[ARFC] Add FRAX Arbitrum Aave v3

Title: [ARFC] Add FRAX Arbitrum Aave v3

Author: @fig - Flipside Crypto, @TokenLogic - TokenLogic

Date: 05-26-2023


Website: https://frax.finance/
Whitepaper: https://docs.frax.finance/overview
Documents: https://docs.frax.finance/
Analytics: https://facts.frax.finance/
Github: frax.finance · GitHub

Arbitrum Contract Address: Abritrum: 0x17FC002b466eEc40DaE837Fc4bE5c67993ddBd6F

Oracle Address: Arbitrum: 0x0809E3d38d1B4214958faf06D8b1B1a2b73f2ab8



This publication presents the community an opportunity to add FRAX to the Arbitrum v3 Liquidity Pool.


FRAX can use its Lending AMO (similar to Maker’s DAI Direct Deposit Module) to mint protocol controlled FRAX to be lent out on Aave Protocol. Frax Finance has in the past done so in Aave v2 on Ethereum and has already stated on the Aave governance forum an interest in doing so on other deployments once FRAX is added.

The Frax Finance team could deploy a similar Aave Lending AMOs to Aave v3 after FRAX is listed.This will provide Aave users with access to FRAX and present an alternative to the four USD stable coins on Aave v3.

Users are able to borrow FRAX and earn yield across DeFi, such as on Curve Finance and Convex Finance.


1. What is the link between the author of the AIP and the Asset ?

There is no link between the authors and the core teams of the asset.

2. Provide a brief high-level overview of the project and the token ?

See summary.

3. How is the FRAX token currently used ?

FRAX is a popular stablecoin to borrow, with its Lending AMO it is able to mint protocol-owned FRAX to ensure low interest rates.

4. Emission schedule

FRAX is a stablecoin and mintable/redeemable so it does not have a governance token emission schedule.

5. Token (& Protocol) permissions (minting) and upgradability. Is there a multisig? What can it do? Who are the signers?

There is a multisig which can operate certain AMO contracts but cannot in any way change users’ FRAX balances, cannot freeze or pause any user’s funds, and cannot in any way alter the behavior of the protocol or sweep/rug collateral or value. There are no FRAX whitelists/blacklists in any capacity as it is entirely a bearer asset/decentralized similar to DAI.

6. Market data (Market Cap, 24h Volume, Volatility, Exchanges, Maturity)


Market Cap: ~$22,425,936.51
24h Volume: ~$50M

Volatility: stablecoin (low)
Arbitrum Launch Date: 27/09/2021

Date of deployment: Dec 20th, 2020
Number of crosschain token holders: 25,000+

The protocol currently holds over $1,004,053,174.00 in TVL across all chains

7. Social channels data (Size of communities, activity on Github)

8. Contracts date of deployments, number of transactions, number of holders for tokens

Supply: 22,425,936.51
Holders: 9,383
Transfers: 427,627

Please see the following post for more details: [ARFC] Add FRAX to Aave V3 Ethereum

Risk Analysis

Parameter Value
Isolation Mode Yes
Borrowable Yes
Collateral Enabled Yes
Supply Cap 7.5M
Borrow Cap 2.5M
LTV 67.00%
LT 74.00%
Liquidation Bonus 7.50%
Liquidation Protocol Fee 10.00%
Reserve Factor 15.00%
Variable Base 0.00%
Variable Slope 1 7.00%
Variable Slope 2 300.00%
Uoptimal 45.00%
Stable Borrowing Disabled
Stable Slope 1 7.00%
Stable Slope 2 300.00%
Base Stable Rate Offset 2.00%
Stable Rate Excess Offset 5.00%
Optimal Stable to Total Debt Ratio 20.00%


The information provided above about FRAX is from public sources and Flipside Crypto cannot guarantee that it is or will stay accurate.

FRAX has not compensated Flipside nor Token Logic to create this proposal and we are doing this because we believe that the listing would be in the best interest of the Aave.

This ARFC has been prepared solely to receive community feedback.


Copyright and related rights waived via CC0.



Chaos Labs supports listing FRAX in Isolation Mode.

Liquidity and Market Cap

When analyzing market cap and trading volumes of assets for listing, we look at data from the past 180 days. The average market cap of FRAX over the past 180 days was ~$1B, and the average daily trading volume was ~$15M (CeFi & DeFi).

Untitled - 2023-05-30T103929.191

Liquidation Threshold

Analyzing FRAX price volatility over the past, we observed daily annualized volatility of 4.69% and 30-day annualized volatility of 1.04%.

Considering this volatility and the history of FRAX on other chains, we recommend an LT of 75%.

We recommend listing FRAX as borrowable as we do not observe a significant risk to the protocol by allowing to borrow FRAX, as long as it is bound by a well-defined cap.

Debt Ceiling

Following Chaos Labs’ Isolation Mode Methodology, we recommend an initial debt ceiling of $1M. Under the methodology for Isolation Mode, we consider two levels of probabilities for extreme price drops - Medium-High and High. We estimate the probability of an extreme price drop for FRAX as Medium-High. Given this debt ceiling, we do not identify a profitable attack vector under the current liquidity levels.

Supply Cap, Borrow Cap, and Liquidation Bonus

Following Chaos Labs’ approach to initial supply caps, we propose setting the Supply Cap at 2x the liquidity available under the Liquidation Penalty price impact.

Given the concentrated liquidity of FRAX we recommend a 6% Liquidation Bonus and a derived supply cap of 7M FRAX, and a borrow cap of 5.5M FRAX.

Untitled - 2023-05-31T171944.860


For the Reserve Factor, Liquidation Protocol Fee, and Interest Rate curves, we recommend aligning the parameters to FRAX on Avalanche V3.

Following the above analysis, we recommend listing FRAX with the following parameter settings:

Parameter Value
Isolation Mode Yes
Borrowable Yes
Collateral Enabled Yes
Supply Cap (FRAX) 7M
Borrow Cap (FRAX) 5.5M
Debt Ceiling $1M
LTV 70.00%
LT 75.00%
Liquidation Bonus 6.00%
Liquidation Protocol Fee 10.00%
Variable Base 0.00%
Variable Slope1 4.00%
Variable Slope2 75.00%
Uoptimal 80.00%
Reserve Factor 10.00%
Stable Borrowing Disabled
Flahloanable Yes
Siloed Borrowing No
Borrowed in Isolation No
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Gauntlet’s Recommendations

This report presents Gauntlet’s recommendations for the listing of FRAX on Arbitrum Aave v3. FRAX has shown significant liquidity since its initial listing.

Symbol Address Market Cap (Circulating) ADV # Txns Total Wallets
FRAX 0x17FC002b466eEc40DaE837Fc4bE5c67993ddBd6F $1B $6M 9,692 441,876

Given the ample liquidity, we propose listing FRAX as a collateral asset.

LTV, LT, LB, Liquidation Protocol Fee, IR

In line with the parameters of assets with a similar risk profile set on Aave v3, we recommend the following values:


Parameter Recommendation
LTV 75%
LT 80%
Liquidation Bonus (LB) 5%
Liquidation Protocol Fee 10%
Uoptimal 0.80
Variable Base 0
Variable Slope 1 0.04
Variable Slope 2 0.75
Stable Slope 1 0.04
Stable Slope 2 0.75
Base Stable Rate Offset 0.05
Stable Rate Excess Offset 0.08
Optimal Stable to Total Debt Ratio 0.20
Reserve Factor 10%

Additional Recommendations

Following Gauntlet’s Isolation Mode Methodology, we propose listing FRAX in isolation mode with a debt ceiling of $3M.

Furthermore, according to our eMode recommendations, we advise listing FRAX in the Stablecoins eMode category on Arbitrum Aave v3.

Initial Supply and Borrow Caps

We use the lower of the conservative and aggressive recommendations generated under Gauntlet’s Borrow and Supply Cap Methodology.

Cap Conservative Aggressive
Supply 10M 15M
Borrow 6M 9M

The recommended supply caps are limited by the circulating supply, while the recommended borrow caps are limited by the top wallets.


Using our conservative recommendations where applicable, we propose the following parameters for the new asset listing:

Parameter Recommendation
Isolation Mode YES
Borrowable YES
Collateral Enabled YES
Supply Cap (FRAX) 10M
Borrow Cap (FRAX) 6M
Debt Ceiling $3M
LTV 75%
LT 80%
Liquidation Bonus 5%
Liquidation Protocol Fee 10%
Reserve Factor 10%
Variable Base 0.00%
Variable Slope 1 4.00%
Variable Slope 2 75.00%
Uoptimal 80.00%
Stable Slope 1 4.00%
Stable Slope 2 75.00%
Base Stable Rate Offset 5.00%
Stable Rate Excess Offset 8.00%
Optimal Stable to Total Debt Ratio 20.00%

Hi Everyone :wave:

We just published this Snapshot vote to progress this proposal through the governance process.


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