Frax Finance

Authors

Aladdin Core Team

Summary

Use 100,000.00 vlCVX to vote for fxUSD/FRAX LP gauge on Curve Finance. f(x) Protocol will match Curve Incentives for this LP by utilizing part of the veFXN owned to vote on f(x) Protocol gauge .

Background

The f(x) Protocol is a DeFi solution that addresses the need for a stable asset in the cryptocurrency space while mitigating centralization risks and capital efficiency issues. f(x) Protocol was conceived by Aladdin DAO; the US banking crisis in March 2023, combined with the depegging of USDC, highlighted the need for a new type of decentralized, highly scalable stable asset.

Initially, f(x) Protocol introduced a new concept called a “floating stablecoin” or fETH. fETH is not pegged to a fixed value, but rather gains or loses a fraction of the price movements of ETH. This allows fETH to hold its value well in any market condition.

When f(x) Protocol first launched in August of 2023, f(x) introduced the DeFi world to something special: a powerful new defi primitive centered around a complimentary token pair. The f(x) pair, or “stable-leverage pair” primitive is based on a simple concept: split a yield-bearing token (called the base or reserve token) into two parts: a low-volatility (i.e. stable) part and a high volatility (i.e. “leveraged”) part, both tokenized. Stable tokens can be staked in a rebalancing pool to earn yield from the reserve tokens, while the high volatility tokens protect the peg simply by existing, themselves providing a remarkably simple, safe, and cheap way to take ETH leverage.

As the protocol has gained attention and adoption, our community highlighted the need of a fully decentralized and hard pegged stablecoin. After extensive discussions and governance process, Aladdin DAO is now prepared to introduce f(x) Protocol’s new USD-pegged stablecoin, fxUSD.

As a stablecoin, fxUSD offers four key features never before combined:

• Built-in yield, derived from LSDs in the reserve
• Scalability: rapidly scalable based on direct demand
• Stability: reliable peg in both directions, backed by f(x)’s invariant
• Resilience: collateralized by Ethereum LSDs, with zero real-world asset exposure

At genesis, we are choosing 5 stablecoins to pair fxUSD with: FRAX (Frax Finance), crvUSD (Curve Finance), pyUSD (Paypal), DOLA (Inverse Protocol) and GRAI (Gravita Protocol). We are aiming for all these pools to have double gauges, on Curve and f(x). Each partner will either use owned vlCVX or veCRV to vote for incentives on Curve’s gauge or will incentives veFXN votes on f(x) Protocol’s gauge.

Motivation

Increasing liquidity and visibility for the fxUSD/FRAX pool is critical to the operation of f(x) Protocol. It would also be beneficial and additive to the ecosystem in the following ways:

• Having higher rewards will incentives more users to deposit in the pool, getting more FRAX deposited;
• Having a deeper pool will help stabilize FRAX’s peg;
• fxUSD is backed in part by frxETH; attracting more deposits will increase the minting of fxUSD, thus increasing frxETH supply.

Proposal

In order to create a deeper pool and to attract liquidity which will support fxUSD - FRAX swaps we propose that Frax vote with 100,000 vlCVX/ epoch for the fxUSD/FRAX pool for the next 12 epochs on Votium. In exchange, f(x) will use treasury owned veFXN to vote on f(x) Protocol gauge in order to match Curve’s rewards for the same duration.

• For: Use 100,000.00 vlCVX to vote for fxUSD/FRAX LP gauge on Curve Finance for 6 months.

• Against: Do nothing.