FIP 44 - Hop AMO

Revised Jan. 28 to clean up the proposal

Author
Hameed

Summary

Create a Hop AMO to provide liquidity directly to the Hop protocol.

Background and Motivation

Hop (https://hop.exchange/ ) is a scalable rollup-to-rollup general token bridge built on Ethereum. Hop lets users to send tokens from one rollup to another almost immediately without having to wait for the rollup’s challenge period.

Ethereum’s Layer 2 (L2 - rollups that utilize the Ethereum main chain for security) will likely become synonymous with “Ethereum” in the not distant future. Currently the most feature rich rollups are Optimistic rollups, which have a seven day withdraw period for assets exiting L2. Hop offers near instant withdrawals for users exiting L2, which will be critical for the widespread adoption of L2 on Ethereum. Hop also offers the best trust assumptions of existing bridges.

As we plan the next phase of growth for Frax, FRAX should become one of the most liquid assets on L2. I propose that Frax create a Hop AMO to provide liquidity directly to Hop to help achieve this goal. Deployed liquidity will earn a yield on Hop, creating a win / win situation for Frax and Hop. If the vision of Hop is achieved, it will become a quasi public good that serves as the connective tissue between L1<>L2 and L2<>L2. Frax can help Hop realize this vision and onboard more users to L2, which also helps Ethereum scale.

Phases

In the near term, Frax can provide stablecoin liquidity (likely USDC / DAI in the short term) for both Hop AMMs and bonding (bonded capital enables fast withdrawals on Hop). We can authorize up to $20m of liquidity in this proposal which we can scale up to over time. If all goes well, I anticipate expanding the AMO significantly in a subsequent snapshot based on Hop demand. In this phase, any bonding will be done in cooperation with the Hop team and the optimal structure and sizing will be determined collaboratively. This is an opportunity for Frax to support Hop and Ethereum scaling by providing liquidity while also earning a return on protocol owned assets.

The first phase is the extent of this proposal. If all goes well with the AMO and the community is on-board with further collaboration, the next obvious step is to work to add Frax to Hop and supply FRAX (and perhaps FPI) liquidity to Hop. The AMO can deploy large amounts of Frax to make it the most liquid and cost-efficient asset to bridge Ethereum L1<>L2 and L2<>L2.

Proposal

Create a Hop AMO and authorize up to $20m of liquidity for use in the AMO.

For: Create the Hop AMO

Against: Do nothing

7 Likes

Are you sure it is AMO, not Bridge Mechanism - Frax Finance ¤?

i think we should be supporting protocols that support FRAX , if FRAX cant be used on HOP yet then i think we should wait for the next step to be completed first.

Providing other stables before hand just helps them stable coins get the first mover advantage

maybe this proposal is just a bit to early.

1 Like

Hey @tan -

That’s a good question - I’ve had some feedback from the team and this approach appears to work at this time. The goal is to have liquidity that Frax can deploy on Ethereum L1 and L2. We’re speaking in hypotheticals here but if FRAX is added to Hop, it would likely be in the form of FRAX on Ethereum L1 and FRAX on Optimism, Arbitrum, Matic, etc. I hope this answers your question or helps clarify things - the important thing from this FIP is that we authorize liquidity that Frax can deploy into Hop which will enable Frax to be a first mover and put Frax in an excellent position on Hop and Ethereum L2.

Hey @sparkes25 -

I appreciate your perspective that Frax should prioritize protocols that support Frax and agree with you. I could have been more clear in my original post but there is mutual interest to work together and this is the best step forward at this time. I cannot speak for Hop but I’d expect that this would only help FRAX support.

Re the idea that this might be early - I like your caution but think it may actually be great if Frax is early. To reframe things - it’s obviously difficult to tell how big Hop will be ahead of time but if it does become the dominant connection between L1<>L2 and L2<>L2 on Ethereum, it would be great if Frax is early to the party and builds a strong relationship with Hop.

1 Like

just seem odd that we are a providing stable coins but not FRAX.

but i guess if they dont add FRAX then we can vote to pull liquidity at a later date

Snapshot is live here:

https://snapshot.org/#/frax.eth/proposal/0x9cacd23e1860182d7231dc59274acfb00def41228e0024c2c9fb1a411ac59369