[FIP -185] Add Sentiment FRAX Lending Pool to FXS gauge controller

Summary:

This proposal is a request to add Sentiment’s FRAX Lending Pool (LFRAX) to FXS gauge controller

Background:

Sentiment is an undercollateralized credit protocol on Arbitrum, allowing borrowers to access up to 5x capital on their collateral value. (Put up whitelisted collateral -> borrow assets from lending pools, up to 5x collateral value)

Borrowers are “confined” within a Sentiment “account”, but users have the ability to deploy borrowed capital within Sentiment-whitelisted yield strategies — such as a variety of Convex & Balancer LP tokens (FRAX/USDC for example), lending on Aave, wstETH, etc. (thus cannot run away with debt & account simply fully liquidated when health factor < 1.2 ((debt + collateral value)/debt owed). An example of a strategy users can deploy using Sentiment is:

1. Deposit 100 $FRAX as collateral
2. Borrow 500 $FRAX as debt
3. Deploy into FRAX/USDC Curve Pool
4. Earn 5x rewards APY from Curve pool and Gauge

Motivation:

While using Sentiment for various strategies has worked in an extremely robust fashion (over $8mm in volume since inception, with the majority coming from stablecoin borrowing → depositing in Convex stable LPs), it’s definitely been tougher to attract lenders due to inherent risk/yield misalignment at the moment, especially given lenders on Sentiment currently cannot borrow against their lent assets, and Sentiment currently does not have a protocol token, thus no direct liquidity mining. As such, we’re pursuing a veFXS gauge for our FRAX lending market (LFRAX) in order to bolster more liquidity (already have an OTC bribe set up). Having a Frax gauge can allow us to incentivize more liquidity, which would create more available FRAX to borrow at a lower interest rate than other stables on our platform. Borrowers will then be able to deposit FRAX in FRAXBP and other FRAX-native yield strategies we hope to integrate in the future. This could create net deeper FRAX liquidity on Arbitrum!

Proposal

We would live for Sentiment to have a veFXS gauge for our FRAX lending pool. We believe with Sentiment’s user demand for borrowing capital and attractive FRAX yield strategies that exist on Arbitrum a Frax gauge could increase FRAX liquidity and distribution on Arbitrum, while increasing Lending liquidity on Sentiment.

LFRAX Address = https://arbiscan.io/address/0x2E9963ae673A885b6bfeDa2f80132CE28b784C40

Voting:

• For: Add LFRAX to FXS gauge controller
• Against: Do nothing.