Funding Frax Finance operations through loans on Fringe Finance

Governance Proposals Liquidity Providing
1

Author
Fringe Finance

Summary

Fringe Finance is offering the FRAX DAO to open a line of credit on the platform that will allow the DAO to access up to $429,000.00 in $USDC to be utilized at the discretion of the DAO.

Background & Motivation

Fringe Finance is a decentralized money market designed to unlock the capital spread in crypto assets regardless of their capitalization and supported networks.

Recently Fringe Finance has integrated $FRAX as a collateral asset on the platform that allows $FRAX holders to access $USDC loans while benefiting from the below described features of the Fringe Finance platform.

  • Borrowing against FRAX to fund the DAO’s operations (eg Liquidity mining programs) instead of selling benefits all the holders by removing selling pressure.
  • Liquidity locked by the FRAX team is a good signal to the community of the DAO acting in their interests by locking up FRAX.
  • USDC is one of the most trusted stablecoins on the market with deep liquidity.
  • Fringe Finance provides added utility for all holders of FRAX including the FRAX DAO by allowing them to borrow USDC against their FRAX.
  • The FRAX community can utilize borrowed USDC funds elsewhere in the crypto ecosystem without the necessity to sell the tokens.

Fringe Finance has already integrated $FRAX as a collateral asset to borrow USDC and provides a useful borrowing option that can be used by both retail users and the DAO’s treasury.

The FRAX community can utilize borrowed $USDC funds elsewhere in the DeFi ecosystem without the necessity to sell FRAX tokens.

Specification

  • FRAX has been assigned a loan-to-value ratio of 71% on the platform. This means that for every $1000 worth of FRAX a $290 loan can be taken.
  • The current borrowing interest is 7.62%/year, but the rate is floating.
  • The borrowing limit for FRAX is currently $429,000.00.

Benefits

  • Reduced selling pressure on the market
  • Signals the additional utility to FRAX holders in that they can access stablecoin loans
  • Fund DAO operation by locking FRAX tokens and increasing cash flow

Proposal

Take a loan on Fringe Finance to fund Frax Finance operations.

  1. Deposit sufficient FRAX token collateral on the Fringe Finance platform from the treasury.
  2. The corresponding USD-denominated line of credit is issued.
  3. Up to $429,000.00 USDC loan can be taken and used by the FRAX DAO.
  4. Announce the taken loan on social media and official blog.
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Correction:

  • FRAX has been assigned a loan-to-value ratio of 71% on the platform. This means that for every $1000 worth of FRAX a $710 loan can be taken.