FRAX x Across Protocol ‘Come Across and try us out.’
Executive Summary
This proposals outlines a trial partnership between Frax and the Across Bridge by:
FRAX to set up an AMO to provide liquidity on Across.
Across to run necessary backend infrastructure (relayer).
Potential incentivization of FRAX LP.
Background and Motivation
The Ethereum ecosystem is currently plagued by high fees and usage is uneconomical for most participants. The rollup ecosystem (collectively known as L2s) is robust and growing immensely - its promise of scale and keeping transactions fees low means that they will eventually dominate usage over L1 mainnet and thus we need to think of the future where many (if not most) projects will be based on some of these L2 chains.
Across (https://across.to/) is a token bridge built on Ethereum with L2-L1 on Arbitrum, Optimism, Boba and soon additional bridges and L2-L2 interoperability. Built from the team behind UMA, its unique implementation of relayers and liquidity pools allow it to boast itself as the fastest and cheapest bridge for token bridging.
FRAX is currently ranked 6 on the Coingecko Stablecoins category with a market cap of about $2.9B, and is one of the largest decentralized algorithmic stablecoin projects on Ethereum behind DAI. To ensure its leadership position and to remain competitive, FRAX should become one of the most liquid assets on as many chains as possible. Complementary to other token bridging solutions, having FRAX be accessible across many different bridging platforms minimizes centralization risk.
This is where Across comes in - we plan to provide some of the necessary backend infrastructure to allow FRAX to be transferred quickly and as cheaply as possible across supported chains. Efficient and positive usage will allow Across to further its mission and deepen its relationship, and to scale up liquidity.
At this point, we simply ask for FRAX users to come try us out.
Specification
FRAX to create an AMO for Across and to deploy $1M of liquidity.
maybe we should look at the pro’s and con’s of this amount and maybe assess if its better to use a larger / smaller amount.
of maybe we start with $1m but set some sort of ises about when it will be increase … eg, if the daily volume goes over x amount, then extra liquidity is added ?
Seems to me less an issue of amout rather than a helpful, efficient and effective bridging tool. Small amouts are as welcome as large ones. In fact, it may even be useful for arbitrage trading due to its instant transfer capability.
In the initial ask we had set the $1M amount based on a trial. Of course we can and should make this liquidity adjustable and nimble enough to adapt to many situations, as you’ve pointed out that if there is a lot of volume we should be able to scale this number up. My thought is that this will indeed be the case as more people find out (especially for larger transactions) the lower fees and speed compared to competitors.
We can review the usage of the initial pilot program after say one month.
Does the AMO have the ability to adjust liquidity automatically or will this need to pass governance proposals to do so?
ok, but where did the number of $1m come from , is $1m better then $5m ? if so why ?
the job of AMO’s it to mint / burn FRAX to keep the price at $1 in that pool, so it can increase liquidity as demand for FRAX from that pool grows, and it will also help keep the peg at the same time.
this is why we have been rolling out AMO’s on new chains.
The LP is not necessarily a means to the FRAX peg as part of the Across mechanism. I apologize if I didn’t clarify - and perhaps someone from UMA can speak more to this topic. For bridging only then the AMO may not be necessarily the best device for this (or perhaps that an LP can also be used to defend the FRAX peg! Again, I defer to experts for more discussion around this piece.)
My understanding is that the LP is needed as an underlying mechanism to attain the fast bridging speeds. In short, there is a delay of sorts to retrieve funds from L2 to L1. The L1-side LP is there so that the user making the bridging transfer draws from the LP immediately to get funds while the incoming original transfer will end up in the LP.
Hence, the LP amount is sized for the anticipated size of transfers bridging across the supported chains by Across at this point in time, and could be dynamically adjusted also. The $1M has been set because we have seen on chain explorers like etherscan that most bridging is of lower amounts, but there are a couple of noteworthy 6-digit bridging transactions. 7-digit dollar value ones are rarer but we hope that we can see more of these as FRAX grows as well as usage of the Across bridge together.
Across Protocol have more than 18M+ USDC liquidity pool for bridge work.
Prove the need for stablecoins to cross the bridge.
‘Let’s make DeFi great again’
I think it’s a great initiative as with high fees and usage getting tougher and tougher with more users, this would help frax and also provide good usecase. As the future seems to be more inclined towards L2s with across having bridges to many of L1s and L2s more stables such as frax would be really required.
+1
That’s an interesting idea. That way the liquidity will be directly tied to the demand. The ressource ($FRAX liquidity) will be optimally allocated to serve the demand in the best way while minimizing waste and inefficiency.
I think this is a great opportunity for us to get on board with a young project that has the support from risk labs and the dev team there. From my interaction with the across team i know they are currently working on building out more networks to support so i think there will be several networks that could utilize frax. overall i think it’s a good investment in a growing project.