LMAP-1: Add frxUSD/sUSDS LP Market to Stake DAO frxUSD v2 Vault

Summary This Lending Market Adjustment Proposal (LMAP) seeks governance authorization to enable a new Morpho lending market within the Stake DAO frxUSD v2 curated vault, accepting the Stake DAO frxUSD/sUSDS LP token as collateral against frxUSD at a 94.5% Liquidation Loan-to-Value ratio (“LLTV”), with an initial absolute supply cap of 400,000 frxUSD and a 100% relative allocation within the vault.

Market ID: 0x87e3786114cbe9d3fcace0eb4099fa70a4b916039db4a29626cae89147180ca3

The collateral is the Stake DAO auto-compounding wrapper (0xdA36Ab65d5Af53763CAcD63AE7D441932032326f) of the Curve factory-stable-ng-343 pool pairing frxUSD with sUSDS, Sky Protocol’s yield-bearing savings token. Under Stake DAO’s three-layer risk methodology (Asset / Platform / Market), the loan asset of the vault is not separately scored as a collateral asset. Accordingly, the substantive due diligence under this methodology was conducted on sUSDS alone. This proposal does not opine on the standalone risk profile of frxUSD; participants should form their own view of frxUSD risk independently.

The proposal targets expanding the yield sources available to frxUSD lenders, while seeking to mitigate exposure through a conservatively-sized initial absolute cap, pending observation of market behaviour and pool growth.

Risk Assessment Summary The full risk evaluation is published in the Market Risk Evaluation worksheet: Market risk evaluation — frxUSD/sUSDS (Google Sheet)

For the avoidance of doubt, the version of the worksheet relevant to this proposal is the version published as at 15/05/2026; an immutable PDF snapshot of that version is available here. Subsequent changes to the worksheet do not amend this proposal.

Final grade: B Final internal grade under Stake DAO’s three-layer methodology: B. This grade is generated by Stake DAO’s internal framework and is not a credit rating, regulatory determination, audit certification, or warranty as to safety or suitability.

(see appendix for grade signification)

Layer Grade Rationale (worst pillar) Layer I — Asset (sUSDS) B Despite a high quality token and social environment, the asset rating was constrained by the combination of the ability to pause the contract via governance and the concentrated governance through a handful of delegates (UUPS-upgradeable proxy controlled by MCD_PAUSE_PROXY; two delegates controlling together c. 80% of the voting power). Layer II — Platforms (Curve + Stake DAO) S Both platforms hold the framework’s reference rating. Layer III — Market (frxUSD/sUSDS pool) A Pool health = 4 (Pool TVL $1.73M = 3, Vault cap / Pool diluted TVL = 19%); all other sub-pillars (Price feed, Underlying asset liquidity, Price fluctuation) score 5–6. Red flags 0 No single criterion scored D (1/6). Overall B Worst layer is Asset (Layer I). Key takeaways Strengths. sUSDS is one of the most liquid stablecoins on-chain. As of 13/05/2026, the underlying asset liquidity is exceptional: approximately $5.93B sUSDS supply, with approximately $4.08B of immediately accessible exit liquidity (LitePSM USDC POCKET of approximately $3.93B plus approximately $160M of USDS on DEXs), versus an initial vault cap of $400k (approximately 0.01% of total immediate liquidity as of that date).

Under prevailing liquidity conditions modelled as of 13/05/2026, simulated slippage for both 10% and 100% of the cap rounds to zero. Actual slippage in adverse or stressed market conditions may differ materially.

The Curve pool has a 15-month operational track record from the reference date (the ‘Lindy’ criterion under the framework; see Appendix A), an A factor of 1500, and concentration metrics within the thresholds defined under the framework as of 15/05/2026 (top-1 LP excluding POL = 11.6%; top-5 = 38.4%), with a healthy trading frequency (40 average daily trades, minimum 8 over the 30-day period ending on 13/05/2026).

Under the framework’s price-feed criterion, this market scores at the maximum tier (6) because, as an LP token, the oracle derives value with zero hops, and the path-quality and heartbeat sub-criteria each score 6.

Limiting factor. The grade is capped at B by the Asset Technical sub-pillar. Two structural elements drive this:

Pause / upgrade capability over the contracts. sUSDS is a UUPS-upgradeable proxy whose admin is the MCD_PAUSE_PROXY (governance-controlled with a 16–30h GSM Pause Delay). The Sky Protocol equivalent of “Mint/burn/freeze with timelock” puts Admin capabilities at 2/6, capping the Technical sub-pillar score. Upgradeability and pause functionality controlled by a governance-delayed admin are widely deployed features in production-grade smart-contract systems and are not, in themselves, indicia of vulnerability; under Stake DAO’s framework, however, they cap the Technical sub-pillar at the score noted.

Concentration of governance power among top delegates. The largest delegate (operating under the publicly disclosed name Cloaky V3) currently holds approximately 45% of effective voting power. Combined with the founder’s direct holdings and his identification as the top user of the LSEV2-SKY-A SKY-backed borrowing system funded by stUSDS, this creates a structural concentration that constrains the Decentralisation criterion to 5/6 and forms the dominant qualitative risk to monitor.

The Market layer (A) and Platform layer (S) ratings both clear the threshold for High Yield vault eligibility. Stake DAO frxUSD v2 is a High Yield vault, making the asset eligible for inclusion at a conservatively sized cap.

Proposed Market Parameters Parameter Value Vault Stake DAO frxUSD v2 0xCE13e39534082FCF8f13F6D84e6D95414D14271e Loan asset frxUSD (0xCAcd6fd266aF91b8AeD52aCCc382b4e165586E29) Collateral asset Stake DAO frxUSD/sUSDS LP wrapper (0xdA36Ab65d5Af53763CAcD63AE7D441932032326f) Underlying Curve pool 0x81A2612F6dEA269a6Dd1F6DeAb45C5424EE2c4b7 (factory-stable-ng-343) LLTV 94.5% Absolute supply cap (initial) 400,000 frxUSD Relative allocation cap in vault 100% Oracle setup LP-token oracle, leveraging the asymmetric path (collateral LP token = 0 hops; non-loan leg sUSDS priced via Chainlink Sky Savings Rate Oracle with CAPO protection) Market ID 0x87e3786114cbe9d3fcace0eb4099fa70a4b916039db4a29626cae89147180ca3 Monitoring & Cap-Adjustment Triggers Stake DAO will use commercially reasonable efforts to monitor the following triggers on an ongoing basis after market activation, subject to data availability and the continued operation of relevant on-chain and off-chain data sources. Stake DAO does not guarantee the continuous availability of monitoring or the timely detection of, or response to, any trigger event. Subject to the foregoing, the occurrence of a trigger event is intended to result in the submission of a re-evaluation LMAP to governance:

Pool TVL falls below $1M for 14 consecutive days. Pool average daily trades below 5 for 14 consecutive days. Any change or development in the Sky ecosystem that Stake DAO, acting reasonably, considers material to the risk profile of sUSDS, including by way of non-exhaustive example: material changes to the stUSDS Liquidation Ratio, the Surplus Buffer, the LSEV2-SKY-A debt ceiling, the upgradeability or governance of the sUSDS or USDS contracts, or to the LitePSM module. Sustained material deviation, downtime, or material change in the Chainlink Sky Savings Rate Oracle or its successor. Any enforcement action, regulatory order, or material public regulatory communication affecting frxUSD, sUSDS, USDS, the Sky Protocol, the Morpho protocol, the Curve protocol, or Stake DAO that Stake DAO, acting reasonably, considers material to the market. Any material change to the Stake DAO frxUSD/sUSDS LP wrapper, the underlying Curve pool, or the receiving vault. More broadly, market parameters will be continuously monitored and follow-up proposals can be published to increase or decrease the initial cap.

Vote For (Yes): Authorise to deploy on the Morpho protocol the frxUSD/sUSDS LP market on the parameters described in this proposal and to include such market in the Stake DAO frxUSD v2 vault allocation.

Against (No): Reject the activation of the market.

Abstain: Take no position on this proposal.