[TEMP CHECK] Add FXS to Ethereum V3

Title: [TEMP CHECK] Add FXS to Ethereum V3
Author: 0xlide
Date: 2023-09-21


Project: https://frax.finance/
Governance Forum: https://gov.frax.finance/
Snpashot: Snapshot
Github: frax.finance · GitHub
Ethereum contracts:0x3432B6A60D23Ca0dFCa7761B7ab56459D9C964D0
Chainlink Oracle:0x6Ebc52C8C1089be9eB3945C4350B68B8E4C2233f
Audit: Audits - Frax Finance ¤
Dune: https://dune.com/wd021/FXS-(FRAX-Shares)
Twitter: https://twitter.com/fraxfinance
Telegram: Telegram: Contact @fraxfinance


This TEMP CHECK presents the community with the opportunity to add FXS to the Ethereum v3 Liquidity Pool.


Frax Finance consists of a Stable-Protocol issuing Frax, FPI, FrxETH and Sub-Protocols such as Fraxlend, Fraxswap, Fraxferry, etc. Frax Shares Token ($FXS) is Frax Finance’s Govenance Token & Utility Token.

Aave may facilitate diversification of GHO collateral by adding FXS. Also, FXS earned as revenue from the Aave V3 pool can be $veFXS as a new strategic asset to be used as a boost trap for GHO and/or new aToken adoption.


What is the link between the author of the AIP and the Asset?
0xLide have no link and are not compensated to present this TEMP CHECK proposal

Provide a brief high-level overview of the project and the token.
Frax Finance operates three stablecoins, $FRAX (USD peg), $FPI (US CPI peg) frxETH (LST and ETH peg), and sub-protocols Fraxlend (lending) Fraxswap (DEX) and Fraxferry (bridge). As of September 12, DeFiLlama’s Protocol TVL Ranking is #17.

Frax Shares Token ($FXS) is Frax Finance’s Govenance Token & Utility Token. There is a possibility of deflation. It also uses Curve’s veCRV mechanism for its vesting and yield system, which can be used to specify the gauge and boost the yield.

Explain the positioning of the token in the AAVE ecosystem. Why would it be a good borrow or collateral asset?
FXS is suitable as an asset to be listed in Aave V3 and can be similar to BAL, SNX, CRV, etc. Also, FXS earned as revenue from the Aave V3 pool can be $veFXS as a new strategic asset to be used as a boost trap for GHO and/or new aToken adoption.

Provide a brief history of the project and the different components: DAO (is it live?), products (are the live?). How did it overcome some of the challenges it faced?

FXS is a non-stable, utility token of Frax Ecosystem and retains rights to governance and all utilities of the Ecosystem. The following are the main products and concepts of the Frax Ecosystem:

FRAX (USD Stablecoin): world’s first decentralized stablecoin with parts of its supply collateralized and parts algorithmic stabilized Frax V2, launched in Q4 2021, introduces the idea of an “Algorithmic Market Operations Controller” (AMO), dramatically improving scalability and profitability. Frax V3, which introduces RWA, is scheduled to be launched in the near future.

Frax Pirce Index: Stablecoin, an inflation-linked currency linked to the CPI-U unadjusted 12 month inflation rate published by the US federal government. *FPI growth is also linked to FRAX growth and FXS is designed to benefit from them.

frxETH and sfrxETH (ETH peg): $ETH Liquid Staking Derivative Service launched in October 2022; as of September 2023, it is third in market capitalization behind Lido and RocketPool with approximately $4.2m Dollar. The upcoming frxETH V2 is expected to be more decentralized, changing the Validator from Permissionless to Permissionless while maintaining high profitability.

Fraxswap, a native AMM: Fraxswap is the first AMM with time weighted average market maker orders used by the Frax Protocol for rebalancing collateral, mints/redemptions, expanding/contracting stablecoin supply, and deploying protocol owned liquidity onchain.

Fraxlend, permissionless lending markets: Fraxlend is the lending facility for Frax-based stablecoins allowing debt origination, customized non-custodial loans, and onboarding collateral assets to the Frax Finance economy.

Fraxferry, optimistic transfer protocol for Frax-based tokens: Fraxferry transfers natively issued Frax Protocol tokens across many blockchains.

Gauge Rewards System – The community can propose new gauge rewards for strategies that integrate Frax-based stablecoins. FXS emissions are fixed, halve each year, and entirely flow to different gauges based on the votes of veFXS stakers.

How is the asset currently used?
As of September 17, 73.9% of FXS are unlocked. About 50.8% have been staked as veFXS for an average of 1.84 years and can be used for Gauge boost.Convex, Pitch, StakeDAO, etc. exist as Liquid Wrappers.

Emission Schedule
The total supply of FXS is 100million FXS, with 60% distributed to liquidity programs (such as Gauge boost Reward) which halves every 12 months, 5% to DAO Treasury, and 35% to Team and investors. 35% (35millionFXS) applied to Team and investors has been unlocked as of July 2022. As of July 2022, the unlocking of the 35% (35millionFXS) allocated to Team and investors has been completed.

FXS supply is initially set to 100 million tokens at genesis, but the amount in circulation will likely be deflationary as FRAX is minted at higher algorithmic ratios. The design of the protocol is such that FXS would be largely deflationary in supply as long as FRAX demand grows.

Token (& Protocol) permissions (minting) and upgradability. Is there a multisig? What can it do? Who are the signers?
The Frax Protocol is owned and managed by veFXS Holder. The Frax Finance runs a Snapshot Subspace where they vote on Governance Proposals.Frax governance based on Compound/OpenZeppelin Governor that controls Gnosis Safes.

Frax Governance Overview: Frax Governance Overview - Frax Finance ¤

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

Market Cap(19 September 2023): $392,832,760 *Source: Coingecko
24h Volume(19 September 2023): $26,491,511 *Source: Coingecko

Decentralized exchange liquidity pools
FraxswapV2 FRAX/FXS 0x3F2E53B1A3036Fd33F3c2f3cC49daB26A88DF2e0
UniswapV2 FRAX/FXS 0xb64508B9f7b81407549e13DB970DD5BB5C19107F
Curve cvxFXS/FXS 0xd658A338613198204DCa1143Ac3F01A722b5d94A

Social channels data (Size of communities, activity on Github)
Twitter: 7.7M
Telegarm: 20k
Github: 114

Risk Parameter
We propose the following parameters according to Gauntlet’s recommendations
Ticker: FXS
Contract Address : 0x3432B6A60D23Ca0dFCa7761B7ab56459D9C964D0

Next Steps
・Gather recommendations from the Risk Management team and feedback from the community.
・If consensus is reached, escalate this proposal to the TEMP CHECK Snapshot stage.

Copyright and related rights waived via CC0.


Strongly supportive of adding FXS


Yes, sounds like a good start. What timeframe would call ready to secure?

1 Like

I would love to include frxETH as well.

1 Like

Proposals to add sfrxETH to Aave V3 have already been submitted by @MarcZeller and will be added as soon as Chainlink Oracle is ready.Personally, I would be happy if it could be done sooner with RedStone Oracle and others.

The exact number of days for the proposal to go to Next Steps has not been determined, but it will proceed as specified in the [ARFC] Framework for ARFC and TEMP CHECK Proposals. 5 days after the recommendation from the risk management team ( @Gauntlet , @ChaosLabs ) is considered appropriate.

Should the community wish to list FXS on Ethereum v3, Gauntlet recommends the following parameters.


Parameter Recommendation
Isolation Mode YES
Borrowable YES
Collateral Enabled YES
Stable Borrowing NO
Supply Cap (FXS) 800000
Borrow Cap (FXS) 500000
Debt Ceiling $4M
LTV 35%
LT 45%
Liquidation Bonus 10%
Liquidation Protocol Fee 10%
Reserve Factor 20%
Base Variable Borrow Rate 0
Variable Slope 1 0.09
Variable Slope 2 3.00
Uoptimal 0.45

LTV, LT, LB, Liquidation Protocol Fee, IR

FXS annualized historical volatility is roughly ~ 95%. We recommend initializing FXS with LT/LTV/LB/IR params in line with assets with similar risk profile set on Aave v3.

Initial Supply and Borrow Caps

FXS is a new asset listing, we use our conservative methodology to recommend initial supply caps. These caps are limited by FXS liquidity.

  • FXS has a 25% depth value of ~$4.5M
  • FXS circulating market cap is ~$425M
  • FXS ADV is roughly ~$20M

Isolation Mode

In line with other assets of similar historical volatility and market cap, we recommend initializing FXS in isolation mode. We recommend a debt ceiling of $4M, limited by our initial supply cap.