[FIP - 381] Create PEPE/FRAX Fraxlend Pair on Ethereum Mainnet and Authorize AMO Allocation

Governance Proposals Fraxlend
1

Authors:
@Westwood

Summary

Propose the creation of a new Fraxlend pair on the Ethereum mainnet: PEPE/FRAX.

Details

  • Fraxlend Pair Name: PEPE/FRAX - Variable Rate V2
  • Chain: Ethereum Mainnet
  • Max Authorized Allocation: 1,000,000 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 PEPE/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 PEPE 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 PEPE token is a crucial factor in the decision to introduce the PEPE/FRAX pair. The following image shows the slippage curve for PEPE, illustrating how liquidity impacts trading:

PEPE Liquidity
PEPE Liquidity2818×862 118 KB

This curve indicates that PEPE 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.

Trading Volume

PEPE is among the top 10 cryptocurrencies by trading volume according to CoinGecko, as shown in the image below:

Coingecko Volume
Coingecko Volume2274×1344 341 KB

This high trading volume signifies strong market interest and liquidity, making PEPE a suitable asset for the Fraxlend pair. High trading volume ensures that there is sufficient market activity to support lending and borrowing activities without significant price impact.

Voting

  • For: Approve the creation of the PEPE/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.
4 Likes
2

I think this is a great idea overall, potentially bring new eyes to fraxlend and from there, the rest of the stack. My only thought is a safe ltv %. :+1:

4 Likes
3

This proposal is up for voting here: Snapshot

2 Likes
4

I think experimenting with meme coins could potentially be good idea, what if there’s a test trail of this using Morpho on Base? In doing so the community can benefit in some analysis on how a pool like this would perform. If successful we can create the pool on Fraxtal with better incentives to bring TVL

2 Likes