Authors

Frax Core Team

Summary

This proposal seeks to launch Frax USD (frxUSD) and Staked Frax USD (sfrxUSD) as new components of the Frax Finance ecosystem. Frax USD represents a modernized, modular stablecoin aligned with Frax Finance’s vision of decentralization, stability, and usability. Staked Frax USD will function as the yield-bearing counterpart to Frax USD, offering users opportunities to earn consistent returns through integration with strategic partners. Additionally, the proposal aims to provide a structured upgrade pathway to transition current Frax stablecoin holders to the enhanced Frax USD framework.

Background and Motivation

Frax Finance has long been recognized as a leader in decentralized stablecoins, establishing itself as a trusted and innovative protocol. With over $600M in market cap, Frax's current stablecoin, FRAX, has been a pillar of the DeFi ecosystem. However, as the market evolves and competition intensifies, it is imperative to adapt and grow.

The transition from FRAX to frxUSD reflects Frax Finance's commitment to innovation and its readiness to meet the demands of a broader audience. Frax USD aligns itself with global familiarity and positions itself as a trusted and recognizable option for stable value storage and transactions.

The savings vault product, sFRAX, will seamlessly upgrade to sfrxUSD, continuing to offer unparalleled risk-adjusted yields. Frax Finance will leverage its extensive DeFi strategies and ecosystem flexibility to maintain its position as a leader in stablecoin yields.

Proposal Details

Key Features and Partnerships

Frax USD (frxUSD)

1. Direct Fiat Redemptions: frxUSD will enable users to seamlessly convert their holdings into fiat currency through a partnership with Paxos. This feature bridges the gap between DeFi and traditional finance, making frxUSD more accessible and practical for everyday use.
2. Federal Reserve Access: Frax Finance, through its strategic partner FinresPBC, is working to establish direct access to a US Federal Reserve Master Account (FMA). This would elevate frxUSD to become the most secure stablecoin available, offering unmatched trust and stability to its users.
3. T-Bill Integration: Leveraging FinresPBC's existing access to T-Bills, frxUSD will be further supported by robust collateral, reinforcing its reliability and expanding its use case.

Staked Frax USD (sfrxUSD)

1. Competitive Yields: sfrxUSD utilizes diverse DeFi strategies to provide consistently high yields, ensuring users can maximize their returns on staked assets.
2. Adaptability: The vault is designed to adjust dynamically to changing market conditions, ensuring that yield opportunities remain sustainable and aligned with Frax Finance’s goals.

Upgrade Pathway

To ensure a smooth and user-friendly transition to the updated frxUSD and sfrxUSD tokens, Frax Finance will implement the following upgrade pathway:

1. FRAX and sFRAX on Fraxtal: FRAX stablecoins and sFRAX yielding stablecoins held on Fraxtal will be upgraded to frxUSD and sfrxUSD seamlessly in a routine OP stack hard fork. The token addresses will remain identical and not change. No action is required by users holding FRAX and sFRAX tokens on Fraxtal.

2. FRAX and sFRAX on chains that are using LayerZero OFT tokens: FRAX stablecoins and sFRAX yielding stablecoins held on the following chains using LayerZero OFT tokens will be upgraded to frxUSD and sfrxUSD seamlessly through a contract upgrade. No action is required by users holding FRAX and sFRAX tokens on: Sei, Mode, and X Layer.

3. FRAX and sFRAX on Ethereum: FRAX stablecoins and sFRAX yielding stablecoins held on Ethereum will be allowed to upgrade to frxUSD and sfrxUSD 1-to-1 at any time through an upgrade contract. Both FRAX and sFRAX tokens will continue to function as normal indefinitely and retain their ability to upgrade 1-to-1 at any time in the future so all DeFi protocols integrating either legacy token can continue to function without disruption.

4. FRAX and sFRAX on chains that are using Frax Ferry: FRAX stablecoins and sFRAX yielding stablecoins held on the following chains using the Frax Ferry system will be allowed to upgrade to frxUSD and sfrxUSD 1-to-1 at any time through an upgrade contract. The chains are as follows: Arbitrum, BSC, Optimism, Avalanche, Polygon PoS, Polygon zkEVM, zkSync, and Tron. Both FRAX and sFRAX tokens will continue to function as normal indefinitely and retain their ability to upgrade 1-to-1 at any time in the future so all DeFi protocols integrating either legacy token can continue to function without disruption.

Important Notes

1. frxUSD Backing: All newly upgraded frxUSD stablecoins will be backed by stablecoin tokens (USDe, USDC, sDAI), CDPs in Fraxlend, and cash equivalent RWA assets from custodians.
2. Full Usability of Legacy Tokens: Both FRAX and sFRAX tokens will remain fully functional and usable across the Frax ecosystem and supported protocols and chains.
3. Update of token logo for Frax USD Stablecoins:

4. Support for Non-Specified Chains: For chains not specified in the upgrade pathway, the legacy FRAX and sFRAX tokens will continue to function as before. The team will provide solutions for their upgrades if needed, subject to governance approval.

Voting

• For: Approve the launch of Frax USD (frxUSD) and Staked Frax USD (sfrxUSD) and initiate the upgrade from FRAX and sFRAX.

• Against: Do nothing.