veFXS Boost Direction: Reducing entry cost to FRAX ecosystem

Hi all - Just a random DeFi Degen here.

As many are already aware (FIP 32 Adjust veFXS boost ratio to catch up with rising FXS price), it is currently very expensive to invest in veFXS to achieve max boost.

I believe a new mechanic should be considered. Although I do agree that “forcing” users to deposit into every boost enabled LP paints a path to a healthy market - where no specific LP pool dominates in TVL and emissions. The project, however, is currently unusable for many.

Source of the Issue

  • Let’s say, FXS trades at $28
  • And then FXS is staked for 4 years
  • This means that $28 invested in FXS will enable $2 to be invested in an LP pool at max boost
  • This is an efficiency ratio of 14x ($28 in FXS / $2 in LP)
  • The upfront investment is beyond reasonable at the moment (i.e. $14 invested in FXS, just to achieve boost on $1 in LP)
  • However, there are 11 boost enabled pools
  • This means, if I were to invest $28 in FXS, I can achieve max boost for $2 in LP in each of the 11 pools
  • Currently, to achieve full capital efficiency, I would need to put up $28 in FXS and $22 in LP across the pool options
  • This seems pretty good actually - reducing the efficiency ratio to 1.27x ($28 in FXS / $22 in LP), but…

Why it’s a Real Issue

  • Okay fine, I just need to put up $1 in LP for every $1.27 invested in FXS
  • To execute this, I must deploy liquidity in 11 places and stake 11 LP tokens on Frax
  • This means: 11 contract approvals & executions for liquidity deployment and 11 contract approvals & executions for LP staking (roughly $2,000 in gas fees, low estimate)
  • Assuming cost of doing business on ETH is 5% of principal, therefore the underlying value of 11 LP pools would equate to $40,000 (i.e. $2,000 / 5%)
    - Side note: I think 5% is a generous assumption. It can really be a lower %; thereby, increasing the value of the underlying assets even more than $40,000
  • Using the 1.27x efficiency ratio from above, this means I would need to invest $50,800 in FXS to achieve max boost (i.e. $40,000 x 1.27)
  • This totals the investment to $90,800 ($40,000 in LP and $50,800 in FXS)
  • It currently costs $90,800 to purchase FXS and to actually use it at its full potential

Proposal (More like a starting point for the community to discuss/refine further):
I think the # of veFXS to achieve max boost should be dynamic - to reflect and allow for a lower amount to be staked with limited boost benefits to 1 specific pool (i.e. veFXS boost direction).

As illustrated, it costs $90,800 in total to use FXS effectively. This is largely due to the implicit “requirement” of forcing users to deploy in 11 LP pools. Instead, why not allow users to stake/hold veFXS in a lower amount - but only be able to direct the “boost power” to 1 specific LP pool?

To deter users or any particular LP pool from dominating in TVL or emissions, we would add a premium for choosing to direct boost power. For now, I think a 20% premium would be fair? Let’s discuss in the comments.

Short Summary:

  • Due to current prices of FXS, a high upfront investment is required for max boost
  • At $28 per FXS (and max lockup), it costs $1.27 to boost $1 in LPs given that all 11 pools are invested
  • However, to do so effectively on ETH, it costs $90,800 in total investment for 11 pools total
  • Why not allow users to direct “boost power” into 1 specific LP pool (and not “force” them to deploy in all 11 pools)?
  • The mechanic would simply be 1.27x + 20% premium to calculate the amount of veFXS or FXS investment required
  • Obviously, the “1.27x” is the simplified version - the actual figure would be dynamic and would be explained through a formula
  • Formula: # of veFXS required for max boost direction = ( 4 veFXS / (1 FRAX in LP x # of Pools) ) x (1 + Boost Direction Premium %)

right now there is 80 staking options listed on the staking page and more are added weekly.

we have staking options on many chains

most stakers dont have the max boost and dont stake in all pools.

there is already many options for people to use when staking and it caters for investors of all sizes.

if a new investor wanted to only invest in 1 or 2 pools they they would be better off just investing all their funds in the pair without the boost as it would return more in $ terms.

you have to remember, rewards are paid out to investors that help FRAX grow, and FRAX willl only grow if liquidity is expanded to more trading pairs, this is why people are rewarded more if they are in more pairs.

This has been discussed in a previous thread: FIP 32 Adjust veFXS boost ratio to catch up with rising FXS price

Honestly I think this point may be moot soon, as Convex will offer boosted Frax pools, so everyone will get access without having to lock FXS → veFXS.

but for convex to offer this the convex protocol has to lock up FXS in to veFXS. so FXS is still being locked up

this was mostly talking about changing the boost ratio, its not talking about changing the boost to personally selected pairs for each investor.

I just meant that the idea of refactoring the veFXS structure so it was more appealing to smaller fish had been discussed.

“rewards are paid out to investors that help FRAX grow, and FRAX will only grow if liquidity is expanded to more trading pairs, this is why people are rewards more if they are in more pairs”

Agree and that is a fair point - and I think liquidity across all trading pairs is a healthy thing. However, the current structure leaves out the incentivization for liquidity depth in any given pool, but rather focuses on liquidity across all trading pairs.

I think allowing users to get in with veFXS boost direction can help increase liquidity depth in the 11 gauges on the market. As seen in February with the MIM fiasco, the MIM-3CRV played an instrumental role in maintaining MIM’s peg. Liquidity depth for stablecoins are as equally important as having as many trading pairs - and I think this change will help increase FRAX liquidity further.

Yep, but they already have a lot of boosting power with the 6m+ FXS they already have max-locked.

the FRAX protocol uses protocol funds to fund a mega deep pool , so it has no need to pay others to do so.

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im not sure what your point is.
im pointing out that convex can only offer the services they do because they lock up a lot of FXS and that if they start to offer other options it will cause more FXS to be locked up.
are you saying this is a bad thing ?

They will have to try and incentivize more to get locked up; until the Curve pool is closer to parity that’s unlikely to happen. And no significant amounts of new FXS have been locked up in a good while, and likely won’t until they launch boosted pools because of the rewards structure.

Some people think Convex locking up more FXS is a bad thing; I own a lot of CVX, so I’m okay with it because I win on both FXS and CVX side.

clearly the amount being locked up will slow down now the airdrop is complete.