Authors

Frax Core Team

Summary

This proposal seeks to provide liquidity providers within the Frax Finance ecosystem the option to exchange their locked liquidity in certain pools for Frax Bond 2029 (FXB2029) at the auction price.

Background and Motivation

Many liquidity providers within the Frax Finance ecosystem have recently expressed a need for a ragequit or exit mechanism for their locked liquidity in FXS gauges. To address this concern and provide a flexible solution, we propose an exchange option to migrate the locked liquidity to FXBs, specifically FXB2029. This provides immediate liquidity to exit LPs starting with the older gauges while also keeping TVL within the Frax & Fraxtal ecosystem, an overall value add for all parties. FXB2029 tokens are liquid with high incentives for liquidity providers, massive FXTL points boosts, and migrators can exit these tokens should they want to leave the ecosystem for any reason by selling them on-chain in Curve pools and other venues and in no way required to hold them until maturity.

FXB tokens are simple, trustless tokens that resemble a zero-coupon bond that converts to the FRAX stablecoin on maturity. FXBs are debt tokens denominated in FRAX stablecoins, not a claim on any other asset or collateral. FXB tokens are only convertible to FRAX stablecoins; they do not guarantee FRAX peg, FRAX value, or yield/interest denominated in any other asset except FRAX.

By migrating to FXBs, liquidity providers will have an alternative means to manage their deployed capital within the Frax ecosystem, providing them with the flexibility they have requested while ensuring the protocol maintains its needed locked liquidity.

Proposal Details

This approach offers liquidity providers a way to exit their positions while maintaining their investment within the Frax ecosystem, ensuring the protocol’s stability and growth. The following points are important to note about this proposal:

• Pricing Based on Underlying Assets: The pricing for the locked liquidity will be based on the current price of the underlying assets at the time of the exchange.
• Exchange with FXB2029: Locked liquidity can only be exchanged for FXB2029 at the auction price prevailing at the time of the exchange. The auction price has a floor price of .794 at the time of this proposal & it is expected to remain at this floor price. An LP that wishes to migrate can sign the migration transaction on the Ethereum mainnet and move their LP token/NFT to the protocol to receive FXB2029 tokens directly to the same address on the Fraxtal mainnet. They are then free to do whatever they wish with their FXB2029 tokens.
• Designated Locked Liquidity for Exchange: Only certain designated pools will be eligible for this exchange option, but this list can be expanded through the governance process.

Pool	Gauge Address
Uniswap V3 FRAX/USDC	0x3EF26504dbc8Dd7B7aa3E97Bc9f3813a9FC0B4B0
Uniswap V3 FRAX/DAI	0xF22471AC2156B489CC4a59092c56713F813ff53e

• Option to Retain LPs: Liquidity providers will have the option to either exchange their locked liquidity for FXB2029 or retain their current locked positions.
• No Ragequit Fee: There will be no Ragequit fee for liquidity providers choosing this exchange method, ensuring a cost-effective transition.
• FXTL points & incentives: Migrators that receive FXB2029 for their positions will be entitled to all FXTL points multipliers & yield opportunities that are available and upcoming for all FXB2029 holders, making it one of the most high-yield opportunities within the Frax ecosystem.

Voting

• For: Approve the option for liquidity providers to exchange their locked liquidity for FXB2029 at the auction price.
• Against: Do nothing.