Frax Finance

Author

Joshua Baker and Eto.eth

Summary

Create dAMM AMO to provide market makers access to FRAX ecosystem tokens, and establish FRAX as the primary stablecoin of dAMM.

About dAMM Finance

dAMM is an under-collateralized lending platform for any token with algorithmically determined interest rates. Any token with a liquidity pool on dAMM, market makers and investors can borrow on dAMM to provide liquidity and trade across all centralized and decentralized trading venues. More details about the dAMM protocol can be found in our whitepaper:

https://damm-finance.gitbook.io/damm-finance/0onmhbd8IPAoHstKw9eg/introduction/abstract 3

Our investors include many major exchanges and market makers, including: Kronos Research/WOO Network, System 9, AscendEx and Gate Ventures. Our founding team are members of System 9, one of the largest alt-coin market makers in crypto. System 9 is the dedicated market market for more than 80 alt-coins as the dedicated market maker and was founded by market makers from the Chicago Mercantile Exchange, JP Morgan Capital, and Bear Stearns. Our protocol is open source here:

github.com GitHub - system9development/compound-protocol at feat/borrower-whitelist feat/borrower-whitelist

The Compound On-Chain Protocol. Contribute to system9development/compound-protocol development by creating an account on GitHub.

Background and Motivation

dAMM is the first under-collateralized lending platform for any token, offering DAO’s and token issuers the ability to lend their assets directly to market makers seeking to provide liquidity in their respective markets. A core stablecoin is necessary for the dAMM protocol, and when examining the current stablecoin landscape, FRAX stood out as the clear favorite amongst the dAMM team for a number of reasons. FRAX pioneered the AMO primitive which has fostered mutually-beneficial relationships with partner protocolsFor this reason, we believe that a FRAX AMO to seed stablecoin liquidity to dAMM is a clear value add for both protocols; as well as establishing FRAX as the native stablecoin of dAMM.

dAMM AMO Goals:

For this AMO, our goal is to provide FRAX with an organic and sustainable stream of revenue from lending to dAMM borrowers, as well as ownership over the dAMM protocol through a retro-active airdrop to DAOs and token issuer’s that are allocating to dAMM based on their allocation size.

Interest payments on dAMM are paid out in the native token of the pool (FRAX in the FRAX pool, FXS in the FXS pool, etc).

10% of all borrower interest payments on the protocol are passed directly to gdAMM (staked dAMM) holders in stablecoin rewards. If this partnership is accepted between dAMM and FRAX through this AMO, those rewards would be paid out in FRAX; making FRAX the native reward asset of dAMM staking.

Risk Mitigation of dAMM:

To mitigate default risk, the dAMM Foundation requires all market makers borrowing from the protocol to sign a master loan agreement, and provide monthly audited financial statements for our credit risk team’s due diligence. The total amount a market maker can borrow is capped as a percentage of their balance sheet as determined by the jurisdiction and licenses of the borrower. All borrowers on the protocol are also required to stake a portion of their loan value in the form of dAMM as well.

Conclusion

dAMM is the first protocol for any token to be borrowed under-collateralized by institutional borrowers. Our intention as well regardless of the proposal’s success is to list all four native FRAX assets (FRAX, FXS, FPI, FPIS) for institutional borrowers. We also seek to list more than 200 tokens in the first year of the protocol being live.

Our long term goal with this AMO is to create a mutually beneficial partnership between our protocols and generate revenue for the FRAX ecosystem, as well as put FRAX in the hands of reputable market makers and institutional borrowers. We’re incredibly excited to partner with FRAX!

Proposal: For: Create the dAMM AMO and authorize up to $10mm of FRAX for use in the AMO.

Against: Do nothing