[FIP - 443] sfrxUSD New Strategies: Aave v4 & Morpho Vault Integrations

Authors

Frax Core Team

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Summary

This proposal builds on FIP-434 by adding new lending and vault-based AMO strategies for sfrxUSD. The objective is to expand frxUSD deployment across major lending infrastructure and curated vault strategies while maintaining strict adherence to the sfrxUSD risk framework and minimum yield rule.

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Background and Motivation

Under FIP-434, sfrxUSD established a structured framework for allocating capital across AMO strategies with clear caps, risk constraints, and a minimum yield requirement. Since then, lending infrastructure has evolved significantly, particularly with the introduction of Aave v4’s hub-and-spoke architecture and the growth of curated vault layers on Morpho.

Aave v4 represents a next-generation lending system designed to unify liquidity across multiple markets while enabling specialized risk environments. Ensuring frxUSD is present across these hubs is critical to maintaining its position as a core borrowable stablecoin.

In parallel, Morpho vaults have emerged as a dominant primitive for curated credit allocation. Different curators (e.g., StakeDAO, Steakhouse, AlphaPing) provide distinct risk-return profiles, allowing sfrxUSD to diversify exposure across multiple lending strategies without relying on a single venue.

This proposal formalizes sfrxUSD participation in these systems within governance-approved limits.

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Proposal Details

1. Aave v4 Lending AMO

• Strategy: Deposit frxUSD into Aave v4 markets

• Cap: $20M total across all hubs

• Chain: Ethereum

• Link: Aave v4

Scope

Deploy frxUSD across Aave v4 architecture, including:

• Core Hub (Main Spoke and relevant spokes)

• Prime Hub (Bluechip Spoke)

Motivation

• Position frxUSD as a core borrowable stablecoin in Aave v4 from day 1

• Capture lending yield

• Increase systemic relevance of frxUSD in DeFi credit markets

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2. Morpho StakeDAO Vault AMO

• Strategy: Deposit frxUSD into StakeDAO-managed Morpho vault

• Cap: $2M

• Chain: Ethereum

• Link: StakeDAO frxUSD v2

Motivation

• Expand frxUSD presence within aggregated lending flows

• Support frxUSD Peg-Keeper program

• Diversify yield sources

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3. Morpho Steakhouse Prime Vault AMO

• Strategy: Deposit frxUSD into Steakhouse Prime Morpho vault

• Cap: $5M

• Chain: Ethereum

• Link: Steakhouse Prime frxUSD

Motivation

• Allocate capital to institutional-grade, risk-managed strategies

• Leverage Steakhouse’s conservative allocation framework

• Strengthen exposure to high-quality credit markets

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4. Morpho AlphaPing Vault AMO

• Strategy: Deposit frxUSD into AlphaPing Morpho vault

• Cap: $500k

• Chain: Ethereum

• Link: Alpha Frax USD Enhanced V2

Motivation

• Explore higher-yield, actively managed strategies

• Provide optionality for yield enhancement

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Risk Framework

All strategies are subject to the constraints defined in FIP-434:

• Minimum Yield Rule: Allocations must exceed the current sfrxUSD benchmark yield on a sustained basis
• Protocol Requirements: All venues are established, high-liquidity platforms (Aave, Morpho ecosystem)
• Caps: Initial allocations are capped and may only be increased via governance
• Discretionary Allocation: Frax Core Team retains flexibility to adjust allocations based on market conditions

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Risk Considerations

• Smart contract risk across Aave v4 and Morpho vault infrastructure

• Curator risk (StakeDAO, Steakhouse, AlphaPing)

• Liquidity and utilization risk in lending markets

All allocations remain actively managed and can be reduced or withdrawn as needed.

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Voting

• For: Approve the addition of Aave v4 and Morpho vault strategies to the sfrxUSD AMO framework with the specified caps.

• Against: Do nothing.