Authors

Frax Core Team

Summary

This proposal seeks to establish a Frax Borrow AMO authorized to use treasury assets or mint FRAX and borrow stable assets (USDC, USDT, USDe) with a total borrow cap of $50 million to pursue yield-generating strategies. The primary focus of the AMO will be on stable AMM liquidity provision and yield-bearing stable assets, with the objective of creating a new revenue stream for Frax Finance. This AMO will only engage in yield opportunities deemed economically profitable and will utilize tier-one lending and collateralized debt protocols for security.

Background and Motivation

As Frax Finance continues to evolve, generating sustainable yield opportunities through carefully managed AMOs has become essential for protocol growth. The Frax Borrow AMO will leverage both newly minted FRAX and treasury assets to increase protocol income by participating in stable AMM liquidity provision and investing in yield-bearing stable assets. This strategy ensures that Frax Finance can optimize returns while maintaining a strong risk management framework.

Using treasury assets in conjunction with FRAX minting allows for greater flexibility and scale, enabling the AMO to participate in a diverse range of stable liquidity pools and assets. This approach is in line with Frax Finance's commitment to secure, sustainable revenue generation.

Proposal Details

Frax Borrow AMO Objectives

1. Mint FRAX and Utilize Treasury Assets: The AMO will have the flexibility to mint FRAX or use designated treasury assets to borrow stablecoins and enhance liquidity, with a $50 million cap on the total borrowed amount.
2. Focus on Stable AMM Liquidity Provision: The Frax Borrow AMO will prioritize stable AMM liquidity pools, supporting pools with stable asset pairs to earn yield while adding liquidity to key markets.
3. Yield-Bearing Stable Assets: The AMO will also focus on yield-bearing stable assets, investing in secure protocols that offer consistent returns on stable assets.
4. Economic Profitability Requirement: Transactions and strategies pursued by the Frax Borrow AMO will be ensuring the borrowing costs are outweighed by the potential returns.
5. Use of Tier-One Protocols Only: The AMO will engage only with tier-one lending and CDP protocols (Compound, Aave, Llamalend, and Yei on Sei Network) to maintain high security and reduce risk exposure.

Voting

• For: Approve the establishment of the Frax Borrow AMO with a maximum $50 million borrow cap, authorization to mint FRAX, and the ability to use treasury assets for borrowing stables and engaging in yield-generating opportunities.

• Against: Do nothing.