This proposal seeks to authorize a revised maximum annual budget of 4,100,000 FRAX for Frax Finance for the fiscal year 2024-2025. The revised budget reflects significant cuts across various categories to ensure financial prudence while continuing to support essential operations and initiatives. The budget is intended to cover four key categories: Development & Operation, Security, Legal & Compliance, and Fraxtal Growth under the Fraxtal Builders Program. Please note that this is a maximum cap, and it is highly likely that not all of it will be used, as we only spent 5,123,990 FRAX last year out of the 9,000,000 FRAX budget that we had during the last fiscal year.
Background and motivation
As Frax Finance continues to grow and evolve, this budget supports our core operations while enabling strategic growth within the Fraxtal ecosystem. The allocation focuses on maintaining our development and operational capacity, ensuring security, managing legal and compliance obligations, and selectively supporting key initiatives within the Fraxtal ecosystem.
Details
Budget Categories
Development and Operation: This budget will be used to cover the costs associated with the development and operation of the Frax Finance protocol. This could include salaries for developers, costs of new feature development, maintenance costs, infrastructure costs, and other operational expenses.
Security (Audits and Bug Bounty): This budget is allocated to maintaining the security of the Frax Finance protocol. This includes the costs of regular security audits by external firms, running a bug bounty program to incentivize the discovery and reporting of vulnerabilities and other measures to ensure the safety and trust of our community.
Legal and Compliance: This budget covers legal and compliance costs to ensure that Frax Finance operates within the legal framework. This could include fees for legal counsel, regulatory compliance costs, potential legal disputes, and other related expenses. Notably, Frax Finance has not encountered any significant legal issues to date, and last year, we spent less than 5% of the allotted legal budget. This allocation remains in place to ensure we are prepared for any unforeseen legal requirements.
Fraxtal Ecosystem Grants (Fraxtal Builders Program): This new budget category aims to support the growth of the Fraxtal ecosystem through the Fraxtal Builders Program. Although limited, this budget supports critical initiatives within the Fraxtal ecosystem, focusing on strategic growth and development. And it can be boosted by allocating Frax Finance grants from Superchain grant programs.
Budget Allocation
Budget Share Percentage
Proposed Budget (2024 - 2025)
Frax Finance Latest Annual Budget (2023 - 2024)
Development and Operation
73.2%
$3,000,000
$3,000,000
Security
9.8%
$400,000
$1,400,000
Grants
0.0%
$0
$600,000
Reserve Emergency Fund
0.0%
$0
$1,000,000
Legal and Compliance
12.2%
$500,000
$3,000,000
Fraxtal Ecosystem Grants
4.9%
$200,000
$0
Total
$4,100,000
$9,000,000
Additional Notes
This proposal represents the maximum caps for each category, not necessarily the exact amounts that will be used.
This proposal does not cover the costs of liquidity incentivization. Kindly refer to the Votium and WETHR proposals for budget allocations related to liquidity incentivization.
All previously approved budgets are still in effect and considered in our ongoing operations. This proposal is designed to supplement and build upon the existing financial strategies.
This proposal does not account for FXS. The team plans to continue utilizing their current treasury allotment of FXS for core development compensation. If more/less FXS resources become necessary in the future, a specific governance proposal will be initiated.
Vote
For: Authorize a maximum annual budget cap of 4.1M FRAX (2024 - 2025)
For posterity I just want to note that I would love for these points to be consolidated and a new unified FXS tokenomic system to be implemented. I support the new team budget and only have issue with the past overhangs.
I am positive. I have one addition I would like to see, and that is a budget rollover, where remaining funds get added to the âFraxtal Ecosystem Grantsâ segment for the next year if there is anything left.
I know the teamâs been working hard behind the scenes â Iâm excited for whatâs in store!
A few Qâs, thanks:
General Questions
Confirming Fiscal Year calendar â assuming its between FXS halving events so this proposal covers 12/20/2024 â 12/19/2025?
Further details on what led to under-spending in the prior Fiscal Year (actual spend of 6.97m FRAX versus budgeted 9.0m FRAX)?
example: Overestimated Legal & Compliance so right-sized that cost category in this yearâs budget proposal
Development and Operation
Headcount strategy: Is Frax expanding team? If so, what roles and a general timeline for onboarding these new hires?
example: Aiming to onboard two more Developers by 3Q-FY, etc
Total Salaries ($) to Full-Time-Equivalents (#) would serve as a useful proxy to check against excess salary allocation
example: 10m FRAX-Salary per 1 Full-Time would be alarming
What sub-categories are driving the need for an incremental 2.0m FRAX compared to prior Fiscal Year?
example: Largely the costs of scaling infrastructure and to a lesser extent headcount growth
Development roadmap for FY 2024-2025
New capabilities? What/when?
example:. frxBTC; focus of newly hired Developer
Upgrading existing product line? What when?
example: sfrxETH â sfrxETH v2; expect Security Audit in 3Q-FY prior to deployment
Security (Audits and Bug Bounty)
Good for transparency if expected Audits were mapped to development/product roadmap
Can access historic Bug Bounties (post-mortem) and outstanding bounties once budget is approved?
Reserve Emergency Fund
Rationale for reducing allocation to this category? Intuitively one might think that a loss allowance should scale alongside the continued growth of Frax.
example: âimproved risk management strategyâ or âenhanced protocol security mechanismsâ would suffice as an explanation with transparency furthering confidence in this proposal!
Legal & Compliance
Additional guidance from the team more broadly around the legal and regulatory environment?
Anything you all are being mindful of as it relates to DeFi, specific jurisdictions, or Frax specifically?
Fraxtal Ecosystem Grants
This proposal introduces a new cost-category (budgeting 4.0m FRAX at inception) and is earmarked for new projects, initiatives, and development within the Fraxtal Layer 2 blockchain.
Would help to understand more practically how the team is thinking of driving more ecosystem growth during FY 2024-2025? What does success look like and how will it be done?
Qualifiers or characteristics for Grant-selection or the type of projects being targeted?
example: Focused on User-Onboarding tools like native Wallets; Not focused on Gaming; Focused on Mega-Protocol partnerships like Aave; Focused on distribution like Polygon; etc
Given the valuable feedback received from community members, and major veFXS holders, we have made several key adjustments to the proposed budget to ensure financial prudence while still supporting essential operations and strategic growth within the Frax ecosystem. Hereâs an overview of the changes:
Development and Operation: The budget has been reduced from the initially proposed 5M FRAX back down to 3M FRAX, matching last yearâs allocation. This decision means there will be limited hiring. However, this ensures that core operations can continue without disruption.
Security: We have scaled back the security budget from 1.5M FRAX to 400k FRAX, saving 1.1M FRAX. This adjustment reflects a tighter focus on essential security measures, aligned with our current development and growth plans.
Grants: The grants budget has been reduced to 0 FRAX, saving 1M FRAX. and combining this category with Fraxtal Ecosystem Grant.
Reserve/Emergency Fund: The reserve fund allocation has been eliminated, saving 500k FRAX.
Legal & Compliance: The legal budget has been reduced from 1M FRAX to 500k FRAX, saving 500k FRAX. We intend to manage any potential legal issues within this revised limit, given that last year we only utilized less than 5% of the legal budget.
Fraxtal Ecosystem Grants: The budget for Fraxtal ecosystem grants has been reduced from 4M FRAX to 200k FRAX, saving 3.8M FRAX. This smaller budget will require us to carefully allocate resources, focusing only on the most critical initiatives. Additionally, we plan to supplement this budget by channeling grants earned from other parties to further support Fraxtal growth.
Jesus christ. While Iâm all for fiscal responsibility I also recognize that as a protocol we want to be able to compete and grow into the future. I am afraid that we arenât allowing for this flexibility for if/when the market turns and we will want to allocate more resources to growth. I guess we can cross that bridge when we get there. In the mean time we go into survival mode and hope that things turn around soon. Creating new products that can compete and bring new users to Frax is imperative if we wish to succeed. Kudos to the team for recognizing the severity of the current economic situation. Letâs continue working to bring CR back to 100, onboard new users, and return to a profitable stage where veFXS holders get what they deserve.
I understand the need for fiscal responsibility, but I feel that in the current format we are sacrificing too much in terms of innovation and building. We are still in a growing phase, and also have some FXS left before the 100m cap to potentially fund some expenses. I urge that we use this year and next to continue building and growing our ecosystem. Hence, we should allocate 5m to development to make sure we do not stifle progress and also have the funds to grow our team.