Following FIP-44 that created the Hop AMO, the Frax and Hop teams have been working together to integrate FRAX on Hop. This proposal will authorize Frax comptrollers to deploy up to $50m of FRAX liquidity at their discretion once FRAX is live on Hop.
Background and Motivation
Previous context:
The previous proposal for the Hop AMO laid the groundwork for FRAX to be onboarded to Hop. Ideally this will occur in the coming weeks. In order to onboard FRAX, Frax will need to run a bonder to provide liquidity for FRAX transactions. This proposal will fund the bonder, which will be maintained by Frax comptrollers and earn fees for the Frax protocol. Frax can also seed liquidity in FRAX AMM pools on Hop. Frax will have access to all funds deployed and be able to increase or decrease funding at the discretion of the comptrollers. The end goal is to make FRAX the most attractive asset to use on L2 and the best option to bridge between L1<>L2 and L2<>L2.
With regards to the size of the proposal, the goal of the proposal is to give comptrollers the ability to provide enough liquidity to make FRAX a compelling option while also generating revenue for the protocol. The deployment of liquidity is at the discretion of the comptrollers. I expect that it will be scaled into over time.
Proposal
Authorize up to $50m FRAX liquidity to be deployed on Hop at the discretion of protocol comptrollers.
For: Authorize up to $50m of FRAX liquidity for use in the Hop AMO
Hey, adding Frax to more bridges always seems like a good call. I’m just wondering how this will work. From my understanding Hop uses integrated AMMs between TOKENs and hTOKENS, but since Frax has its own bridging system which allows to mint canonical Frax, will Frax be adding hFrax as collateral to mint canonical Frax?
Hi Seba! I think that I understand your question - the Hop AMM pools are stableswap pools like Curve. So Frax will add canonical Frax on each chain (Polygon, Optimism and Arbitrum) and it will be split between FRAX/hFRAX on each pool’s respective stableswap pool. The AMO will then control the LP positions and be able to increase or decrease the positions as necessary. The Frax bonder will be run by Frax and it basically balances the Frax across the chains and enables fast withdraws for Frax. So it will include FRAX on all the L2 chains as well as FRAX on mainnet.
So of the 50m Frax, it will be split between the supported chains, for example 10m of liquidity will be supplied on Arbitrum, Optimism, Polygon, Gnosis,…?
Yes, the FRAX will be split between the AMM pools on each of the chains (specifically Optimism, Arbitrum and Polygon) and then the bonder (which is on each of those chains as well as on Ethereum Mainnet). It will be scaled into over time, with the end goal of making FRAX the most liquid asset to bridge between L2 and L1.
Very much in support of this proposal. I posted an RFC: Cross Chain Routing Protocol AMO in January with a similar idea that didn’t seem to gain much traction. But very excited to see it’s actually been implemented in collaboration with a CCRP.