Author
Westwood
Summary
The Collateral Ratio (CR) of FRAX at time of writing is 98.8%. With the CR approaching 100% in accordance with [FIP - 188] Increase CR to 100%, and the overall market sentiment in bullish territory, I believe it is rational to reinstate fees to veFXS holders.
Abstract and Motivation
At the same time, it is important to ensure the protocol is fully collateralized by exogenous assets in order to be as resilient as possible for future market downturns. With this in mind I propose that until the protocol is fully collateralized by exogenous collateral, fees should be split 75/25 between veFXS holders and the protocol treasury.
As of now, the protocol has been twap selling FXS to recollateralize FRAX (which is a rational choice) but I believe that switching strategies in this market, while seeming counter-intuitive, wiil actually go further to recollaterize quicker. Switching from selling FXS to buying FXS with protocol revenues and then redistributing will increase FXS price, increase sentiment, and increase community confidence, leading to a higher FXS price, more activity for Fraxtal, and more veFXS locking. It will also increase the distribution and amount of FRAX in the FXS/FRAX LP which is counted against the CR, ultimately achieving our mission of 100% CR.
In conclusion, I believe this is the positive catalyst Frax needs in order to get the flywheel spinning again.
Voting
- For: Redistribute 75% of protocol fees to veFXS, 25% to Treasury.
- Against: Do nothing.