Frax Finance

Summary

1. Set up a relayer with 250K worth of FRAX tokens.
2. Set up and Fund a FRAX liquidity pool for 500k-750k

Background and Motivation Across (https://across.to/) is a token bridge built on Ethereum with L2-L1 on Arbitrum, Optimism, Boba and soon additional bridges and L2-L2 interoperability. Built from the team behind UMA, its unique implementation of relayers and liquidity pools allow it to boast itself as the fastest and cheapest bridge for token bridging.

The Ethereum ecosystem is currently plagued by high fees and usage is uneconomical for most participants. The rollup ecosystem (collectively known as L2s) is robust and growing immensely - its promise of scale and keeping transactions fees low means that they will eventually dominate usage over L1 mainnet and thus we need to think of the future where many (if not most) projects will be based on some of these L2 chains.

FRAX is currently ranked 6 on the Coingecko Stablecoins category with a market cap of about $2.9B, and is one of the largest decentralized algorithmic stablecoin projects on Ethereum behind DAI. To ensure its leadership position and to remain competitive, FRAX should become one of the most liquid assets on as many chains as possible. Complementary to other token bridging solutions, having FRAX be accessible across many different bridging platforms minimizes centralization risk.

This is where Across comes in - we plan to provide some of the necessary backend infrastructure to allow FRAX to be transferred quickly and as cheaply as possible across supported chains. Efficient and positive usage will allow Across to further its mission and deepen its relationship, and to scale up liquidity. In the near future, there will be potential to incentivize FRAX LP on Across which would further drive demand higher for FRAX.

Specification To create a system for bridging FRAX using Across for fast, low cost bridging requires 2 components.

The first component is to set up a ‘relayer’. Risk Labs (UMA) would be working with the FRAX team to demonstrate how a relayer can be set up with the intent that the FRAX team will run the relayer themselves; alternatively, FRAX could lend 250k $FRAX to Risk Labs to run a relayer on behalf of the FRAX team. Risk Labs will not charge Frax Finance for any costs of running the relayer for at least 3 months.

The second component is the liquidity pool. This would constitute funding the liquidity pool with 500k-750k $FRAX as a reasonable amount to start with. If all goes well, we anticipate expanding significantly in a subsequent snapshot based on Across demand.

Example Transaction & Mechanics Bob wants to move 100,000 FRAX from Arbitrum to Mainnet. He puts it into a deposit box in Arbitrum. The relayer sees that deposit and fronts the FRAX to him on Mainnet. After a 2hr dispute period, the relayer gets reimbursed by the FRAX LP on Mainnet. The FRAX LP gets reimbursed by sending the original FRAX from the Arbitrum deposit box through the canonical bridge back to Mainnet. So the relayer is doing 2-hr loans and the LP is doing 7-day loans. This is the reason why the relayer needs less funds. A relayer has to be able to support Frax’s largest single transfer whereas the LP needs to have enough liquidity to support 7 days of transfers.

Proposal

1. Set up a relayer with 250K of $FRAX tokens.
2. Set up and fund a liquidity pool with 500k-750k $FRAX.
3. Review period after 3 months.