[Frax] [FIP-448] Wind Down the Frax Price Index (FPI) System

Quorum: 10% veCLEV

Authors

Frax Core Team

Summary

This proposal seeks to wind down the Frax Price Index (FPI) system and retire FPI as an active product within the Frax ecosystem. While FPI was an innovative attempt to create an inflation-indexed unit of account, changing market conditions, the emergence of higher-yield alternatives, and declining adoption have significantly reduced its utility. This proposal would allow Frax Finance to simplify the protocol and focus resources on products with stronger demand and strategic importance.

Background & Motivation

The Frax Price Index (FPI) was originally designed as an inflation-indexed unit of account that would track changes in consumer purchasing power through a CPI-based oracle system. At the time of launch, inflation was a major macroeconomic concern and short-term interest rates remained relatively low, making an inflation-tracking asset a compelling addition to the Frax ecosystem.

Since then, market conditions have changed significantly. The rise in Interest on Reserve Balances (IORB) and Treasury yields has enabled Frax Finance to develop products such as frxUSD and sfrxUSD that offer attractive real yields while maintaining a stable dollar denomination. As a result, much of the demand that FPI was designed to address has shifted toward these newer products.

At the same time, FPI adoption has steadily declined and usage remains limited relative to the broader Frax ecosystem. The product no longer serves a significant strategic role, and maintaining dedicated infrastructure, liquidity, governance attention, and oracle dependencies for a low-utilization system is no longer the most effective use of protocol resources.

This proposal seeks to wind down the FPI system in an orderly manner, allowing Frax Finance to simplify the protocol and focus resources on products with stronger adoption, clearer product-market fit, and greater long-term strategic value.

Proposal Details: Wind-Down and Balance Sheet Transition

• Upon approval of this proposal, the FPI reference price will be permanently frozen at its current value and will no longer track CPI updates.

• Minting of new FPI will be disabled.

• LayerZero support for FPI will be discontinued and Frax Ferry will become the main supported bridging mechanism for FPI.

• The existing Ethereum redemption infrastructure will remain available to support ongoing redemptions.

• The FPI balance sheet will be merged into the Legacy FRAX (LFRAX) balance sheet.

• All remaining FPI assets and liabilities will become part of the Legacy FRAX system.

• Any FPI that remains outstanding after the merger will become a liability of the Legacy FRAX balance sheet.

• Based on the current balance sheet, FPI is overcollateralized by approximately $2.74 million. Any excess assets remaining after satisfying outstanding obligations will accrue to the benefit of the Legacy FRAX balance sheet.

• Frax Facts balance sheets will be updated by the Frax Core Team to reflect the merger of the FPI and Legacy FRAX balance sheets and any resulting asset and liability transfers.

Voting

• For: Approve the orderly wind-down and retirement of the Frax Price Index (FPI) system and authorize the Frax Core Team to execute the transition.

• Against: Do nothing.