[FIP - 3XX] Develop fast crosschain liquidity for FraxFerry

Hello everyone, my name is Max and I represent the Connext Collective, an ecosystem composed of autonomous entities and individuals aligned with the common goal of realizing the Connext vision. Connext is a modular protocol for securely passing funds and data between chains.

We are seeking feedback from the FRAX community to integrate the FraxFerry into the Connext protocol.

Purpose:

Connext aims to integrate the FraxFerry to leverage its fast liquidity and execution layer. This collaboration will facilitate rapid transfers (1-4 minutes) of FRAX and frETH assets across all chains connected with FraxFerry.

Problem

Currently, FRAX has deployed the FraxFerry primarily on core chains using an optimistic system that results in slow transaction times (up to 24 hours). This delay limits the ability of users to efficiently move FRAX across different chains, and for the FRAX assets to fully become a recognized unit of value across ecosystems.

Solution

Connext is a modular interoperability protocol composed of different layers.

  • The lower level “slow path” focuses on crosschain messaging and value settlement.
    It ensures communication across chains by plugging into the most secure path available. For L2 to L2 communication, Connext uses native L2 bridges. For L1 to L1, Connext can plug into other communication channels and implement an optimistic mechanism (similarly to Fraxy Ferry).

  • The upper level comprises a network of routers or liquidity providers.
    These providers front funds to users to immediately complete their transaction, and later receive a refund from the slow path. This system adds no extra trust assumptions, as routers are compensated only upon successful execution of user-requested actions. These LPs charge 5bps for their services, so the network is self sustainable.

The upcoming Connext upgrade will allow it to integrate the FRAX Ferry and use it as the slow messaging path.
The liquidity network can then front FRAX to users, and settle their credits via FRAX Ferry.

Benefits:

  • Fast, zero-slippage transfer of FRAX (and all tokens in the FRAX ecosystem) across chains, with no additional trust assumptions. Direct L2 to L2 transactions are enabled.
    We believe this can increase the bridging volume for Fraxy Ferry by more than 10X.
  • No code change from FRAX protocol
  • Inclusion of FRAX routes in bridge aggregators like MetaMask, Li. Fi, and Socket that already integrate Connext.
    This not only applies when a user wants to bridge FRAX directly, but also when a long tail asset has liquidity with FRAX on both origin and destination chain.
    For example, if a user wanted to move UNI from Ethereum to Optimism, it might be economically convenient and therefore selected as a route from the aggregator to swap UNI–>FRAX, Bridge FRAX with Connext, Swap back FRAX→UNI. This provides massive liquidity demand for FRAX.
  • Developers can build crosschain applications that use FRAX tokens, like crosschain staking or other FRAX-based DApps.

Request:

We are seeking $120k in funding from the Frax DAO to support the development and integration of FRAX Ferry, aimed at enhancing the efficiency and reach of the FRAX ecosystem. As the Connext collective wants to strongly align with the FRAX ecosystem, we propose a portion of the grant be provided in FXS tokens

  • $90k in FRAX tokens
  • $30k in FXS tokens (priced at the average of the last 30 days’ TWAP as of the date of this proposal’s approval)

The grant will be disbursed:

  • 50% at proposal approval
  • 50% at completion, defined as the successful execution of the first fast mainnet transaction of FRAX

This cost covers:

  • [Small part of] our protocol upgrade that unlocks the possibility for Connext to integrate FRAXFerry
  • Integration of FRAX Ferry as a settlement layer
  • Contracts audit

Timeline

The project’s completion timeline is currently flexible and will be better estimated after further discovery and analysis.
We anticipate that it will take several months from the date of approval: we will provide constant updates on progress.

2 Likes

I would love to see this happen, but am not certain if we should or shouldnt postpone til after CR 100%.

Am also very keen to hear the Devs weigh in. @maxlomu you stated that there are no added trust assumptions. So long as thats true, I dont see any reason why this wouldnt be a fantastic addition to the ecosystem.

Ive been using connext since v1 with matic and gnosis, always been a fan.

That being said, safety is rule #1 with Frax and the reason why Frax Ferry exists the way it does.

3 Likes

Thanks @lyule67 for supporting the initiative! Also looking for more devs to chime in.

Yes, there is no additional trust assumption for users:

  • Liquidity providers take the initial risk by fronting the tokens to users. These tokens are not a wrapped version of FRAX: they have been previously minted by FraxFerry itself.

  • Users are free to use those tokens however they want

  • The LPers wait for a refund from the messaging layer (FraxFerry) and complete the cycle.

2 Likes