Hey everyone, Sam here from Frax. I’ve been talking to c2tp, Michael, and others to create this proposal which I hope the community likes
Create a FraxBasePool (FBP) of FRAX-USDC and put up for vote for gauge+base pool candidacy. Then whitelist Frax Protocol to stake veCRV to permalock majority of earnings as veCRV (and cvxCRV) from all FBP emissions.
The Frax Protocol has been a steadfast Curve+Convex ally for well over a year. FRAX’s Curve AMO has proven to be a very important innovation in DeFi & stablecoins. The AMO smart contract essentially keeps the Curve pool balanced+managed entirely onchain deterministically & allows the FRAX protocol to deploy its protocol owned liquidity to Curve, earn tx fee revenue from it, earn CRV+CVX from it, and allows FRAX to participate in the greater Curve ecosystem.
This is in contrast to pre-AMO stablecoin designs where their entire Curve TVL was rented by emitting large amounts of governance tokens always at a loss to the stablecoin protocol and fizzling out after a few short months. FRAX has created a sustainable, positive-sum flywheel.
Additionally, FRAX has brought a lot of revenue and efficiency gains for veCRV and vlCVX holders. For the first time in Curve history, there is a stablecoin protocol that can earn fees, yield, and sustainably distribute this back to veCRV+vlCVX holders through “bribes” (aka gauge incentives on Votium). FRAX has been distributing millions of of dollars every voting period back to the Curve+Convex community sustainably for many months.
This symbiotic system continues to bring liquidity to Curve and helps power a yield engine that has benefitted both FRAX, Curve, and Convex over competing AMMs like Uniswap, Balancer, etc. For example, FRAX’s pool alone subsidizes about 50% of all of 3Pool’s liquidity. Of the $1.5B TVL in Curve’s flagship pool, ~$700m of that demand is paid for by FRAX in our metapool.
Lastly, we also would like to bring even more value creation to the Curve ecosystem by proposing FRAX be whitelisted as veCRV stakers. One common, and understandable, criticism of FRAX has been that the protocol sells a majority of its CRV earned in the AMO to fund the next round of Votium incentives and market operations. This is not out of choice, but out of an inability to lock veCRV which we hope to change with this proposal.
We propose to lock the majority of CRV emissions earned from FRAXBP in a combination of veCRV and/or cvxCRV to further bind FRAX’s revenue generation to the underlying CRV cash flow that its liquidity is creating. This will make the FRAX stablecoin essentially “backed by” the underyling cash flows of the Curve ecosystem, aligning FRAX<>Curve incentives permanently & contributing to continuous CRV demand.
Deploy a FRAX-USDC pool named FRAXBP to Curve. Afterwards, the Frax team will propose a Curve DAO vote for a FRAXBP gauge. If and only if this gauge vote passes, then propose a vote to make FRAXBP a base pool & initiate a vote to whitelist Frax Protocol to stake veCRV.
This new FRAXBP Curve pool can become one of the pillars of Curve+Convex ecosystems, permanently locking CRV+CVX it earns. It also encourages other smaller stablecoin projects to pair with it. FRAX will make a commitment to return revenue generated from FRAXBP demand back to metapools paired with FRAXBP thus allowing us to contribute more cash flows back to the ecosystem. Essentially, FRAX will proportionally distribute revenue to any project that pairs with FBP equal to the demand for FBP in their metapool. For example, if Abracadabra creates MIM-FBP metapool with TVL of $500m, that is ~$250m of FBP growth it subsidizes. Because the Curve AMO can mint FRAX into the FRAXBP pool to balance this new demand, it will earn more CRV+CVX+fees due to the MIM-FBP metapool. FRAX can then distribute the revenue it generated back to Abracadabra through veCRV+vlCVX incentives the MIM-FBP pool in the next voting period essentially returning value back to any project that pairs with FBP proportional to its size. This would be a new flywheel and liquidity engine for stablecoin projects looking to sustainably keep liquidity in Curve.
This proposal requires a series of concrete steps that require individual onchain Curve DAO votes:
Step 1) Curve team launches FRAXBP pool (this cannot be done from the factory contracts as no pools with USDC can be created other than 3CRV metapools). Thus, FRAXBP pool has to be deployed by Curve core devs.
Step 2) Create on chain proposal for adding gauge to gauge controller for FRAXBP. Anyone can initiate this vote in a permissionless manner.
Step 3) Create an on chain vote to add FRAXBP as base pool.
Step 4) Create an on chain vote to whitelist FRAX to stake veCRV.
1.) A new base pool that is safe, highly reliable (only has FRAX & USDC) and positive sum commitment to every stakeholder in the ecosystem from Curve, Convex, to all potential projects that use this base pool.
2.) Permanently locking a vast majority of CRV and driving CRV demand over a long, continuous period.
3.) FRAX has shown to be a helpful, honest, transparent, and value creating participant of the Curve & greater DeFi space.
Not much reason that I can see to vote against it unless the community wishes to keep only 3CRV as the basepool or a limited number of metapools. But seeing as how there have been (and currently are) a number of base pool proposals floating around the governance forum, I think this should hopefully be appropriate to consider.
Pool coming soon after temp check/discussion