This Week in Frax - Aug 4, 2023

Frax v3 Proposed! Finres, Curve Exploit + Michael's loan, Spicy Drake, and more

Aug 4, 2023

Frax v3 Proposed!!!

This morning, we woke up to see Sam Kazemian had posted a proposal to onboard Finres as Frax’s first RWA partner. Huge news!

Finres would be an isolated non-profit that would serve one purpose, to hold US dollar assets for Frax in an FDIC insured IntraFi savings account and earn yield. Whoa…

This is the first official documentation about Finres or Frax v3 to be released.

Financial Reserves and Asset Exploration Inc (dba FinresPBC 55) will do the following

FinresPBC is not a for profit entity: its incorporation documents state that its public benefit mission is to bring traditional financial assets (colloquially known as “RWAs”) onchain for the benefit of the public. Thus, any yield generated from assets it holds on behalf of Frax Protocol will be returned to the protocol (minus costs/fees incurred to operate the public benefit business). Therefore, FinresPBC’s public mission is to provide the Frax Protocol access to safe cash-equivalent assets and near Fed rate yields for the benefit of all without seeking to make profit from this relationship or charge fees (other than to pay for minimum costs related to serving its mission). Additionally, FinresPBC’s mission is to continue expanding its traditional infrastructure including meeting requirements for a Federal Reserve Master Account (FMA) in the future.

So Finres will be the institution/company that acquires FMA access in the future… good to see some progress on this.

Finres won’t have any control over the protocol, it will just hold assets. It will be limited to 4 actions

1.) Hold US Dollar deposits in FDIC Insured IntraFi savings accounts & earn yield on such accounts.
2.) Mint/Redeem Paxos USDP stablecoins & earn yield.
3.) Mint/Redeem Circle USDC stablecoins & earn yield.
4.) Hold/Purchase/Sell United States Treasury Bills in segregated brokerage accounts & earn yield.

To note, Earn yield is written on every point above. Good things ahead for Frax v3.

CURVE CURVE CURVE

Starting on Sunday, July 30 at around 11:30 am news of the Curve hack hit the Frax main chat.

Anons immediately noticed that some of the Frax pools were using the older compiler version

However, the bug was isolated only to native ETH pairs AND the older compiler version.

Travis jumped in…

From then on out, it was a massive operation to remove liquidity and protect protocol assets. Read our summary from Monday.

Frax POL returned

All protocol owned liquidity was added back after the team conducted a full audit of the current Vyper compilers and reviewed the exploit postmortem. Liquidity was added back on Thursday throughout the day. No Frax assets were ever at risk.

Additionally anon Ernest asked if the exploit would cause any delays. Sam K answered “No pushing back anything.”

New Curve LP for fFRAX

We covered the launch of crvUSD’s newest pool paired with fFRAX.

CRV Acquisition

The Curve exploit was the least of Curve Founder Michael Egorov’s issues this week. His massive loan spread across 4 different lending protocols was the most intensely watched position this week.

On Monday night, the price of CRV was pushed lower by off-chain shorters, who had their eyes on his $.40 cent liquidation price. Near midnight, as CRV danced around $.50, Michael’s wallet started sending off chunks of CRV to various wallets controlled by Justin Sun, DCF God, and others in a series of OTC deals. Michael raised capital to pay down his debts, yet he has not stopped selling CRV.

Over the course of this week, Michael sold 63.5m CRV, raising $25.4m in stablecoins that he used to repay his loans. Notably, today Yearn acquired several million CRV and Aave is currently voting on a proposal to purchase $2m worth of CRV.

I asked main chat if we should be looking to acquire CRV through OTC channels and got an emoji seal of approval.

I immediately created a discussion FIP on the subject. Join in and leave comments on the CRV acquisition.

Drake gets spicy

Lots of new eyes of Fraxlend this week, and Twitter Frax-knowlarpers were abundant. Thankfully Drake popped in from his honeymoon to set the record straight.

Later in the week while Abracadabra was voting to change their interest rates, he gave some spicy takes. The proposal was eventually shot down, probably in part to Drake’s feedback.

FraxEtherRedemptionQueue goes live!!

Don’t want to pay a small amount of slippage on frxETH? Want to get exact withdrawals? Well the team is about to push a new redemption system live to assuage any fears about redemptions.

Travis writes:

TLDR: Alternate way to exit frxETH and get 1-to-1 for ETH

You deposit your frxETH and get an NFT receipt. Then you wait, based on what the current Beacon entry + exit queue length is. Protocol triggers a validator exit if needed. Then you can claim your ETH after that comes in (you still have to wait for fairness if enough leftover from a previous exit is there). If you want to cut that short and sell back into the Curve pool, you can redeem your NFT early for your frxETH back, minus a penalty. This is to prevent mass exit request griefing. Reason you have to wait to exit is you didn't when you entered and got frxETH -> sfrxETH and started earning yield immediately and didn't have to stand in line with the Beacon entry queue. You can also sell your NFT to somebody else if you want to avoid the early exit fee (e.g. you get a better deal), then they can wait.

https://etherscan.io/address/0x8d6467faa693bb1e1ff0cbbccee9c79d19740718#code

IndexCoop adds sfrxETH to their Diversified Staked ETH Index (dsETH)

Check out the new LSD index asset.

Are you ready to SHORT?

Two new governance proposals went live this week to add new Fraxlend markets for FRAX/WBTC and FRAX/WETH. This would allow traders to short both WETH and WBTC.

We’re really enjoying seeing a new diverse variety of collateral types be added to Fraxlend.