Use of FRAX and how to increase adoption and yield

Feel free to share your thoughts.

What is the value the FRAX protocol provides?
The value of FRAX protocol lies in how much we control and how much yield we receive from this control.

Airdrop

Airdrop should not be a one-time event but spread out over 2-3 months as it can act as interest for locking FRAX/FXS LP, veFXS.

Broad investments in other protocols

All rewards to veFXS should be removed. APR has been around 2-15% the last months thus it is not the APR that drives veFXS lock up, but the ability to control the gauge and subsequent boosts. Instead, all yields should go minting FRAX with the objective of investing into long term high yield assets decided at the sole discretion of the FRAX committee (currently only the founders).

Utility token is FRAX not FXS

Interest paid out in FXS should only be available for FRAX related LPs. No FXS should be sent to other protocols for single staking FXS. This insures we focus our resources in the adoption of FRAX (not FXS). The demand for FXS will come in the long run if FRAX adoption is successful.

85 % collateral target

Current expansion of FRAX is pushed to FRAX3CRV pool as 100% collateral. This increases the collateral ration slowly towards 100%. Historically the CR has been balancing around 85%. We should continue supplying FRAX3CRV with FRAX, but only 85% of the time. For each 1 FRAX minted to FRAX3CRV we send 0.15 FRAX to long term investments potentially as collateral in other protocols. If a bank run happens the Protocol Reserve Treasury can be activated by being sold off to buy FRAX. However, this is going to be more than a $1bn bank run, and most of the $2.6bn liquidity is controlled by the protocol itself.

Protocol Reserve Treasury

As no names has been assigned to the different holdings of the protocol, I propose the following:

Our holdings in governance tokens include CVX, Toke, vlCVX, CRV, SOFI, sOHM, ETH, is our Protocol Reserve Treasury.

Our FRAX pools like FRAX3CRV make up the Protocols Liquidity Reserve.

Income currently used for buyback to veFXS, meaning sold off yield in other tokens paid out or reinvested in FRAX or FXS is the Protocol Profit.

The Protocol Reserve Treasury is used to control and making sure we receive as much yield as possible. As mentioned in the 85 % collateral target, if we are not able to sell off enough FRAX because of long term commitments our protocol reserve assets can be used to stabilize FRAX.

Voting power of governance tokens

We should never have 50+ % unless aim is to take over the protocol. By having 25-30 % voting rights we ensure a healthy competition and use of the service, if our stake becomes too high the market might imply risk due to potential loss of control and divest their interest and thus an overall collapse of value of governance token and interest.

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Hi Anders, thanks for sharing some thoughts. What are you proposing exactly, aside from adoption of these terms you provided?

bit of lost here , stablecoin $FRAX is the value of frax protocol. yield can help this purpose.

i would say the value the FRAX protocol provides to other protocols is access to liquidity.
The value to the average investor is the control FRAX has of liquidity on other protocols and how the voting power the protocol holds is used to increase returns to the FRAX protocol investors.

Im not so sure this is so clean cut, the protocol makes $500-$1m a day in profits and only about $500k-$1m is paid to veFXS per week, so only around 15% of the total profits goes to veFXS rewards. Im fully on board with the idea of collecting more assets for the protocol but i think we have a good balance right now because of the way veFXS APR % drops when FXS goes up, but also the reverse of this, so if FXS crashed the APR for veFXS holders would rocket and drive more people to buy and lock up FXS.

Buying back FXS also creates buying pressure for FXS and as FRAX profits grow, so does the buying pressure generated by the protocol. taking FXS off the market and handing it to locked in long term investors.

Maybe we should start doing our DAO-DAO swaps with FRAX rather then FXS to reduce the amount of FXS we hand to other protocols??

i would agree to this , but feel a longer timeframe would make a bigger difference, maybe split the airdrop over a 12 month time frame. but should this would mean a snapshot each month rather then 1 single snapshot, and that could cause issues.

If $FRAX is the value then we might as well buy Doge. I see $FRAX as the product that adds value to FXS. Yield (not the one we provide through our 60m allocated FXS), but external yield is what adds value to FXS.

I wanted to start a general discussion about how we use the protocol, and how we understand the value we bring to the market. I’m not going to create any FIP based on this. Just find it easier to use this forum compared to Telegram.

Agree!

This is an important point to make. We need to create balanced incentives. I agree it does have en upside with increased APR in the veFXS. But I also see paying out yield as a ‘cost’ to the protocol, and costs should be minimized. With the daily income we could be compounding that income.

Agree. Besides having af stable $FRAX, FXS is the most precious thing we have.

Perhaps as a supplement to our 60m community allocated FXS we could have FPI as yield? We might still need a good chunk to justify the hype of an airdrop.

Doge won’t peg to dollar, ppl need dollar pegged utility

we are compounding about 85% of it right now tho.

i see it like this, if FXS holders make he correct votes and guide FRAX down the right path then they are rewarded with 15% of the profits, the batter FRAX does, the more they get. the more FXS earns the more each FXS will become.

if FXS gets 0% of the profit FRAX protocol makes then would it make any difference to the value of FXS if it was controlling $2b or $200b ?

I have been looking through the contracts and the Dune dash by Seba. I cannot see that we set aside 85% of our yield to accumulate more Protocol Reserve. Could you point me in the right direction?

It is almost as if owning FXS is like owning an DeFi index fund. That is why I see payouts to veFXS as cost, because the value of control far outperforms the APR one can recieve from staking FXS.

its just rough maths, daily earnings for the protocol is about $500 - 700k a day, but the weekly rewards paid to veFXS is about $600-800k. the numbers swing about a bit , but its about 15-20% ish normally