Frax Finance

Summary

• Add the future FRAX/ETH pool on Swaap v2 to FXS gauge controller

The proposal will provide FRAX with the following benefits:

• Reinforce FRAX as a “connector token” within DeFi
• Improve FRAX-ETH execution by creating a direct liquidity venue (lower gas, lower spread)
• Deepen liquidity on FRAX
• Create a new yield opportunity for FRAX holders

Background about the protocol

Swaap v2 is a non-custodial RfQ market-making infrastructure offering optimal liquidity services, launching soon.

Market making in crypto is split between centralized & opaque actors & transparent AMMs that yield negative returns for their LPs. Swaap v2 brings the best of both worlds - profitable, open, transparent, non-custodial, composable, secure, & adaptive.

Swaap v1, launched in June 2022 on Polygon, proved that profitable onchain market making was possible. Its WBTC / WETH / USDC pool underwent less than 0.1% in Impermanent Loss.

Swaap v2 is set to further improve this by making the best market making models available onchain, focused on higher yield strategies. It also introduces new security standards in DeFi such as the onchain max-drawdown.

For further information, please refer to Swaap v2 whitepaper.

Why it’s good for FRAX

Increase demand & liquidity for FRAX in a transparent and sustainable way:

• Launching a FRAX-ETH pair on Swaap v2 would improve FRAX-ETH execution by creating a direct liquidity venue. Today, a FRAX to ETH swap usually goes through Curve FRAX <> USDC and then Uniswap v3 USDC <> ETH. This represents an increased cost in terms of execution (spread) and gas fees. Having a direct pool on Swaap v2 would reduce such costs (notably on the gas fees side)
• This improved execution would not need to be incentivized as much as it would be the case on an AMM like Uniswap v3 to compensate the Impermanent Loss as the pools are built to be profitable for LPs.
• The liquidity would be deepened on FRAX in case of extreme events
• Creating this direct route FRAX <> ETH would reinforce FRAX as a “connector token” within DeFi, and potentially attract volume from other DAO tokens which could pair their assets against FRAX.
• As Swaap v2 pools are built to be profitable, this is an opportunity to create a new yield opportunity for FRAX holders. Besides, as ERC-20 tokens, Swaap v2 LP positions are highly composable and can appeal to a wide range of profiles once integrated into structured products.

Vote

• For: Add the future FRAX/ETH pool on Swaap v2 to FXS gauge controller
• Against: Do nothing