[FIP - 379] Locked Liquidity Standard Exit

Authors

Frax Core Team

Summary

This proposal seeks to provide liquidity providers within the Frax Finance ecosystem the option to exchange their locked liquidity in certain pools for Frax Bond 2029 (FXB2029) at the auction price.

Background and Motivation

Many liquidity providers within the Frax Finance ecosystem have recently expressed a need for a ragequit or exit mechanism for their locked liquidity in FXS gauges. To address this concern and provide a flexible solution, we propose an exchange option to migrate the locked liquidity to FXBs, specifically FXB2029. This provides immediate liquidity to exit LPs starting with the older gauges while also keeping TVL within the Frax & Fraxtal ecosystem, an overall value add for all parties. FXB2029 tokens are liquid with high incentives for liquidity providers, massive FXTL points boosts, and migrators can exit these tokens should they want to leave the ecosystem for any reason by selling them on-chain in Curve pools and other venues and in no way required to hold them until maturity.

FXB tokens are simple, trustless tokens that resemble a zero-coupon bond that converts to the FRAX stablecoin on maturity. FXBs are debt tokens denominated in FRAX stablecoins, not a claim on any other asset or collateral. FXB tokens are only convertible to FRAX stablecoins; they do not guarantee FRAX peg, FRAX value, or yield/interest denominated in any other asset except FRAX.

By migrating to FXBs, liquidity providers will have an alternative means to manage their deployed capital within the Frax ecosystem, providing them with the flexibility they have requested while ensuring the protocol maintains its needed locked liquidity.

Proposal Details

This approach offers liquidity providers a way to exit their positions while maintaining their investment within the Frax ecosystem, ensuring the protocol’s stability and growth. The following points are important to note about this proposal:

  • Pricing Based on Underlying Assets: The pricing for the locked liquidity will be based on the current price of the underlying assets at the time of the exchange.
  • Exchange with FXB2029: Locked liquidity can only be exchanged for FXB2029 at the auction price prevailing at the time of the exchange. The auction price has a floor price of .794 at the time of this proposal & it is expected to remain at this floor price. An LP that wishes to migrate can sign the migration transaction on the Ethereum mainnet and move their LP token/NFT to the protocol to receive FXB2029 tokens directly to the same address on the Fraxtal mainnet. They are then free to do whatever they wish with their FXB2029 tokens.
  • Designated Locked Liquidity for Exchange: Only certain designated pools will be eligible for this exchange option, but this list can be expanded through the governance process.
Pool Gauge Address
Uniswap V3 FRAX/USDC 0x3EF26504dbc8Dd7B7aa3E97Bc9f3813a9FC0B4B0
Uniswap V3 FRAX/DAI 0xF22471AC2156B489CC4a59092c56713F813ff53e
  • Option to Retain LPs: Liquidity providers will have the option to either exchange their locked liquidity for FXB2029 or retain their current locked positions.
  • No Ragequit Fee: There will be no Ragequit fee for liquidity providers choosing this exchange method, ensuring a cost-effective transition.
  • FXTL points & incentives: Migrators that receive FXB2029 for their positions will be entitled to all FXTL points multipliers & yield opportunities that are available and upcoming for all FXB2029 holders, making it one of the most high-yield opportunities within the Frax ecosystem.

Voting

  • For: Approve the option for liquidity providers to exchange their locked liquidity for FXB2029 at the auction price.
  • Against: Do nothing.
3 Likes

Looks great! Let’s go!

2 Likes

Is there a plan to migrate to a different bond in the future? In other words, how would this work in 2029/2030? I assume the idea is to migrate to a bond with a maturity five years in the future (e.g., 2024->2029), but not sure if that’s just my assumption.

1 Like

Let’s bring this to voting.
Benefits everybody, hurts nobody.

1 Like

looks good!

Glad the Uniswap V3 FRAX/USDC is included

1 Like

Thanks for your question. Definitely, it is something that can be changed through the governance process in the future. But for now, we have decided to start with this bond.

Hi, I’m the original proposer of Implement Ragequit for Uniswap v3 FRAX/USDC LP

Firstly I wanted to say thanks to everyone involved in the efforts to help us LPs get our liquidity back, and do it in a way that is not negative to the Frax protocol.

However I have a concern. I just checked the Curve pool on Fraxtal for the FXB2029 pool and to exchange FXB2029 for FRAX USD there’s a 800 bps slippage associated. And looking at the overall size of the pool there’s only 671,000 USD in there. Given that there’s a large amount of slippage for just one user (me), and there has been a few comments on the previous governance post which indicates demand for this LP exit, I’d like to have a conversation about the liquidity available for this implementation to be useful for those of us withdrawing.

One other alternative which I would be happy with is to take a straight haircut on the LP position and not have to go through the USDC/FRAX LP → FXB2029 → FRAX process.

Edit: Link the pool on Fraxtal Curve.fi

the curve exchange rate will take a hit indeed
but should balance itself somewhat as if the peg is low enough it causes demand
i think the current proposal returns a higher $ than a straight haircut
and at the same time makes sure the actual underlying $ doesn’t leave frax eco
so it’s a win win just maybe it causes people to have to wait for the peg to restore a couple of times

We could end up in the situation where we’ve withdrawn from the Frax lock with a fixed time but have an indefinite wait for liquidity.

this is why you should only withdraw when there’s liquidity if ur wanting to avoid this risk (fxb and it’s curve pools have way higher apr than the uniswap one)

Good idea but let’s add some pools that aren’t about to unlock in 1-3 months for most LP’s anyway.

Stakedao 3crv
Vesper frax
Frax/pfi

1 Like

This proposal is up for voting here: Snapshot