I completely understand why sole FXS holders are worried, but I think it’s a bit myopic not to consider the perspective of what is likely a large contingent of voters out there that own both FXS and FPIS and don’t care for the tribalism.
These dilutive arguments are irrelevant to dual holders of FXS and FPIS, they want what’s best for the combined protocol, with the lightest load on the frax core development team, and a scenario where the combined value of simplifying things is worth more than the sum of the parts…in other words, they are going to vote the proposal through.
If you believe that the proposal is so shockingly asymmetric to one side, what’s stopping you from capturing the asymmetry yourself in the marketplace?
To reiterate, the people that hold both FXS and FPIS are the swing voters here. They seem likely to vote in favor of the proposal, so it might make sense to get on the same page as them?
As a veFXS staker and a minor FPIS holder I support this proposal. People advocating for merger using a market price seems do not consider that FPIS and FXS liquid wrappers have relatively low liquidity and prices are sometimes arbitrary, they can’t be used for any meaningful calculations. I can understand frustration by anybody who recently locked FXS. For them such merger will be missed opportunity. However, locking veFXS is the most conservative approach to invest in Frax ecosystem, it assumes the lowest risk (no additional smart contracts, etc.) and the lowest yield among other options, all liquid wrappers have much higher apr and sometimes a huge discount. Nevertheless I hope proposal will be revised and include different options for voting.
FPIS 90 day average prior to this proposal was 1.06 taken from CG.
FXS 90 day average prior to this proposal was $8.67 taken from CG
$1.06 for FPIS for 1 FXS at $8.67 is premium of 817%.
The value is greater than 950% when you account for liquidity at a 2% depth.
Further, all FPIS becoming veFXS 4 year locked changes the APY and voting power of existing FXS holders in a drastic way. Hollowgrahm has highlighted some of those numbers above.
A simple proposal would be to convert FPIS into veFXS 4 year locked with a 4% premium.
cdFXS has no discount currently.
cvxfxs has a 4% discount so lets just assume the worst of these two and use the 4% premium.
Convex doesn’t lose because all the existing TVL from cvxFPIS will transition to cvxFXS.
All FPIS users who want to exit will have much deeper liquidity than they get with their current FPIS holdings.
All users under FXS are satisfied that they weren’t unnecessarily diluted.
A related point:
One of the most predictive determinants of stock doing well is willingness of management to not issue additional equity.
Most companies that are willing to issue additional equity after being around for more than 2 years, suffer price declines in the following one year and five year periods.
Lots of research on negative impact of increasing existing supply.
If the team is steadfast on increasing max supply just know that it comes with unintended consequences. Requests to continue printing and printing, whales jousting for stronger position etc, alienating minority stakeholders etc.
I’m one of the 50% of FXS holders who joined since FPI launched almost two years ago. Despite FPI being a great product, I saw FPIS as a speculative bet on FPI growth not worth taking as Frax was focused elsewhere. What I overlooked was the governance power of the two being so intertwined that FPIS holders would always be taken care of.
I see both sides:
FXS holders who don’t want to get diluted and want conversion at market price
FPIS holders who have governance power and want 1:1 for their belief in FPI
I took a look at the historical average price ratio of FXS:FPIS and it is 4.9, now sitting at 5.1 after the recent pump. Acknowledging the strong desire to unify under FXS, I think a ratio of 4:1 strikes a balance between the two sides.
Yes, there will be losers like myself who locked FXS and would’ve come out ahead with FPIS. And reasonable investors who have sold FPIS recently. But I’m looking forward to putting this last hurdle behind us and putting our collective focus on growing the pie with Fraxtal.
For additional context, current average veFXS lock is 1.58 years, or about 40% of max. All those holders could hypothetically max out to grow their veFXS side to 222M veFXS of a total 382M, or 58% of the bag. So they’d still be diluting 42% of the profit and governance power for acquiring a product that is only backed by about 10% of the value that they had to lock, which I believe is the more pressing concern.
FXS requires heavy deposits into LP so can’t be fully assumed to be locked.
Both Convex and Frax incentivize liquidity depth on FXS pairs.
So to assume fully locked state isnt a fair comparison.
Whereas ALL fpis would get locked as veFXS with 4 year and take a lionshare of future APY.
People who bought FXS and locked into veFXS would then hold a disproportionately small share of voting power and apy despite having invested in the part of the protocol that earns 98% of the profit.
Regarding the last sentence, assuming 10% of the value of Frax protocol for FPI is generous.
FPI the product earns roughly 2% of the revenue of the other Frax products.
It is likely that FPIS was actually overvalued and would fall over the next year if it wasn’t for this merger discussion.
FPIS had a 50% apy to encourage people to lock up fpis rather than sell it and it was still falling in price and mcap.
Looking forward to a revised proposal that values FPIS for what its objectively worth.
The FPIS merger aimed at simplifying governance, enhancing token utility, and fostering ecosystem growth.
The debate highlights significant concerns about fairness, dilution, and the long-term implications for both FPIS and FXS holders. The community is divided on the best approach, with suggestions ranging from favorable conversion rates with lock-ups to using alternative methods such as cash or bond buyouts. The need to balance the interests of both FPIS and FXS holders is central to the discussion, with various proposals aiming to find a middle ground that supports the overall health and growth of the Frax ecosystem.
discussion
1. Sharkysnakefish
Perspective: Proposes a 1.5:1 FPIS to FXS conversion ratio with a 4-year lock-up, with a boost for veFXS stakers and a less favorable 4:1 ratio for non-veFXS stakers.
2. 0xVanna
Perspective: Strongly opposed to a 1:1 conversion ratio due to unfair profit for FPIS holders, dilution of veFXS holders’ rewards and voting power, and potential adverse effects on FXS supply and Convex protocol dynamics.
3. Hollowgrahm
Perspective: Suggests a lower conversion ratio (~14%, or 8:1) to prevent disproportionate governance power for FPIS holders, ensuring that the conversion is more aligned with the actual value provided by FPIS.
4. Universalyield
Perspective: Advocates for rewarding FPIS holders for their support of Frax, arguing that they have been left out and deserve compensation for the lost vision of FPIS, supporting a more favorable conversion rate.
5. Ssmccul
Perspective: Proposes alternative buyout methods using cash or Frax Bonds (FXB) to avoid immediate dilution of FXS, suggesting a long-term payout approach with bonds maturing in the future.
6. 0xstrife
Perspective: Concerned about breaking the fixed supply perception of FXS, governance centralization, and suggests alternative s