Frax Finance

Authors

Frax Core Team

Summary

This proposal is to onboard and activate an AMO that lends FRAX to Morpho Blue. Authorize lending AMO to deposit minted FRAX into the following Morpho Blue pairs with the mentioned max authorized allocation.

Asset	Collaterals	Max Authorized Allocation	Lending Market	Risk Manager
FRAX	sUSDe, USDe	200,000,000 FRAX	Morpho Blue / MetaMorpho	Re7 and TBD

Background and Motivation

Morpho Blue is a decentralized protocol that facilitates overcollateralized lending and borrowing crypto assets (ERC20 Tokens) on the Ethereum Virtual Machine. The protocol, designed as an immutable smart contract, serves as a trustless base layer for lenders, borrowers, and applications, with risk management layers provided by MetaMorpho.

Re7 Labs, specializing in DeFi R&D and liquid crypto investment strategies, and other firms (to be determined) are collaborating with Morpho Blue to provide risk management services through the MetaMorpho vault system, enhancing risk management and lending vault capabilities.

Algorithmic Market Operations (AMOs) make FRAX one of the most potent stablecoin protocols, creating maximum flexibility and opportunity without altering the base stability mechanism that made FRAX a leader in the stablecoin space. So far, we have deployed multiple AMOs, including lending AMOs on the Fraxlend, Aave, and Gearbox protocols.

Proposal Details

This proposal involves minting FRAX and depositing it into designated MetaMorpho Vaults that exclusively use sUSDe and USDe as collateral assets. The maximum authorized allocation for this action is set at 200 million FRAX. Frax AMO will initiate this process by allocating FRAX into the Re7 Vault within MetaMorpho, starting the integration of FRAX into Morpho Blue’s lending markets. This strategic allocation aims to enhance liquidity and utility for FRAX within the Morpho Blue ecosystem while leveraging Re7 Labs and other future risk management firms’ capabilities within the MetaMorpho vault system.

This integration will expose FRAX to the high demand for borrowing against sUSDe and USDe within Morpho Blue’s lending markets, thereby increasing Frax’s market share and further solidifying its position as a leading stablecoin protocol.

Voting

• For: Authorize the Lending AMO to deposit minted FRAX into the Morpho Blue pairs through MetaMorpho Vaults with the max authorized allocation mentioned.

• Against: Do nothing.