[ARFC] onboard frxUSD and sfrxUSD to Aave v3 on Sonic Instance

Governance
1

[ARFC] onboard frxUSD and sfrxUSD to Aave v3 on Sonic Instance

Author: ACI & Frax Core Team

Date: 2025-04-11

Simple Summary

This proposal seeks to onboard Frax USD (frxUSD) and Staked Frax USD (sfrxUSD) as new assets to the Aave v3 protocol on Sonic, after successful [TEMP CHECK] onboard frxUSD and sfrxUSD to Aave v3 on Sonic Instance and TEMP CHECK Snapshot.

Motivation/Background

Asset Overview

frxUSD

frxUSD is a fiat-redeemable stablecoin issued by the Frax Protocol, fully backed 1:1 by tokenized U.S. Treasury funds managed by institutional custodians like BlackRock and Superstate. Its bankruptcy-remote structure ensures unparalleled stability, and it is mintable/redeemable directly through licensed partners and soon directly on the frax.com interface itself to any user in the world (fiat wires will require KYC/AML). frxUSD is mintable/redeemable 1:1 for cash, USDC, and USDT directly from the issuer, Frax Protocol. Additionally, frxUSD offers a unique revenue-sharing mechanism, allowing up to 100% of its underlying T-Bill yield (currently 4.1%) on unborrowed frxUSD assets in Aave pools to be shared with Aave DAO. This revenue can be utilized as protocol income or distributed as incentives for depositors, providing flexibility for governance decisions.

sfrxUSD

sfrxUSD is a yield-bearing stablecoin implemented as an ERC4626 token, designed to maximize returns through a dynamic “benchmark yield” strategy. It automatically allocates capital across three governance-approved strategies: carry trades, Algorithmic Market Operations (AMOs), and the base T-Bill rate. This design consistently delivers higher APYs compared to competitors like sUSDS and sUSDe.

Benefits of Listing frxUSD and sfrxUSD

frxUSD

  • Stable Collateral Base: Institutional-grade reserves reduce protocol risk.
  • Revenue-Sharing Option: Aave DAO can capture up to 100% of T-Bill yield (4.1% APY) from unborrowed frxUSD assets deposited in Aave pools, offering new revenue streams or user incentives.
  • Sonic Ecosystem Points: This token will earn points as part of backing asset for scUSD
  • Regulatory Compliance: Positioned as a payment stablecoin under the proposed GENIUS Act.

sfrxUSD

  • Yield Dominance: Benchmark-driven APY historically exceeds competitors.
  • Strategy Flexibility: Automatic rebalancing ensures optimal returns across market cycles.

Chain to be Deployed/Listed

Sonic

Proof of Liquidity (POL) and Deposit Commitments:

POL and Deposit Commitments will be discussed at the ARFC stage.

Useful Links

Disclaimer

The current proposal has been powered by Skywards. The Aave Chan Initiative is independent and has not received any form of compensation from related parties for the drafting of this proposal. The Frax Core Team has a direct relationship with frxUSD/sfrxUSD as protocol developers.

Next Steps

  1. Publication of a standard ARFC, collecting community & service providers feedback before escalating proposal to ARFC snapshot stage.
  2. If the ARFC snapshot outcome is YAE, an AIP vote will be published for final confirmation and enforcement of the proposal.

Copyright

Copyright and related rights waived under CC0.

2 Likes
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Hi everyone, Sam from Frax here. As part of frxUSD’s roadmap of being fully US payment stablecoin legislation compliant, we’ve initiated this FIP through the Frax Protocol currently in discussion and moving to a vote by early next week: [FIP - 4XX] Preparation for frxUSD Payment Stablecoin Charter Compliance - Governance Proposals - Frax Finance Governance

Because this proposal brings frxUSD in full compliance and structure with the proposed US stablecoin legislation (both the GENIUS Act and STABLE Act), we’re requesting to briefly pause the ARFC process for 1-2 weeks until the FIP can be voted on and implemented (if passed). We believe that risk analysis reports and final listing decisions would be most accurate when they analyze the final state of the frxUSD and sfrxUSD assets proposed in the above FIP. Thus, we’re requesting ARFC process to continue after the conclusion of the formal vote.

We will post here as soon as the conclusion of the FIP vote and implementation (should it pass) to continue the process immediately. Thank you! :handshake:

1 Like