DeFiDave sat down with Sam Kazemian at ETH Denver and had an expansive discussion on Frax and the future of the protocol. We broke down the highlights below.
The biggest event at ETH Denver was Sam's talk on Stablecoin Maximalism. In his view, everything is a stablecoin, a derivative of the original that must be maintained and developed. Frax is the premier stablecoin protocol and will continue to view the entire crypto ecosystem through the eyes of building stable products used across a variety of networks.
When thinking about money or stablecoins, the most important metric is the Monetary premium. This is the percentage of supply that is not earning yield and used for its own sake. For Frax, this is the amount of FrxETH not in either the Curve ETH/FrxETH LP or the sfrxETH vault. As more use cases emerge and various DeFi protocols and networks add support, the monetary premium should rise.
Frax is the Ultimate Power User in DeFi
Infrastructure helps expand the Frax vision and Sam K knows which teams are long termed aligned. The Curve ecosystem is one of the most powerful and Sam K is “very grateful” for their work and how they have allowed Frax to grow.
Curve gives Frax pricing power, a social consensus to ensure stablecoins remain pegged to each other. While Uni-V3 is highly efficient, stablecoins want the best mint redeem function and that is a smooth invariant, and that’s found at Curve. As a stablecoin maximalist Sam K loves this mint/redeem function provided by Curve.
On building a later stage project
We all love being degens, but at some point, when a protocol or idea gains enough traction, you have to become more conservative to preserve the original ideas and vision. Now that Frax is a billion dollar protocol, he wants to ensure the safety of it as many people’s lives depend on it. There’s a lot of new products in the Frax' ecosystem, but none of them break the core dynamics of the stablecoin.
BAMM is an oracle-less lending product that both builds liquidity and lets people borrow liquidity as the asset rises. Frax is building it to increase the FRAX supply. The structure is brand new and is not limited by a matching lenders and borrowers. Anyone can borrow whatever side they want at any rate. It’s a generalized lending facility that potentially will massively increase demand for FRAX.
It’s nearly impossible to build a completely decentralized application that never requires any upgrades or improvements after launch. Only a few projects like Uniswap, Liquity and Tornado Cash have been able to do this grand feat. In reality, a team of people control a multi-sig which executes on-chain actions. It’s not a perfect solution. Frax is working to fully remove any threat from external actors by developing a new governance module, that would allow the DAO to vote down any multi-sig actions over a 24 hour period. This would fully remove the multi-sig from its position of power, instituting a check from veFXS holders. Expect to see news about this in the second half of the year.