FIP 44 - Hop AMO

Governance discussion thread: https://gov.frax.finance/t/fip-44-hop-amo/731

Author

Hameed

Summary

Create a Hop AMO to provide liquidity directly to the Hop protocol.

Background and Motivation

Hop (https://hop.exchange/) is a scalable rollup-to-rollup general token bridge built on Ethereum. Hop lets users to send tokens from one rollup to another almost immediately without having to wait for the rollup’s challenge period.

Ethereum’s Layer 2 (L2 - rollups that utilize the Ethereum main chain for security) will likely become synonymous with “Ethereum” in the not distant future. Currently the most feature rich rollups are Optimistic rollups, which have a seven day withdraw period for assets exiting L2. Hop offers near instant withdrawals for users exiting L2, which will be critical for the widespread adoption of L2 on Ethereum. Hop also offers the best trust assumptions of existing bridges.

As we plan the next phase of growth for Frax, FRAX should become one of the most liquid assets on L2. I propose that Frax create a Hop AMO to provide liquidity directly to Hop to help achieve this goal. Deployed liquidity will earn a yield on Hop, creating a win / win situation for Frax and Hop. If the vision of Hop is achieved, it will become a quasi public good that serves as the connective tissue between L1<>L2 and L2<>L2. Frax can help Hop realize this vision and onboard more users to L2, which also helps Ethereum scale.

Phases

In the near term, Frax can provide stablecoin liquidity (likely USDC / DAI in the short term) for both Hop AMMs and bonding (bonded capital enables fast withdrawals on Hop). We can authorize up to $20m of liquidity in this proposal which we can scale up to over time. If all goes well, I anticipate expanding the AMO significantly in a subsequent snapshot based on Hop demand. In this phase, any bonding will be done in cooperation with the Hop team and the optimal structure and sizing will be determined collaboratively. This is an opportunity for Frax to support Hop and Ethereum scaling by providing liquidity while also earning a return on protocol owned assets.

The first phase is the extent of this proposal. If all goes well with the AMO and the community is on-board with further collaboration, the next obvious step is to work to add Frax to Hop and supply FRAX (and perhaps FPI) liquidity to Hop. The AMO can deploy large amounts of Frax to make it the most liquid and cost-efficient asset to bridge Ethereum L1<>L2 and L2<>L2.

Proposal

Create a Hop AMO and authorize up to $20m of liquidity for use in the AMO.

For: Create the Hop AMO

Against: Do nothing