Sam Kazemian Explains Frax's Role in the Arbitrum Short Term Incentive Program

Samuel McCulloch
Samuel McCulloch
Oct 26, 2023
Sam Kazemian Explains Frax's Role in the Arbitrum Short Term Incentive Program

Two weeks ago, Frax was granted approval by the Arbitrum DAO to receive 1.5m ARB to use as incentives for its inaugural Short Term Incentives Program (STIP). These funds will serve to increase liquidity across the board for the largest L2 and bring new users in to use the network's apps and protocols.

Frax was 1 of 29 projects, from more than 100 applicants, to be selected to receive incentives. Notably, they were the only major Ethereum-based DeFi protocol to make the cut. Other heavyweights such as Lido, Maker, Aave, all failed to earn enough votes, or simply to file an application in the first place.

Flywheel interviewed Sam K about the Frax's role in the STIP program and what we should expect for the three month period.

Frax's Proposal Highlights:

  • Grant Request: Frax has asked for a grant of 1,500,000 ARB.
  • Grant Allocation: The grant aims to provide incentives to various Frax products like sfrxETH, frxETH, FRAX, and FPI. The plan is to utilize these incentives by January 31, 2024, targeting a total yield of 120% of the unsubsidized yield on each pool.
  • Objectives: Frax hopes to leverage its brand to attract new users and assets to Arbitrum. Given Frax's wide array of products and its solid reputation, it believes the increased TVL it will bring will be sticky. Another crucial objective is to diversify the Arbitrum stablecoin market, currently dominated by USDC and USDT, by introducing FRAX as a decentralized alternative.
  • KPIs: Key milestones include:
    • Tripling current volumes by bridging >10 million FRAX to Arbitrum in a 30-day period.
    • Tripling current levels by locking >60 million FRAX in DeFi smart contracts.
    • Achieving staking yields on Frax Ether on Arbitrum that surpass 480 ETH in 12 months.

According to Frax Facts, around 10m worth of assets are currently held on Arbitrum. This includes $6m worth of Frax, 1m for the Fraxlend AMO to support ARB, and other assets placed in various protocol's LPs.

The goal with the STIP program is to 10x the amount of Frax TVL on Arbitrum. Frax will be providing 500k ARB monthly, which is expecting to bring upwards of $60m+ in new liquidity for the network.

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