Authors:
@Westwood
Summary
Propose the creation of a new Fraxlend pair on the Ethereum mainnet: weETH/FRAX.
Details
- Fraxlend Pair Name: weETH/FRAX - Variable Rate V2
- Chain: Ethereum Mainnet
- Max Authorized Allocation: 10,000,000 FRAX
- Max Loan-to-Value (LTV): To be decided by the development team
Background and Motivation
Fraxlend is a lending platform that enables the creation of markets between pairs of ERC-20 tokens. Each pair functions as an isolated, permission-less market, allowing users to engage in lending and borrowing activities. This protocol is designed to generate new financial opportunities for the FRAX community.
Automated Market Operations (AMOs) enhance FRAX’s capabilities as a leading stablecoin protocol by offering maximum flexibility and opportunities without compromising its core stability mechanisms. To date, multiple AMOs have been deployed on platforms such as Fraxlend, Aave, and Rari.
Introducing the weETH/FRAX pair into the Fraxlend AMO on Ethereum Mainnet aligns with this strategic vision. It will facilitate the minting of FRAX, secured by over-collateralized debt, further strengthening the ecosystem. The choice of weETH as an asset is based on its growing popularity and liquidity, which can attract a broader user base to Fraxlend. Allowing the development team to decide the LTV ensures that the risk parameters are set appropriately based on market conditions and risk assessments.
Liquidity Profile
The liquidity profile of the weETH token is a crucial factor in the decision to introduce the weETH/FRAX pair. The following image shows the slippage curve for weETH, illustrating how liquidity impacts trading:
This curve indicates that weETH has a significant liquidity pool, which helps maintain stability and reduce slippage during large trades. A robust liquidity profile is essential for minimizing risks and ensuring the smooth functioning of the Fraxlend pair.
Market Cap
weETH is among the top 30 cryptocurrencies by market cap according to CoinGecko, as shown in the image below:
This high market cap signifies strong market interest and liquidity, making weETH a suitable asset for the Fraxlend pair. A high market cap ensures that there is sufficient market activity to support lending and borrowing activities without significant price impact.
Voting
- For: Approve the creation of the weETH/FRAX Fraxlend pair on Ethereum Mainnet with the specified max authorized allocation and allow the development team to decide the LTV.
- Against: Do not approve the creation of the new Fraxlend pair.