Authors
Haym Salomon and DeFi Dave
Proposal
Grant $50,000 worth of FRAX and $25,000 worth of FXS to launch Protocol Research Unit with the goal of identifying and modeling Frax core Key Performance Indicators (KPIs), developing proof-of-concept dashboards and a business cycle process. This grant is for a trial period of ten weeks.
Background
Frax Finance launched in December 2020 with a lot of promise. In the short 1.5 years since launch, Frax has grown from an upstart stablecoin experiment to an increasingly influential pillar of DeFi. If/when FRAXBP passes, Frax Finance will become deeply intertwined with Curve Finance and Convex Finance, binding the three in a novel Protocol Triumvirate.
Since genesis, the Frax team has (and will continue to) delivered around-the-clock efforts to develop world class technology and economic theory. DeFi is entering a critical juncture with the creation of FRAXBP, the loss of Terra, the lurking MEV issue, etc. The Frax core chain must continue pushing innovation on-chain.
As Frax matures into the full-fledged ecosystem it has been building towards its inception, it must accept the responsibility to clearly define, monitor and execute against data-driven KPIs. Because of this, Frax must formalize its own key success, risk and health indicators; not only provide the Frax core team more data to make better-informed decisions, but also to lead by example as a responsible steward of all of DeFi.
Summary
Deliverables:
- Credmark
- Identification of no less than 4 and no more than 6 business metrics and
- Develop mathematical models
- Produce proof of concept dashboards (eg PowerBI dashboards)
- Deliver comprehensive whitepapers
- Identification of no less than 4 and no more than 6 business metrics and
- Haym
- Proposal for a regular business cycle
All the research and tooling will be persistent, open source, and adjustable by the Frax community.
Team/People
Project Lead - Haym Salomon. Contributor to Umami Finance and Dopex in the past and has written a number of Twitter threads pertaining to Frax and the wider DeFi landscape.
Advisors - DeFi Dave. First-follower and missionary of Frax. Current Co-Founder of PIF Labs. Previously led growth for Gelato and wrote numerous articles for The Defiant.
Analytics Development - Credmark is a full stack DeFi financial modeling platform. The Credmark team has published numerous research reports (eg: Terra Ecosystem Postmortem) and provides the risk analysis technology for Debt DAO. Frax sample work: Frax/FXS/FPIS distribution and inflows/outflows
Funding
- KPI identification and Development
- Credmark has estimated a budget of $10k per KPI.
- Budget: $50k of FRAX
- Design and creative development
- Budget: $5k of FXS
- Buffer/Unanticipated cost overruns
- Budget: $10k of FXS
The project will provide a full accounting and will return any unspent funds to the Frax Finance treasury.
Requests in this proposal take into account funding from previous grants (for community websites and dashboards) Those who are currently being funded by those grants will not be eligible for rewards.
Timeline
Deliverables will be interactively produced throughout the ten week period as individual items are complete.
It is anticipated that the first week will be used to set up operations and the next nine weeks will be used to execute. When we seek renewal when the period ends, we will have a better idea of the associated costs of our efforts.
Key Performance Indicators (KPIs)
The primary purpose of this proposal is to rigorously define and document the most important KPIs for Frax Finance. We will limit our findings to include no more than 6 primary KPIs.
Initial starting ideas:
-
Frax Finance
- veFXS locked %
- Protocol Controlled Liquidity (POL)
-
Financial Performance
- EBITDA, revenue and costs
- Assets under management
- Cost of capital
-
DeFi Dominance
- Stablecoin dominance
- DEX dominance (Fraxswap), lending dominance (Fraxlend), staking dominance
-
Centralization
- Decentralization Ratio
- Counterparty exposures and measures
- Whale exposures and activity
Motivation
In May 2022, DeFi and crypto were rocked when UST broke its peg and the TerraLuna ecosystem collapsed. In the aftermath, regulators, TradFi and the general public immediately began asking questions and demanding for action to be taken. As regulation begins to take shape, it has become more and more clear that Frax Finance does not have (and is not prepared for) a seat at the table at those levels.
On the heels of the collapse of TerraLuna, community members such as 0xHamz (@0xHamz on Twitter) have discussed large-scale real world opportunities. This correctly identifies a huge opportunity for scaling both Frax as an organization but also (given Frax’s role and the nature of FRAX) DeFi in general.
As Frax Finance grows in both on-chain scale and DAO contributors, it becomes more and more critical to clearly define success and organize the DAO, investors and the crypto community around simple and transparent metrics.
The first step in order to address both impending risks and RWA opportunities is to formalize organizational structure, metric and processes. The Protocol Research Unit will engage in a holistic and a financial review of the Frax protocol to define and begin tracking these metrics.
Using these KPIs and reporting as a basis, Frax will be able to provide clear, concise and reliable information to Frax operations, investors and media creators alike. Upon successful completion of the trial period, we intend to submit proposals better focusing on each of these three key stakeholders.
Proposal
- Grant $75,000 FXS/FRAX to establish Protocol Research Unit
- Do Nothing