FIP 76 - Allocate a portion of CRV farmed to create a staked cvxCRV holdings

Governance Proposals Miscellaneous
1

Author:
C2tP (Convex Finance)

Summary:
Deposit 20-40% of protocol wide farmed CRV into cvxCRV and stake to create more revenue/cash flow for the protocol via CRV emissions and Curve fees (3pool stablecoins), as well as more CVX emissions for Frax to lock. CRV will be deposited directly into cvxCrv if the market discount is lower or equal to 3% and can be swapped if higher. The deposit amount will be decided by the Frax team based on market conditions at the time of deposit as long as it is in the defined 20-40% range.

Related Readings:
Please read the Curve proposal and future roadmap laid out by Sam at (Deploy a "FRAXBP" Pool & whitelist Frax for veCRV Staking - Proposals - Curve.fi Governance)

Details:
I have been in discussion with Sam for many months now about how Frax could use their farmed rewards more efficiently. At face value there is a big decision of lower immediate profits vs long term sustainability. With the advance of a few key points, we think we have found a good solution on what can be done. This will be a multi step procedure involving multiple proposals on both Frax and Curve. This proposal is the first step.

Currently CRV farmed by POL are being sold and returned to veFXS holders as revenue. This proposal will allocate a portion of that CRV to create another revenue stream that will compound farming rewards. This gives Frax not only continued crv/cvx rewards but also gives the platform a revenue stream in stable coins. This will provide a nicer balance and stability to revenue which is less volatile than governance token farming. The current APR as of this writing is 52.7%, of which 32.4% is in stablecoins via Curve admin fees. While recent turbulent times have had a negative effect on CRV prices, trading fees have increased dramatically. This should clearly show that it should be a priority for Frax to have more revenue streams denominated in different token types.

Until Curve whitelist is passed and frax3crv is deprecated for its fraxbp replacement, the Frax team can use cvxCrv as incentives on Votium. Their goal and mandate should be to try to stock pile cvxCrv but also use what’s necessary to keep proper liquidity incentives. This balance is decided by the team.

Merits:

  • Compoundable CRV
  • More CVX rewards to increase Frax’s CVX position.
  • Stablecoin revenue stream
  • More vecrv power to Frax’s CVX holdings.

Future Plans:
This proposal is for stockpiling cvxCRV as a revenue stream. In a future proposal, we will lay out a system in which frax can use this cvxCRV in a way that will capture more gauge weight and increase Frax liquidity. This is the first step and follows closely with the Curve proposal posted by Sam, as well as the future release of Fraxlend.

Voting Options:

For: Deposit 20-40% of protocol farmed CRV into cvxCRV and stake for rewards

Against: Do nothing

4 Likes
2

Hey, I think that the power to direct CRV emissions (and other potential emissions from protocols Convex integrates with) is the most important factor for Frax, so as long that is on the table I think this is a great proposal that Frax, Curve and Convex will benefit immensely from. I’d even support to lock 100% of the CRV farmed distributed among available locker options (StakeDAO), so Frax remains neutral, but locking 40% on cvxCRV is a nice point to start.

3 Likes
3

Strongly in favor of this proposal. Significant upside as the pool yields >30% allowing us to compound our CVX and CRV holdings while we build back trust in algo stable coins. Downside seems quite limited to me, smart contract risk seems limited. Also dont see it massively depegging for a long time and if it does then apparently the CVX/FXS bull market hasnt returned yet and we continue to farm while continuing to work hard to reignite enthusiasm. Confident enthusiasm (and price) will return w the exciting and ambitious road map. Thank you for this well-thought through proposal C2TP!

4

Want to say I am in favor of this proposal too and strongly builds on the relationship that FRAX<>Convex<>Curve has built.

One thing to suggest is that I think we should make it clear on the snapshot vote that this economic change applies to FRAXBP earnings of CRV per the Curve proposal. This is probably already the implied intent of the proposal but wanted to make it clear on the snapshot.

The reason I say this is that the economics of FRAX3CRV pool is different in terms of bribe/incentives costs and the team should still partially have discretion over whether to keep AMO revenues from that pool on the balance sheet or sell to fund veFXS yield+further bribes/incentives of FRAX3CRV.

When it comes to FRAXBP flywheel, totally agreed that this is a no brainer and should go through to locking the amount as cvxCRV suggested in this proposal.

5

Discussed with Sam about a bit of confusion around the Pre-fraxbp and post-fraxbp setup. We decided together to add a small amendment to the current proposal for specific handlings of the pre-fraxbp phase.

Amendment: Until Curve whitelist is passed and frax3crv is deprecated for its fraxbp replacement, the Frax team can use cvxCrv as incentives on Votium. Their goal and mandate should be to try to stock pile cvxCrv but also use what’s necessary to keep proper liquidity incentives. This balance is decided by the team.