While we appreciate Frax Finance’s contributions to the DeFi ecosystem and recognize their track record of innovation, we believe frxUSD’s current market profile does not align with Aave’s growth objectives.
A major concern lies in the market cap of $82.92M which is low when compared with established stablecoins that have high usage on Aave: USDC ($35B+), USDT ($120B+), DAI ($4B+).
In addition there is significant concentration risk. At the proposed $50-100M Aave deposits, this would represent 60-120% of total circulating supply. And similarly we believe there is insufficient liquidity to support large-scale borrowing without severe slippage.
In conclusion we believe that given the current workload and limited development resources, we do not believe that onboarding this asset would result in growth and revenue that would justify onboarding.
From a business perspective, ACI recommend voting NAY to onboarding frxUSD at this time.
Asset Information
| Attribute | Answer |
|---|---|
| Current marketcap | $82.92m (CoinGecko: frxUSD) |
| Committed Aave TVL | $0 (None committed) |
| Expected Aave deposits | $50-100m+ |
| Expected monthly revenue | $40-60k |
| Aave incentives budget | Ongoing incentives via 100% revenue sharing |
Commercial information
| Attribute | Answer |
|---|---|
| Asset class | Fiat-backed stablecoin |
| Systems & projects associated | Frax Finance (Frax.com) |
| Basic utilities | Regulated stablecoin with on-chain transparency and reward sharing |
| Planned future developments | Potential expansion to collateral asset |
| Use-cases of Aave onboarding | Borrow asset (initially), potential collateral asset (future) |
| Yield mechanism | Backed by cash-equivalent assets (BUIDL, USTB) held by regulated custodians |
| Previous adverse events | None disclosed |
| Borrow assets | Standard stablecoins (USDC/USDT/etc.) |
Disclaimer
This review was independently prepared by ACI. ACI is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.
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