Authors

Frax Core Team

Summary

This proposal seeks to add two new asset types, ezETH and pzETH, to the assets that the frxETH Automated Market Operations (AMO) can hold and to allocate a portion of the frxETH AMO funds within the Fraxtal network. The goal is to enhance diversification, optimize returns, and support the growth of the Fraxtal network.

The proposed allocation caps for frxETH Curve AMO are:

Current Asset Allocation:

• ETH, WETH: Max 100% Min 50%
• wstETH, stETH: Max 50% Min 0%

Proposed Asset Allocation:

• ETH, WETH: Max 100% Min 0%
• wstETH, stETH: Max 100% Min 0%
• ezETH, pzETH: Max 20% Min 0%

This means the team can allocate up to the specified maximum percentages to the respective pools if deemed advantageous.

It is important to clarify that the min/max caps specified in this proposal are separate from the "withholding ratio." The caps are not intended to suggest that we are directing 100% of all ETH minted from frxETH to the AMO. The withholding ratio of ETH is a separate parameter. These max/min caps are put in place to govern the portion of the withheld ETH that will be allocated to the pools within the AMO. more information about the current frxETH balance sheet can be found in Frax Facts.

Background and Motivation

Automated Market Operations (AMO) make Frax Finance one of the most potent stablecoin protocols, creating maximum flexibility and opportunity without altering the base stability mechanism. In Frax Ethereum, most of our Protocol Owned Liquidity (POL) resides on Curve, so setting clear allocation caps is crucial for managing our liquidity effectively and transparently in frxETH Curve AMO.

Adding ezETH and pzETH to the portfolio offers significant value by providing another assets that aligns with our goals of optimizing returns and enhancing liquidity. Additionally, allocating a portion of the frxETH AMO within the Fraxtal ecosystem will support its growth and provide necessary liquidity, fostering innovation and activity on Fraxtal.

About ezETH

ezETH is a liquid restaking token representing a user’s restaked position at Renzo. Users can deposit native ETH or LSTs and receive ezETH. It is a reward-bearing token similar to cTokens, and the underlying restaking positions earn rewards reflected in the ezETH price. Rewards are expected in ETH, USDC, and Actively Validated Services (AVSs) reward tokens. This means the value of ezETH increases relative to the underlying LSTs as it earns more rewards in AVS tokens. Withdrawals take at least 7 days due to EigenLayer unstaking requirements, and transfers are facilitated through supplying liquidity or selling ezETH on Balancer.

About pzETH

pzETH is a liquid restaking token representing a user’s restaked position within the Symbiotic ecosystem. Users can deposit stETH, wstETH, wETH, or ETH to receive pzETH. It offers a higher yield than traditional ETH staking by securing Actively Validated Services (AVSs) through restaking. pzETH can be withdrawn from day one and is fully redeemable for the underlying restaked collateral.

Proposal Details

• Authorize Holding ezETH: Allow the frxETH AMO to hold ezETH as one of its asset types.
• Set Allocation Caps: Establish the following maximum and minimum allocation caps for the frxETH AMO:
  • ETH/WETH Pools: Max 100%, Min 0%
  • wstETH/stETH Pools: Max 100%, Min 0%
  • ezETH/pzETH Pools: Max 20%, Min 0%
• Deploy Assets on Fraxtal: Allocate a portion of the frxETH AMO to be deployed within the Fraxtal ecosystem. The specified allocation caps for ETH, WETH, wstETH, stETH, ezETH, and pzETH pools also apply to assets deployed in Fraxtal. For assets on Fraxtal, the Fraxtal native bridge will be used for WETH, stETH, and wstETH, while the Hyperlane bridge will be used for ezETH and pzETH.

Voting

• For: Authorize frxETH AMO to add ezETH and pzETH as assets and allocate funds in curve pools based on the mentioned max and min authorized asset allocations.
• Against: Do nothing.