. This way Frax provides liquidity for a total of $10M to zkSync 1.0 and ZigZag’s StarkNet launch. After StarkNet launch, more FRAX will be minted and more ETH and USDC collateral will be provided as liquidity ($10M) for a total amount of $20M.

As more attention is being given to ZK-Proofs, it becomes clear that this is the final method of scaling Ethereum and a lot of TVL from alternative L2s will flow into ZKSync and StarkNet’s networks. For FRAX to get a well-established position into this new ecosystem, our exchange introducing FRAX as a stablecoin pair would bring more use case/liquidity and utility to the whole Frax Protocol. This is a great opportunity for both platforms to take advantage of a newly established endgame ecosystem.

PROS

Pros Frax:

  • Exposure: FRAX trading pairs on zkSync and StarkNet beating other stable coins to the L2s
  • Revenue: through the spread from market making; current revenue is ~$2k a day and revenue will go up linearly as volume increases
  • Future potential: As ZigZag grows, we will introduce margin trading in which Frax will also be earning yield off.

Pros ZigZag:

  • New/more pairs: FRAX/USDC and FRAX/ETH
  • More liquidity, more volume, more users —> exponential growth

Links:
ZigZag Exchange
ZigZag’s LINKTREE

3 Likes

I think this would be a great fit. Let’s do it.

2 Likes

sounds like it could be fun :slight_smile:

2 Likes

Holy crap. We, as a community, couldn’t wish for a better proposal imho. Let’s absolutely do it.

1 Like

For those who would like to catch up on everything L2s in general and ZK-Rollups specifically, I’d suggest taking a look at these guides, posts and videos:

1 Like

This is great, I think zero-knowledge scaling solutions will be a huge step forward.

My question, since ZigZag is an order book DEX, how does providing liquidity work? Do we need to run a trading bot?

1 Like

LPing will be available once smart contracts are enabled. There will be no need for a trading bot for the average user.

Source:

Very cool proposal, thanks for reaching out!

I will back this FIP 100%

You seem quite insightful in recognizing the power of FRAX. We can indeed allocate a significant amount of FRAX and USDC, also far beyond the amounts you mentioned. Likewise, it seems you have developed one of the very first zkDEXes that scales.

Thinking out loud here… Would you be interested in exploring how to deepen our partnership? For example: preferred routing of FRAX as default stablecoin in return for liquidity guarantees, governance token swap to align incentives, mutual bond program, … What is your biggest pain point right now? We might be able to help.

Prolly best to just get going with this proposal right now. But happy to explore more ways to work together in the meantime :handshake:

2 Likes