FIP 50 - Frax + Futureswap



The Frax and Futureswap teams have been working together to enable a derivative layer on top of Frax products. This proposal will formalize the collaboration with a $3m token swap and the creation of a $8m long term AMM liquidity pool, which will include $4m of FRAX.

Background and Motivation

Frax is preparing for the next phase of expansion. FPI, Fraxswap and native lending markets are all on the horizon.

Futureswap ( ) is a decentralized non-custodial perpetual protocol where users can gain leveraged exposure on assets. Futureswap is live on Arbitrum and plans to expand to other chains in the coming weeks. More information about Futureswap can be found here.

Futureswap is working to provide a layer of derivative products on top of the Frax ecosystem. The Futureswap team is already assisting with Fraxswap and will be one of the first products to utilize Fraxswap once it is live. Some of the possible applications include leveraged exposure for pairs listed on Fraxswap, including leveraged exposure to inflation via FPI. Futureswap also plans on building products for Frax’s native lending markets.

There is tremendous potential for Futureswap and Frax to enable great markets together. The vision is for Futureswap to provide a derivative layer on top of Frax on all relevant chains. As we begin this effort, now is a great time to execute a token swap to align interests and benefit from mutual protocol growth going forward. The proposed swap amount is $3m of FXS for $3m of FST at a 30-day TWAP.

This proposal also authorizes the creation of an $8m long term FST/FRAX AMM pool, with Frax contributing $4m FRAX and Futureswap contributing $4m FST. This pool is designed to create a long term market for FST priced in FRAX with both protocols as equal owners of the LP positions.

This proposal is only for the approval of a $3m token swap and $4m FRAX for the AMM pool. The next phase of the collaboration will likely include Frax providing liquidity on Futureswap. This will be addressed in a future proposal.


Authorize a $3m FXS swap for $3m FST at a 30-day TWAP and up to $4m FRAX for a long term FST/FRAX AMM pool to be jointly owned by both protocols.

For: Authorize the swap and creation of the AMM pool

Against: Do nothing


I’m a big fan of Futureswap and their team, especially with past conversations I had with them. This is a logical first step to align incentives and later for FRAX to provide liquidity to their platform. I support this proposal. If anyone has any concerns or objections, I’d be curious to hear them.

Think this proposal needs more work.

First off I’m generally against the idea of “token swaps”. Protocols can always collaborate and build together to enrich both sides, but a “swap” just to say we’re friends isn’t needed.
Need to call it what it is and that’s a treasury purchase using FXS to OTC buy FST.

So why do we want FST? There’s no info here on why holding it will be good. What’s the current yield? is it even yield bearing? Creating an AMO for Futureswap can definitely be a worthy idea. so how do those FST help the AMO?

Also what does Futureswap plan to do with their FXS? Boost their liquidity pool with it I assume? so that means there will be future FXS emissions allocated to that pool as well via this deal.

Both protocols can build together to have mutual positive outcomes. If one wants to hold the other’s token they should just buy it on the open market.


  • token swap = Don’t need
  • AMM liquidity = just do a gauge proposal and assign gauge weight to get liquidity
  • Frax AMO = Could be worth exploring but need more info
  • FST purchase = Based on Frax AMO details. Could just farm it like Frax did with CVX

(Side note here: Futureswap doesn’t open source their code, do not verify contracts, and geo-fence people using their UI)


i dont really see a need for the swap. but agree with the rest.

Having dealt with swaps at Olympus I think this is a bit one-sided - Futureswap look like a good team with a good product but limited success. The deal should be on the footing that Frax is bringing more value to the table by putting actual capital at risk when FST is just putting up governance tokens. There are big unlocks coming up for them and Frax’s capital is exposed in the FST/FRAX pair - not saying they will, the investors are top tier but it is important to note.

What if instead Frax provides them with the liquidity and then they can use Olympus Pro or the TWAMM to pay it back over 90 days selling FST for FRAX into the market - liquidity as a service as it were

The swap should also be at a discount given the imbalance in utility of their token and maturity of the protocol - for example see the Fiat DAO swap Olympus did at 50% discount OIP-72: FIAT DAO x Olympus Partnership - OlympusDAOForum


Hey @C2tP-C2tP - I appreciate you engaging. Apologies in advance for the long text but it should provide additional context.

On Swaps

I agree that token swaps are generally a bad idea and I’ve been pretty skeptical of most swaps (especially when they are proposed by other projects). We have a finite amount of FXS and given it’s high upside potential, we should default to no when it comes to token swaps. I also agree that the token swap is a treasury transaction - ideally we should create a new proposal type strictly for treasury transactions. I’ll take a shot at it when I have a chance but I haven’t gotten around to that yet (anyone else is welcome to work on it as well). I appreciate the feedback that I could have provided more context upfront.

Working with Futureswap

In this specific instance, from both a strategic and investment perspective, I think that doing a token swap makes sense for Frax.

Strategically, Frax is focused on the next phase of growth from 3bn FRAX to 30bn FRAX. Existing efforts as well as L2, FPI, Fraxswap, native lending are all catalysts for this growth. As Fraxswap and native lending launch, having interesting leverage options with FRAX / FPI denominated pairs could make very compelling products. As an example, many of the largest crypto native stablecoin protocols can actually be viewed as lending products (e.g. Maker, Abracadabra, etc.). FRAX has achieved a nearly $3bn market cap without any native lending offerings, which in some ways may have been a more difficult route to take. Putting systemic risks aside, MIM / UST with degenbox had over $1bn of MIM at one point in time. We can argue whether or not this is actually productive growth for a protocol but I think it’s clear that demand likely exists for leveraged / derivative products. The question becomes whether to build in-house or use an existing product / team (or potentially merge / acquire a project). The Frax team is already growing and working on a huge scope. IMO it’s much more feasible at this time to work with an existing team that already understands the complexity of building these products. It would be ideal to find a team that is excited to create bespoke derivatives products for various Frax products.

Futureswap has 10 quality devs and they are excited to focus on building products for Frax. One challenge in assessing the fit is that we need to look at what they are working on building rather than what they’ve built. Futureswap is preparing to launch a new version of their core product (which has completed audit) that allows the creation of leveraged markets for any pair that has sufficient AMM liquidity. They’ve told me that they plan to open source and verify their contracts (they can answer any questions on this directly).

They have been working with the Frax team to support Fraxswap on launch. This will enable Fraxswap LPs to deposit their LP positions on Futureswap to earn trading fees and rewards, while the trading on Futureswap is volume on Fraxswap. This will create a leverage trading market on any Fraxswap pair that has sufficient liquidity deposited on Futureswap. This is different than adding FRAX as a collateral type - it’s more akin to creating a derivative layer on top of Frax. Beyond the core product, Futureswap is interested in building bespoke products for Frax. Recursive lending and a leveraged FPI product could be interesting ideas. They’ve been involved in helping Frax ship Fraxswap and are starting to help on the lending side of things as well.

Will Futureswap ultimately create compelling products with Frax? We’ll likely find out in the next few of months. If Futureswap succeeds in creating a useful derivative layer on top of Frax products, Frax having a solid FST position makes a lot of sense. If Frax helps Futureswap grow and succeed as protocol, it would also be smart for Frax to participate in the economic upside. Building a FST position will provide both governance and economic exposure to the success of Futureswap going forward. FST does not currently have a yield but the team is open minded and I can easily see the framework for an updated token model that creates a yield and aligns incentives. We could wait to do a swap or purchase after we have successful live products with them, however I expect that the success will become priced in for FST and we’d receive significantly less for our money.

Timing and Liquidity

From an investment perspective, this looks like a reasonable time to purchase FST. Like a lot of DeFi projects, FST is down significantly from ATHs. The project currently has a $38m market cap and a $200m fully diluted valuation.

One major problem for acquiring FST is that there is basically no existing market liquidity. There aren’t currently incentives for deposit FST/ETH LP into the Uniswap v2 pool and accordingly there is approximately $300k of total liquidity (72k FST) on Uniswap. The only option to acquire any meaningful amount is through an OTC transaction. If Frax were to complete this swap, it would be for over 1,000,000 FST (depending on the final TWAP) which will be at least 1% of the total FST supply and close to 5% of the liquid supply. For Frax, it would likely be closer to 0.1% of the FXS supply. So while Futureswap could potentially use it to direct FXS from a gauge vote, I don’t think it will be disruptive.

One approach would be to use protocol profits to purchase FXS and use purchased FXS for the swap to avoid reducing protocol owned FXS. This makes it closer to a $3m FRAX for $3m FST transaction which preserves the FXS upside.


As for the AMM pool, I should have been more clear that it’s primarily going to be liquidity on Fraxswap. It will help Futureswap by creating more liquidity while effectively pricing FST in FRAX and making Fraxswap the main venue for FST liquidity. The AMM LP position will then be deposited onto Futureswap and earn fees for both protocols (essentially as part of the AMO). Frax comptrollers can scale up to the $4m at their discretion.

The basic premise of the AMO will be to deposit protocol owned Fraxswap LP positions into Futureswap to create a leveraged market for Fraxswap pairs while also earning the fees and potential incentives from Futureswap. As we get closer to Fraxswap launch, the details of the AMO will be more clear and shared for feedback.

I hope this clarifies some of the questions and concerns that you raised. Please let me know if I can go into further detail on anything.

I agree that we don’t need to do a swap to build great products together but I think it makes a lot of sense in this case. The AMM pool and AMO will be built on Fraxswap and are designed to be useful and profitable for both projects.

The only reason you give for us swapping for FST is ;
its slightly below ATH
it has no liquidity on the open market.

my questions are …
What use case do we have for owning FST, how would us owning FST benefit us ?

what use case does futureswap have for FXS, how would them owning FXS benefit them?

have they agreed to lock the FXS ??

have we agreed to do anything with the FST ??

is there any gauge pool they can vote for that would benefit them ??

do they plan to partake in governance voting ??

would they buy FXS on the open market if we dont do a swap with them? if not, do they really want FXS or are they just looking to unload FST and are looking for liquidity?

if they do want FXS, have they been buying it already? if not , why ?

Hey Aidan - thanks for the response on this, responding below:

  1. I tried to lay out more complex reasoning for doing the swap (strategic priorities of Frax, etc.) in the long post. To address your comments, the spot price of FST is approximately $2, the ATH was $20 last October. It’s more than slightly below the ATH from my perspective.

  2. I’m going to avoid repeating my longer post but the point is to have economic exposure to a project that is working to become a core partner for Frax, establish a voice in their governance and future direction of the project while locking in their focus on Frax going forward.

My answers to the rest of your questions are limited because I can’t speak for them but this is my understanding / impression / speculation :

  1. They are bullish on Frax in general (probably also on our potential to grow together). They are putting a lot of trust and effort into building products together and may view the swap as a further signal that we are also taking this seriously and valuing their partnership. If we do succeed in building products together, FXS will give them a formal voice in our processes.

  2. They appear to be very long term oriented. I expect that they’d be locking the FXS, likely for a long duration.

  3. We have not agreed to do anything with the FST (there is not much to do with it at this time). However if there were an opportunity to get a yield from the FST / use it to help direct resources or participate in governance I’d expect Frax to pursue these opportunities. Frax also is looking at this with a long term perspective, especially with the energy and expertise that Futureswap brings to the table. You know Frax - in general, we’re a welcoming community open to working with good actors in the space. We’ve been so focused on the terms here that I haven’t talked about the Futureswap team much. In my experience with them, they’re a quality group that’s very excited to build with Frax and the Frax community. They’ve been helpful at every opportunity, including helping the Frax team work through some of the kinks to finish Fraxswap.

  4. I’m not aware of any guage that specifically benefits them. Arguably they all can be useful because they all will become potential pairs on Futureswap.

  5. I can’t speak for them but I’d assume that they would participate at their discretion.

  6. I’m not sure if they would buy it on the open market otherwise. They have a very strong group of investors and my understanding is that they have a lot of capital on hand. I do not the impression that they are looking to unload FST.

  7. I’m not sure but I assume that they are not - I’m not sure why they would purchase any while this proposal is a possibility.

I’m pressed for time and had to respond quickly but I hope that addressed your questions.

i can name lots of project that are priced well below their all time high, i dont see this as a valid reason to be buying something.

you state we cant do anything with FST, so why would we want it?

they have no gauge that benefits them , so why would they want FXS ?

if they would not buy FXS on the open market… do they even want it?

if the swap vote does not pass, would FRAX protocol buy FST on the open market?

you may not like the impression that they are looking to unload FST, but thats what it looks like imo.

i still see no valid reason for a swap. if a swap happens then we get a token that we cant use to our benefit and they get a token they cant use for their benefit, just seems a bit pointless as everything could still be done without a swap.


Sounds like the terms should just be buying with FRAX then and then letting them decide if they need FXS or if they need that money for devs etc. This is a speculative investment for a product that doesnt exist yet, so doing a governance swap still doesn’t make sense to me. (and probably never will as im biased against swaps but im for purchasing for ourselves if numbers show its beneficial)

The amount also seems high as its direct funding for their team and not the open market. If futureswap releases something thats beneficial for Frax then the Frax AMO will farm future FST thus there doesn’t seem to be any rush to throw tons of money at it at the current time. If the product looks good on release and the benefits are clearly visible, we can always buy more even if price rises. We don’t need to go all in on speculation.

All this combined with the fact we dont seem to know what FST will even do or how it will play as an important role to increasing AMO revenue

AMM Liquidity:
Sounds like futureswap needs to revamp their tokenomics to get liquidity. A swap for FXS would give them free weight to incentivize their own governance token. I want to see platforms commit to using their own funds before asking for freebies. Lke this is clearly still not enough liquidity to be a healthy pool anyways so they need to make more effort on their part.
Also dont see why this needs to be shared? If the Frax AMO is already taking on the risk by being an LP, it could just LP its own FST if there is revenue to be made.

We can always make a gauge for them so that they focus their liquidity with a FRAX pairing.

Swap - against direct swap but you could do a smaller buy with FRAX to play a speculative move. but since its speculative it should be minimal. Can always farm/buy more later if we like the results.

amm - against, FRAX can just do an AMO for the LP if its lucrative. BUT there’s no problem with making a gauge for them so that they can focus on a FRAX pairing. They also need to show more effort in creating liquidity on their own.

We will be voting against the Futureswap proposal. I’ll be in favor if there are some changes though so not like a full on stop. Just want to revise values and wordings.

First off it’s just too much for a token we don’t even know what it does. What are we buying? We don’t know. Collaboration can be fostered without token swaps so it’s not like this should be part of the deal for them to use FRAX.
That being said, I’d be ok with a smaller amount. We can do a chunk up front(like 500k?) And give the team the power to spend up to say 1.5m more as we see progress on their products and how their token will shape up. This timeframe can be at the discretion of the team.
We need to have an option to bail if they don’t pull through so paying all up front doesn’t make much sense.

Same with the AMM etc. This is 100% risk to us. It’s just gov tokens for them but dollars for us so we take on the price risk.
We can do an initial amount and then “up to” some max amount once we see how their tokenomics will change and product advancement.

Honestly it doesn’t really even make sense for us to pair a liquidity pool unless we can use that to farm a pool2.
On the other hand we can just give them a FRAX/FST gauge and let incentives do their work.
The AMM part of the proposal makes the least amount of sense to me. I would even suggest making it a separate proposal when we know if there will be incentives etc for doing this LP, otherwise why are we putting up the risk?
Either way, even if we do the shared liquidity pool, we should start with a lower initial amount and allow the team to add to it when the timing seems right.

To reiterate, not against this proposal in general. Just think it should be brushed up a bit to give Frax a bit more leverage.

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i agree with C2tP .

im not against the idea of working together but as i stated before, i dont see any reason for us to do a token swap. if it was a few hundred $k’s then its no big deal but $3m is not a small amount, and i still dont understand what we do with $3m of FST.

i would like to see this re-posted as 2 different votes, one for the AMM and a 2nd one for the swap if the first one passes.

but i will still be voting no to the swap.

I’ve been working with @C2tP-C2tP to revise this proposal. Here is the updated proposal based on feedback and discussion:


Approve a $1m swap up front with authorization for up to $3m total at the team’s discretion. Approve $1m FRAX up front for an AMM pool with authorization for up to $3m FRAX total at the team’s discretion. Frax is entitled to all fees generated on the AMM LP position.

The proposal is designed to give the team flexibility to do additional amounts as they see development, progress and traction.

I appreciate everyone’s feedback on the proposal.


Has anyone pointed out a good reason for FRAX to be holding FST yet?

Seems to be only speculation on their upcoming products and possible rework of tokenomics. No hard details yet.

we should wait for the information before we vote. bit hard to vote on something we dont know about yet.