[ARFC] Add sFRAX on Ethereum V3

Gauntlet Analysis


Gauntlet recommends adding sFRAX to the Ethereum Aave V3 Liquidity Pool, conditioned on the price feed being addressed properly in final AIP.


Market Cap

Current supply of sFRAX is ~28M.

Staking Yield

sFRAX is designed to allow holders of the protocol’s partially collateralized fractional-algorithmic stablecoin FRAX to earn yields matching the U.S. Federal Reserve’s (Fed) interest rate on reserve balances (IORB), currently around 5.4%.

Below shows yield rankings of stablecoin LSD on Ethereum, ordered by TVL.

Screenshot 2024-01-22 at 3.03.56 PM

Slippage and Liquidity

  • sFRAX liquidity creates ~2.5% slippage on trade over $2M sFRAX to FRAX (see here)
  • The primary liquidity venues for sFRAX include the sFRAX - crvUSD (~$165M TVL) on Curve (see here)

Screenshot 2024-01-18 at 11.37.18 AM

Counterparty Risk

In the sFRAX model, users deposit FRAX, and the DAO invests their own equivalent funds in short-term assets via Finres. Thus sFRAX is able to be atomically exchanged for FRAX without any liquidity concerns funds invested in RWAs.


Given the market cap, liquidity and risk profile analyzed above, Gauntlet recommend parameters as below.

Parameter Recommendation
Isolation Mode NO
Borrowable NO
Borrowable in Isolation NO
Collateral Enabled YES
Stable Borrowing NO
Supply Cap 10M
Borrow Cap N/A
Debt Ceiling N/A
LTV 70%
LT 75%
Liquidation Bonus 6%
Reserve Factor 10%
Base Variable Borrow Rate N/A
Variable Slope 1 N/A
Variable Slope 2 N/A
Uoptimal N/A