FIP 54- FRAX + Citadel: Bringing BTC to Frax

Introduction

Hi, Frax community, my name is Spadaboom, a contributor to both Badger and Citadel DAO. I’m sharing this proposal on behalf of the Citadel DAO community.

Citadel is a treasury DAO aiming to be the largest community owned Bitcoin position in the world. The treasury and protocol will be governed by the CTDL token, with a predominant Bitcoin treasury actively earning yield and shared with long term CTDL holders. Citadel DAO is a sub DAO to Badger.

It will leverage unique funding mechanics to accelerate the continuous growth of its treasury while using the power of BadgerDAO’s tried and tested vault strategies to optimize its yield.

To ensure it can create sustainable yield on its Bitcoin positions it will hold not only Bitcoin (+ BTC LP’s), but also yield influence assets across DeFi (eg. CVX, FXS and BADGER). This enables Citadel to wield large influence across multiple ecosystems and fight for Bitcoin to get the yield it deserves.

How Citadel DAO works

The way the Citadel protocol works is very innovative yet simple. Users can Swap, stake and/or lock.

With a very similar experience to making a trade on a decentralized exchange, with 1 click users can SWAP Bitcoin or yield influence assets for xCTDL (staked CTDL) at a discount to the current market price on a continuous basis.

We call this “funding” and it’s the main source of treasury growth.

xCTDL holders receive continuous emissions in the form of CTDL determined by the fixed elastic emissions model.

Holders of xCTDL will also have the option to LOCK their xCTDL for a fixed period of 7 epochs (each epoch is 3 weeks, so this amounts to 21 weeks). In return for locking xCTDL, lockers will receive the following additional rewards:

  • 2x boost on CTDL emissions (for example, if a user was receiving 1% of CTDL emissions when staking xCTDL, they would receive 2% with vlCTDL).
  • Share of Funding revenue generated — paid out in BTC
  • Share of treasury yield — paid out in BTC
  • Governance rights to vote on whitelisting protocols for Citadel treasury deployment and which assets to accept for continuous funding (ie. allow for swapping to discounted xCTDL).

To better understand how Citadel works, CTDL token mechanics and elastic emissions, review Citadel DAO’s tokenomic deep dive article here Citadel Tokenomics: A Deep Dive. A closer look at Citadel’s Tokenomics… | by Citadel DAO | Medium

To dig into Citadel protocol open source code: GitHub - Citadel-DAO/citadel-contracts: Citadel DAO Core Contracts

CTDL Launch Event

Citadel DAO’s goal is to have a completely fair and transparent launch while distributing ownership of CTDL to not only users that participate early but to a select group of DAO’s/dapps across our ecosystem, that align with the core values of Citadel. Their alignment and vested interest will accelerate Citadel’s ability to effectively deploy its treasury to benefit all participants in the ecosystem.

We call this launch the Citadel Knighting Round.

Over the course of multiple days users will be able to swap BTC and yield influence assets for xCTDL.

Only users who qualify for the whitelist can participate in the launch event. The whitelist selection criteria will be based on a combination of actions users have taken in the Badger ecosystem and in our partners dapps, like Frax. The group of partners/knights have been revealed over the last month and consists of;

  • Frax
  • Convex
  • Redacted
  • Ren
  • TRIBE
  • Alchemix
  • Tokemak
  • JonesDAO

All of the Citadel Knights are also whitelisted to participate in the launch event themselves, leveraging their treasuries.

The current launch event details being discussed amongst Citadel DAO community members are as follows;

  • Round 1(Core Treasury Boostrap): Uncapped, whitelist participants only, open to bribes, fixed price of $21/CTDL

    • Accepted assets: WBTC, bibbtc/sbtc (ibbtc Badger vault token), ETH, FRAX, USDC
    • Assets will be rebalanced post launch to reflect the Citadel DAO policy teams ideal treasury composition for optimizing yield and BTC exposure
  • Round 2 (Yield Influence) : Capped (amount TBD), no whitelist, no bribes, fixed price of $25/CTDL

    • Accepted assets: Badger and CVX

Token distribution

This launch event is the ONLY distribution of CTDL tokens. There were no prior investment rounds, private or public.

To ensure a fair valuation of Citadel DAO at launch the following token distribution breakdown was developed by community contributors. Community sale includes round 1 & 2 as outlined above.

  • Partners and Badger (5% + 10% respectively) will receive vote locked CTDL which will remain locked for 21 weeks.

  • Operations (10%) allocation will be uncirculating and with the DAO to decide how to best utilize it in the future.

  • Early contributors (5%) will receive 33% of their allocation in xCTDL at launch with the remaining 67% vested over 21 weeks.

  • LP (10%) allocation is CTDL which will be paired with wbtc and 100% of it added to the Curve v2 pool to support liquidity for the CTDL token.

  • The community sale (60%) amount will be distributed as xCTDL at launch of the protocol after the completion of the 2 public rounds.

After the launch event vlCTDL, will immediately be enabled along with the rest of Citadel’s protocol mechanics (swap, stake and lock) and the start of putting the treasury assets to work.

For a comprehensive overview of all the details of Citadel DAO please review our introduction article: Introducing the Citadel DAO. Citadel is a treasury DAO aiming to be… | by Citadel DAO | Medium

Proposal

Frax DAO participates in Round 1 of launch

To further align the two DAO’s, introduce BTC backing to FRAX, accelerate FRAX’s yield influence and support the growth of 4pool on Curve, we’re proposing FRAX DAO participates in the initial launch event using protocol capital. This is at the same fixed price as the whitelisted users from partner communities and the only distribution of pre-protocol launch CTDL.

To gain community wide sentiment, we’re proposing 3 different participation amounts for the purpose of deciding the adequate allocation collectively;

  • $21M ($16M in FRAX & $5M in FXS) @$21 per CTDL = 1,000,000 CTDL
  • $15M ($12M in FRAX & $3M in FXS) @$21 per CTDL = 714,285 CTDL
  • $11M ($9M in FRAX & $2M in FXS) @$21 per CTDL = 523,809 CTDL

What will Citadel DAO do with the FRAX & FXS?

Create deep liquidity for BTC/4 Pool on Curve

Citadel will pair the FRAX provided with WBTC from its treasury (in a new wbtc/4pool) and provide liquidity for the Curve v2 pool it intends to launch. Today most of the volume of BTC <> stablecoins on Curve goes through the tricrypto pool. Introducing deep liquidity for the 4pool against BTC, will provide additional utility for FRAX and alternative routes for swapping with BTC on Curve. This is, of course, contingent on the creation and gauge approval for 4pool – if the gauge is not approved, Citadel DAO could create a wbtc/frax pool instead to execute the same strategy.

Outside of providing liquidity, Citadel DAO will support yield on this pool through its Convex farming strategy. Using its potentially large CVX position along with bribing, Citadel DAO will push vote weight to optimize the CRV and CVX rewards allocated to this pool via bi-weekly Curve/Convex gauge votes. This will not only help with the wbtc/4pool, but also the overall adoption of 4pool across DeFi.

To optimize the returns and increase influence for Citadel leveraging this pool, Badger will design a custom LP vault (wbtc/4pool) that participates both in Convex and FXS ecosystems. This vault strategy will allow Citadel to earn more CVX (locked) to influence the yield on this pool, grow liquidity, lock more FXS and support the cvxFXS peg, while creating a flywheel to redistribute BTC to CTDL lockers (which FRAX could be one of the largest).

Become a long term locker of FXS and gauge system supporter

Citadel DAO will max lock the FXS received for veFXS. Assuming a FXS gauge approval for bwbtc/4pool (Badger vault token) and protocol whitelisting, Citadel DAO will use its vote weight to drive additional yield in the form of FXS. It will then use that FXS to support the cvxFXS peg and lock more as veFXS.

This further aligns Citadel DAO with FRAX as both would be large participants in each others protocols governance along with long term supporters.

Introduce BTC backing to FRAX

The launch of wbtc/4pool on Curve opens up a unique opportunity for Frax Finance to introduce BTC to the backing of FRAX. If Frax were to extend its existing Curve or Convex AMO to this pool, The protocol can use it to create additional peg stability and farm more CVX while increasing the backing of the LP (wbtc/4pool) for FRAX.

This is contingent on the Frax core team building out an AMO to support this, but in preliminary conversations this seems like something they are open to doing.

What does Frax get from this?

Frax will receive voted locked CTDL (vlCTDL) in exchange for their participation, which has a 21 week lock.

This will earn boosted CTDL emissions (2x and expected at 3 digit APY to start), BTC cash flow from treasury yield generated & funding revenue and the ability to participate in governance for whitelisting new protocols for treasury deployment and determining which assets the treasury can accept.

As described in the Tokenomics Deep Dive, Citadel will be distributing a portion of its treasury yield and funding revenue (revenue generated from users directly purchasing xCTDL from the treasury on an ongoing basis) to users who lock their xCTDL.

Citadel’s Treasury yield and funding revenue distribution will be divided as follows:

Funding Revenue

  • 10% to holders of vlCTDL
  • 10% to the DAO (Operations/LP)
  • 80% to the Treasury

Treasury Yield

  • 50% of yield to holders of vlCTDL
  • 50% of the yield will be used for auto-compounding treasury positions

Frax would directly benefit from the yield being generated on the Citadel DAO treasury, which would consist of the FRAX and FXS received for participation. It will also receive a consistent flow of BTC into its own treasury that could be used to further grow the backing of BTC in the FRAX asset.

Frax would also have influence over how the treasury is deployed and which assets the treasury takes in. This is important for ensuring Citadel DAOs long term alignment with Frax.

Citadel + FRAX become a force TOGETHER

Together, Citadel and Frax can support yield on bitcoin, grow utility of FRAX, grow 4pool adoption, have another strategic partner in the Curve renaissance, and Frax can gain significant influence around one of the largest BTC treasuries in the world. On top of it all, FRAX will have a protocol committed to being a long term holder and participant of the FXS ecosystem.

Bribe to Earn More Influence

There is 5% of the entire CTDL supply allocated to partners of Citadel. By using the Hidden Hand platform from Redacted (currently supports Frax Hidden Hand ) during the launch event, users can vote for 1 of the 8 partner DAO’s when participating in the sale. The more votes a partner DAO gets, the larger share of the 5% supply they will receive.

Separate from the proposed participation of $21, $15M or $11M, to gain a larger share of this pool, we propose a $2M ONE TIME bribe in the form of FXS that will go directly to users.

This would amplify all of the outlined benefits in the previous sections, as Frax would become an even larger vlCTDL holder increasing its overall yield in CTDL and BTC.

For modeling purposes, if Citadel were to have a $200M full diluted market cap at launch, the 5% of total supply would be valued at $10,000,000. Due to the elastic emissions, the vlCTDL has non dilutive properties which will enable Frax to maintain its large position over time.

How will the participation and bribe amounts be executed?

Prior to the community sale, Frax DAO would send the approved participation amount in Frax and FXS to the Citadel DAO multisig, which is governed by its token holders and 5 signers. Citadel DAO would then send the Frax DAO multisig xCTDL at the time of token & protocol launch after the completion of the 2 community rounds. Frax would then lock that xCTDL as vlCTDL via the Citadel DAO smart contracts.

For the $2M FXS bribe, that would be handled exclusively through the Hidden Hands platform with no control by the Citadel DAO.

Conclusion

We’re looking forward to discussing this proposal with the Frax community here on the forum and gaining sentiment around the direction they would like to go.

Resources

Discord - discord.gg/citadeldao

Twitter - https://twitter.com/TheCitadel_DAO

Github - GitHub - Citadel-DAO/citadel-contracts: Citadel DAO Core Contracts

Blog - https://thecitadeldao.medium.com/

9 Likes

So what is Citadel exactly? A DAO that runs BTC-focused yield strategies on Badger, Curve, and Convex?

1 Like

Yes, its essentially a BTC denominated treasury DAO with a focus on partnering with other DAOs in DeFi to build out strategies for deploying its assets.

1 Like

tldr
whats the proposal in 50 words or less ?

2 Likes

Frax buys Citadel DAO token (CTDL) with up to $15M in Frax + $6M in FXS via initial sale. Frax DAO gets vlCTDL (vote locked Citadel) to govern the treasury and earn yield from the treasury in the form of BTC + more CTDL.

Citadel is a BTC focused treasury DAO. FRAX & FXS go to the treasury. They pair that FRAX with its own BTC, create the btc/4pool on Curve and become a big LP + drive yield influence. Increasing 4pool utility.

Frax builds AMO on this pool to increase BTC backing of Frax.

Citadel locks FXS as veFXS and participates in the gauge system.

Not exactly 50 but I tried my best lol

3 Likes

thanks,
so the end result would be …

FRAX = has a $xx m amount of locked CTDL (vlCTDL).
Citadel = has $xx m of FRAX and FXS , the FRAX is use in a FRAX/BTC pool and the FXS is locked.

a pool is created for FRAX/BTC
Citadel is whitelisted for FXS locking.
Citadel will vote for the cvxFXS/FXS pool with its veFXS and use its CVX to vote for the FRAX/BTC pool ??

1 Like