[FIP-4XX] Provide frxUSD to a joint Frax / Zivoe pool on Curve

Governance Proposals
1

Authors

The Zivoe team.

Summary

This proposal seeks to introduce a joint Curve liquidity pool on Ethereum for Zivoe’s vault token and frxUSD, as well as lay the foundation for future potential collaboration between Frax and Zivoe.

Background & Motivation

Zivoe (https://zivoe.com/) is a real-world asset credit protocol launched in September 2024 that connects on-chain liquidity to consumer lenders for the purpose of funding off-chain consumer loans. Zivoe’s portfolio currently generates a net 17% APR (excluding governance token emissions), making it one of the highest-yield projects in the RWA space. The Zivoe team has been longtime believers / users in the Frax ecosystem and have held FXS for years. Our team comes from top financial institutions such as JPMorgan Chase, Wells Fargo, and more, as well as DeFi-native individuals from top protocols such as Maple Finance.

With our team’s extensive background in consumer credit, we bring a deep understanding of the space, making us uniquely qualified to manage risk in this segment. Multiple members of our team have run profitable multi-billion dollar consumer lending portfolios in the past. Our underwriting partner utilizes a proprietary underwriting model that takes into account credit scores, alternative credit sources, banking information, fraud detection mechanisms, and other relevant attributes. Zivoe’s off-chain lending partner is well-capitalized and maintains provisions for potential losses to ensure portfolios remain profitable.

The protocol currently relies on a two-tranche system with two separate tranche tokens that correspond to each tranche. The value of these tokens is backed by an off-chain SPV of consumer loans. Starting in late Q2 / early Q3, Zivoe will be migrating to a uni-tranche system that utilizes the ERC-4626 standard. We are proposing this Curve pool to help provide liquidity for this new vault token, increase the utility of frxUSD on Ethereum, and set the groundwork for future collaboration between Frax and Zivoe.

Proposal Details:

Initial Pool Structure

  • Zivoe’s depositors will provide 250k of the protocol’s new vault token to the pool, and Frax will provide 250k frxUSD to the pool. The pool will utilize Curve’s stable swap implementation with fees split equally between the two parties.

Token Incentives

  • For contributing frxUSD to the pool, Zivoe will give Frax 25,000 ZVE (0.1% of the total supply), the protocol’s governance and utility token. Based on Zivoe’s most recent funding round, this equates to $50k in ZVE resulting in a 20% return to Frax before factoring in pool fees.

Risk Management

  • After 1 year, there will be an option to renew or sunset the pool. If the pool is sunset, and the LP position of the parties is materially different from the starting positions, Zivoe will buy back the vault tokens from Frax to ensure they are returned their initial $250k in frxUSD. This ensures Frax is not left holding vault tokens.

Strategic Benefits

  • Provides Frax with a gateway to gain exposure to the $1.5 trillion consumer credit market in the United States through a regulated lending structure, and further establishes frxUSD as an early mover in the rapidly evolving RWA sector.

Future Integration

  • Zivoe will also begin accepting frxUSD as a deposit asset, explore denominating future loans in frxUSD, and work with the Frax team to explore other ways that Zivoe can further integrate into the Frax ecosystem to contribute to the growth of Frax.

Vote Outcomes

  1. Frax provides 250k frxUSD to a joint frxUSD / Zivoe vault token pool on Curve with pool fees being equally split. Zivoe gives 25k ZVE to Frax and will buy back any vault tokens held by Frax when the pool is sunset.
  2. Do nothing
2

Based on feedback received from the community we’ve updated the proposal to the following:

Proposal Title: [FIP-4XX] Incentivize a joint Frax / Zivoe pool on Curve

Authors

The Zivoe team.

Summary

This proposal seeks to establish joint incentivization for a Curve liquidity pool pairing Zivoe’s new vault token (zveUSD) with frxUSD, while also laying the groundwork for future collaboration between Frax and Zivoe.

Background & Motivation

Zivoe (https://zivoe.com/) is a real-world asset credit protocol launched in September 2024 that connects on-chain liquidity to consumer lenders for the purpose of funding off-chain consumer loans. Zivoe’s portfolio currently generates a 17% APR (excluding governance token emissions), making it one of the highest-yield projects in the RWA space. The Zivoe team has been longtime believers / users in the Frax ecosystem and have held FXS for years. Our team comes from top financial institutions such as JPMorgan Chase, Wells Fargo, and more, as well as DeFi-native individuals from top protocols such as Maple Finance.

With our team’s extensive background in consumer credit, we bring a deep understanding of the space, making us uniquely qualified to manage risk in this segment. Multiple members of our team have run profitable multi-billion dollar consumer lending portfolios in the past. Our underwriting partner utilizes a proprietary underwriting model that takes into account credit scores, alternative credit sources, banking information, fraud detection mechanisms, and other relevant attributes. Zivoe’s off-chain lending partner is well-capitalized and maintains provisions for potential losses to ensure portfolios remain profitable.

The protocol currently relies on a two-tranche system with two separate tranche tokens that correspond to each tranche. The value of these tokens is backed by an off-chain SPV of consumer loans. Starting in late Q2 / early Q3, Zivoe will be migrating to a uni-tranche system that utilizes the ERC-4626 standard.

Proposal Details:

Initial Pool Structure

  • We propose the joint incentivization by both Zivoe and Frax for a zveUSD (Zivoe’s new vault token) and frxUSD liquidity pool on Curve. This pool will utilize the StableSwap implementation, targeting a total size of $500K. Zivoe depositors will contribute up to $250K in zveUSD, while Frax community members will provide frxUSD liquidity.
  • Zivoe and Frax will agree to incentivize the pool for an initial one-year period. Upon the sunset of this period, both parties may elect to continue incentivizing the pool or discontinue incentives.

Token Incentives

  • Zivoe will initially allocate 25,000 ZVE (0.1% of the total supply), the protocol’s governance and utility token, to incentivize deposits into the pool. Based on Zivoe’s most recent funding round, this equates to $50k in ZVE.
  • Frax will incentivize the pool with FXTL points (and/or FXS), and Curve gauge voting to direct CRV emissions.

Strategic Benefits

  • Provides Frax with a gateway to gain exposure to the $1.5 trillion consumer credit market in the United States through a regulated lending structure, and further establishes frxUSD as an early mover in the rapidly evolving RWA sector.

Future Integration

  • Zivoe will also begin accepting frxUSD as a deposit asset, explore denominating future loans in frxUSD, and work with the Frax team to explore other ways that Zivoe can further integrate into the Frax ecosystem to contribute to the growth of Frax.

Vote Outcomes

  1. Approve joint incentivization of a zveUSD / frxUSD StableSwap liquidity pool on Curve. Zivoe depositors will provide up to $250K in zveUSD, and Frax community members will provide frxUSD liquidity. Frax will incentivize the pool with FXTL points (and/or FXS), and Curve gauge voting to direct CRV emissions. Zivoe will allocate 25,000 ZVE to support frxUSD deposits. The pool will be incentivized for an initial one-year period, with the option to extend.
  2. Do nothing