"Darkest Before Dawn" - FraxCheck #51

Sept 5, 2023
"Darkest Before Dawn" - FraxCheck #51

This week... I call this week the “Darkest Before Dawn” week. As the name suggests, this week we're deep in the darkness.


  1. FRAX // 746.7M (-7.4%)
  2. FRAX // $66M balance (-21.3%)
  3. frxETH // Binance staked ETH flipped frxETH

Frax Supply & Peg

Big moves these past two weeks.  We saw another large drawdown of 7.4%.  FRAX supply is now at 746.7M.  We've definitely seen better days but every stablecoin project needs to be able to scale up and down when it's needed.  On a less grim note, the peg is currently at $0.992.  Again, not great.  Not what we wanted but it's what we got.  Lastly, we have to review the balance sheet.  

Our Assets are $881.8M, Liabilities are $815.5M, and a Balance of $66.3M.  This represents a 21% drop in our Balance indicating that Assets dropped a lot more than Liabilities did.  Pain.  Let's move on to the Collateralization & Decentralization Ratios.

Collateralization & Decentralization Ratios

Collateralizaiton % remains fairly flat for the past few Frax Checks at 94.5%.  However, the Decentralization % has been bumping up to 26.6%.  


Slight drop in TVL for the FraxBP down to $438M.  In August, the pool facilitated 69M in trading volume, which is about 16% utilization rate.  Looking at other Frax-related curve pools, we see that FraxPP is steady at $129M but Frax3CRV dropped to a new low of $10M.  Combining all three pools, Frax still has about 2.7x the size of the native 3Pool.  

FrxETH supply and distribution

Now onto the crowd favorite, le frxETH. We rocking strong here with 257,659 frxETH supply, a 1.8% increase from two weeks ago — frankly one of the lowest growth rate we’ve seen.  But there's some new curve pools such as the frxETH/WETH and the frxETH/stETH pool showing up on the dashboard – about 2% and 1% of the supply, respectively.

FrxETH peg

Reminder, frxETH is still a stablecoin, just a stablecoin pegged to ETH instead of the dollar. In the markets, we swapped 3.5k frxETH for ETH via Curve and received an exchange rate of 0.9984, which is a very strong exchange rate. Arguably, one of the best exchange rates in the LSD landscape.  However the pool itself has an imbalance of 27.5% to 72.5%.  

Competitive landscape

We have a new challenger on the scene!  EigenLayer is now in 6th place with 0.85% market share and $161M TVL.  We're big fans of the EigenLayer.  Go check out our pod with the founder if you haven't already!

But for Frax, we are down.  Worse, we got flipped by Binance staked ETH. We not only lost 3.5% in market share but we're now 5th in the LSD game.  Over the last 30 days, we've only grown by 5% whereas our competitors grew by as much as 566% (EigenLayer).  

More concerning is that Lido is growing by 7%!  Since stETH is 73% of the market, that growth rate is a massive number.  Rocketpool also grew by nearly 7% and that was our closest competitor.  

Though fortunately, there is some hope.  We are still the highest yielding LSD with a 4.5% APY and on the charts, you see that we're actually still 44% better than rETH and 26% better than stETH on a 6-month time horizon.


We saw a flat week this week so nothing to report.


We also see some downtrend for Fraxlend as well with borrowing down to $59.3M, which is a 68% utilization rate – down 8% since two weeks ago).  We also saw a lot of liquidations that happened in August so folks are definitely taking risk off the table or at least taking leverage off.


Lastly, we have the final leg of the DeFi Trinity with FraxSwap. We like to call this the Dex that no one talks or knows about but it’s pushing out major volume relative to its size. There are only $63.8M TVL across all the pools yet it facilitated $57M in volume in August, a 89% utilization rate.

The most popular pair as you could guess is the FXS/FRAX on Ethereum, with volume ranging from as low as $5M to $15M per week.


Revenue, Expenses, Profit

Show me the money! Well, here it is.

For all the AMOs we have a total of $695.7M being put to work across all of DeFi.  There's still $503M in the Curve AMO, $105M in the Lending AMO, $52M in the Liquidity AMO, and $34M in the Investor AMO.  We are definitely in austerity measures right now and focusing on carefully deploying these AMO assets to work.

For the Curve/Convex AMO, we're working on building a new dune dashboard to do more accurate reporting so standby for that.  

The majority of the Lending AMO is in FraxLend and we had a great month.  Well great for the protocol but not so great for some users.  The AMO generated roughly $116k for the month of August through interest payments but the lion share came from the liquidations fees of $227k.  In total, the AMO generated $343k in August.

From FPI, the protocol generated $72k in profit for August!  The veFPis holders should be happy to see that.

Lastly, if we do some rough math we could estimate the runrate of frxETH at $1M for the year.  The math goes as such: 257,659 frxETH *6.5% APR *4% Fee Rate * Price of ETH.  Then dividing that by 12 to get the monthly figure of $83k per month.

Across these three revenue streams, Frax protocl generated $498k in August.  Note that we're not including the rewards nor the bribe expenses from the Curve/Convex AMO.  Stay tuned as we're working on a solution for that.

That is it for this week’s Frax Check #50! We hope you guys enjoyed this one and see you soon!


Not financial or tax advice. This article is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This post is not tax advice. Talk to your accountant. Do your own research.

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