Authors

Frax Core Team

Summary

This proposal amends FIP-434 by adding several new sfrxUSD yield strategies to the approved AMO whitelist.

These additions expand sfrxUSD’s on-chain yield opportunities through new holdings, Curve liquidity pools, and Pendle market integrations while maintaining the conservative risk framework and governance-guided allocation rules established under FIP-434.

Background and Motivation

sfrxUSD was designed to serve as the on-chain benchmark USD yield stablecoin with allocations that are transparent, risk-managed, and governed by a minimum yield rule.

Since the passage of FIP-434, several new integrations have emerged that meet the same standards for transparency, security, and capital efficiency while expanding sfrxUSD’s role in stablecoin and short-duration yield markets.

Adding following strategies allows sfrxUSD to maintain competitive risk-adjusted returns, diversify income sources, and strengthen liquidity for the broader Frax stablecoin ecosystem.

Proposal Details

1. USDS and sUSDS Strategies

This section adds sfrxUSD exposure to Sky’s USDS and sUSDS stable assets through direct holdings and Curve liquidity pools.

• Cap: $10 million total (aggregate for all USDS/sUSDS strategies)

• Components:

  • Hold sUSDS directly as a short-duration yield-bearing asset.

  • Curve AMOs:

    • (s)USDS/frxUSD Pool (Ethereum)

    • (s)USDS/sfrxUSD Pool (Ethereum)

• Motivation:

  • Earn stable, low-risk on-chain yields through Sky’s USDS and sUSDS instruments.

  • Enhance sfrxUSD’s role as a benchmark yield stablecoin through high-quality, transparent collateral exposure.

• Notes:

  • Includes Booster vaults staking where yield maximization is possible.
  • Managed under existing sfrxUSD AMO rules and governance reporting.

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2. USDf Integration and Curve Pool

This section introduces USDf and the frxUSD/USDf Curve pool as the initial step in establishing a broader liquidity and partnership initiative with the USDf ecosystem.

• Cap: $3 million total allocation

• Components:

  • Curve AMO: frxUSD/USDf Pool (Ethereum)

• Motivation:

  • Expand frxUSD’s liquidity and initiate cooperation with Falcon Finance.

  • Build foundational liquidity for future joint markets, integrations, and incentive programs.

  • Represent the first phase of Frax’s long-term strategic partnership with Falcon Finance.

• Notes:

  • Allocations may be increased in future governance proposals once market depth and stability are established.

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3. Pendle Short-Maturity sfrxUSD Markets

This section authorizes sfrxUSD participation in Pendle markets to capture yields and help bootstrap sfrxUSD liquidity within Pendle’s ecosystem.

• Cap: $10 million total allocation

• Components:

  • Deploy sfrxUSD into Pendle markets with maturities of ≤ 3 months.
  • Stake resulting positions in the Pendle Gauge to capture boosted rewards.

• Motivation:

  • Kickstart sfrxUSD liquidity and activity on Pendle.
  • Broaden sfrxUSD’s utility in the fixed-income layer of DeFi.

• Notes:

  • The Frax Core Team will manage rollovers at maturity based on yield efficiency and liquidity conditions.
  • All positions remain within sfrxUSD’s AMO accounting and governance framework.

Voting

• For: Approve the addition of new sfrxUSD strategies.

• Against: Do nothing.