# \[ARFC\] Remove FRAX from Isolation Mode on Aave v3 Mainnet **URL:** \ **Category:** Governance\ **Created:** [October 7, 2024, 3:47pm UTC](https://governance.aave.com/t/arfc-remove-frax-from-isolation-mode-on-aave-v3-mainnet/19337 "2024-10-07T15:47:58Z")\ **Posts on this page:** 8\ **Page:** 1
**Author:** ![ACI](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/aci/32/4780_2.png) [@ACI](https://governance.aave.com/u/ACI)\ **Post date:** [October 7, 2024, 3:47pm UTC](https://governance.aave.com/t/arfc-remove-frax-from-isolation-mode-on-aave-v3-mainnet/19337/1 "2024-10-07T15:47:58Z")
## **[ARFC]** Remove Frax from Isolation Mode on Aave v3 Mainnet ## **Author: ACI (Aave Chan Initiative)** ## **Date: 2024-10-07** > ARFC has been updated with Risk Parameters provided by Risk Service Providers. 2024-10-14 * * * ## **Summary** This is an ARFC to remove FRAX from isolation mode, and set LTV to 0%. This is a reboot with minor changes of a [previous ARFC](https://governance.aave.com/t/arfc-remove-frax-from-isolation-mode-and-onboard-sfrax-to-aave-v3-mainnet/18506) which passed Snapshot but has not yet been implemented. ## **Motivation** FRAX and Aave DAO have found more synergies over the last months. The FRAX team has responded with major updates to security on sfrxETH in response to BGD Labs feedback. FRAX has also initated governance proposals to add GHO to Frax Lend. There are ongoing conversations to have a FRAX AMO included into Aave v3. sFRAX was [previously accepted](https://governance.aave.com/t/arfc-add-sfrax-on-ethereum-v3/16303) for onboarding in a previous [ARFC vote](https://snapshot.org/#/aave.eth/proposal/0xdba99e9c8da24424447d7c7b70eff93ad5b6055714b5f34cf9859c923fb3a38a) before the introduction of CAPO feeds. This proposal suggests removing FRAX from isolation mode to facilitate further AMO deployments. Furthermore, this proposal sets LTV to 0% as there is no use-case for FRAX to act as collateral. ## Specification - FRAX will be removed from Isolation Mode on Aave v3 instances. - FRAX will receive same parameters as DAI, a Reserve Factor as other stables, and LTV of 0%. | Parameter | Recommendation | | --- | --- | | Isolation Mode | NO | | Borrowable in Isolation | NO | | Stable Borrow | NO | | Enable Borrow | NO | | Enable Collateral | YES | | Loan To Value | 0% | | Liquidation Threshold | 75.00% | | Liquidation Bonus | 6.00% | | Reserve Factor | 10.00% | | Liquidation Protocol Fee | 20.00% | | Supply Cap(sFRAX) | 10.00M | | Borrow Cap(sFRAX) | N/A | | Uoptimal | N/A | | Base | N/A | | Slope1 | N/A | | Slope2 | N/A | | Debt Ceiling | - | ## **Useful Links** [[ARFC] Remove Frax from Isolation Mode and onboard sFRAX to Aave v3 Mainnet](https://governance.aave.com/t/arfc-remove-frax-from-isolation-mode-and-onboard-sfrax-to-aave-v3-mainnet/18506) [[ARFC] Remove Frax from Isolation Mode and onboard sFRAX to Aave v3 Mainnet Snapshot](https://snapshot.org/#/aave.eth/proposal/0x89f056f633646ee0676e226da41e2c6a7df756a7087204a96db8c3d74427244a) [[ARFC] Add FRAX on Ethereum v3 Forum Thread](https://governance.aave.com/t/arfc-add-sfrax-on-ethereum-v3/16303/4) [[ARFC] Add FRAX on Ethereum v3 Forum Thread Snapshot](https://snapshot.org/#/aave.eth/proposal/0xdba99e9c8da24424447d7c7b70eff93ad5b6055714b5f34cf9859c923fb3a38a) ## **Disclaimer** This proposal is powered by Skywards. The Aave Chan Initiative is not directly affiliated with FRAX and did not receive compensation for creation this proposal. ## **Next Steps** 1. Publication of a standard ARFC, collect community & service providers feedback before escalating proposal to ARFC snapshot stage. 2. If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal. ## **Copyright** Copyright and related rights waived under [CC0](https://creativecommons.org/publicdomain/zero/1.0/). ---
**Author:** ![LlamaRisk](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/llamarisk/32/12865_2.png) [@LlamaRisk](https://governance.aave.com/u/LlamaRisk)\ **Post date:** [October 8, 2024, 4:06pm UTC](https://governance.aave.com/t/arfc-remove-frax-from-isolation-mode-on-aave-v3-mainnet/19337/2 "2024-10-08T16:06:51Z")
LlamaRisk supports the removal of FRAX from Isolation mode under the proposed parameters. DAI’s parameters, including 0% LTV, are appropriate for this asset. Liquidity for the asset is good. We do not see significant changes in the protocol structure since our [last comment reviewing this asset](https://governance.aave.com/t/arfc-remove-frax-from-isolation-mode-and-onboard-sfrax-to-aave-v3-mainnet/18506/5). It is worth noting that FRAX now [conducts governance on Fraxtal L2](https://snapshot.org/#/frax.eth/proposal/0x60ce169bce5174b399fa09ccc35c14e692a6bb19229d5957e44940f58e89efbc), their inhouse chain, but it does not appear to be “onchain” governance [that was promised since 2023](https://flywheeldefi.com/article/frax-101-paging-frxgov-bravo-over). ---
**Author:** ![ChaosLabs](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/chaoslabs/32/6850_2.png) [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)\ **Post date:** [October 9, 2024, 11:05pm UTC](https://governance.aave.com/t/arfc-remove-frax-from-isolation-mode-on-aave-v3-mainnet/19337/3 "2024-10-09T23:05:56Z")
Chaos Labs supports the proposal to remove FRAX from Isolation mode while also decreasing its LTV to 0%. On-chain liquidity for the asset has improved significantly since July of this year, with a $60M swap to USDC able to be completed for just 1% price slippage, significantly larger than its current 15M supply cap and 12M borrow cap. Its current market cap is 648M, again indicating that the current supply and borrow caps are sized appropriately to limit risk to Aave. These factors support the removal of the asset from Isolation mode. ![image - 2024-10-10T020419.812](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/2/23146b668f4a7d9706287ab4e1add5e1d72c6b36.jpeg) Additionally, we have observed strong peg stability, with a 30-day daily annualized volatility of just 1.84%, reducing the chances of liquidation when FRAX is used as a borrowed asset. ![image - 2024-10-10T020422.877](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/f/ff077217c06aa54636fe24f127cb66b1e935f7cd.png) Finally, the proposal to reduce LTV to 0% is prudent, as we have observed extremely limited demand to borrow against this asset. As of this writing, less than $1 of USDC (with a debt ceiling of $10M) is being borrowed against 800K FRAX supplied. # Specification: The current parameters for FRAX remain unchanged despite the modifications listed below. | **Parameter** | FRAX | | --- | --- | | Isolation Mode | No | | LTV | 0% | | Debt Ceiling | - | ---
**Author:** ![ACI](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/aci/32/4780_2.png) [@ACI](https://governance.aave.com/u/ACI)\ **Post date:** [October 14, 2024, 5:27pm UTC](https://governance.aave.com/t/arfc-remove-frax-from-isolation-mode-on-aave-v3-mainnet/19337/4 "2024-10-14T17:27:43Z")
The current proposal has been escalated to [ARFC Snapshot](https://snapshot.org/#/aave.eth/proposal/0x9bc3f3d8e38d70f55887f2f2498e1b39f59467489158923488aceab73cd4f144). Vote will start tomorrow, we encourage everyone to participate. ---
**Author:** ![ACI](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/aci/32/4780_2.png) [@ACI](https://governance.aave.com/u/ACI)\ **Post date:** [October 21, 2024, 7:02am UTC](https://governance.aave.com/t/arfc-remove-frax-from-isolation-mode-on-aave-v3-mainnet/19337/5 "2024-10-21T07:02:44Z")
After Snapshot monitoring, the current [ARFC Snapshot](https://snapshot.org/#/aave.eth/proposal/0x9bc3f3d8e38d70f55887f2f2498e1b39f59467489158923488aceab73cd4f144) ended recently, reaching both Quorum and YAE as winning option with 623K votes. Therefore the ARFC has PASSED. Next step will be the publication of an AIP for final confirmation. ---
**Author:** ![system](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/e11637c36f45ffa158f2146f5c19438d46e0824d.svg) [@system](https://governance.aave.com/u/system)\ **Post date:** [November 20, 2024, 7:03am UTC](https://governance.aave.com/t/arfc-remove-frax-from-isolation-mode-on-aave-v3-mainnet/19337/6 "2024-11-20T07:03:43Z")
This topic was automatically closed 30 days after the last reply. New replies are no longer allowed. ---
**Author:** ![ACI](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/aci/32/4780_2.png) [@ACI](https://governance.aave.com/u/ACI)\ **Post date:** [December 6, 2024, 1:41pm UTC](https://governance.aave.com/t/arfc-remove-frax-from-isolation-mode-on-aave-v3-mainnet/19337/7 "2024-12-06T13:41:17Z")
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**Author:** ![ACI](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/aci/32/4780_2.png) [@ACI](https://governance.aave.com/u/ACI)\ **Post date:** [December 6, 2024, 1:41pm UTC](https://governance.aave.com/t/arfc-remove-frax-from-isolation-mode-on-aave-v3-mainnet/19337/8 "2024-12-06T13:41:56Z")
The current proposal has been escalated to AIP, which is currently live, you can check [here](https://vote.onaave.com/proposal/?proposalId=213&ipfsHash=0x141a3189c70b282415870d2c3ea6f7c05d256c8033b41895293ae74989c2b1b9). Vote is open, we encourage everyone to participate.