This Week in Frax - January 5, 2024

Samuel McCulloch
Samuel McCulloch
Jan 5, 2024

Yield of the Week - crvUSD/FRAX on Arbitrum

Our friends at Curve have just launched a new STIP incentivized LP pool on Arbitrum for crvUSD/FRAX. It's got healthy yields of 25% right now and potentially will be one of the biggest and best stable pools on Arbitrum.

If Sam K is bull posting, we know something big is brewing.

Fraxchain (Fraxtal), BAMM, FXB, sfrxETH v2... 2024 is going to be a big year.

"Honest" Frax Validators

A great new site popped up yesterday called

It tracks the slot times for all LSDs to track if participants are intentionally delaying their blocks to increase MEV rewards. 

According to the site “This tactic gives builders extra time to enhance their blocks, leading to more MEV for the validator. As a result, those entities enganging in such games might be able to offer higher APYs, attracting more stakers and users.”

In the pic above you can see a clear difference between Frax, Rocketpool and Lido. 

Frax plays zero timing games and has extremely low latency nodes.

Rocketpools distribution is affected by solo stakers with less than optimal latency and speed. 

Lido.. hmm very interesting distribution happening here. 

Timing games are most likely a net negative for the network. Researchers wrote in “Time is Money: Strategic Timing Games in Proof-of-Stake Protocols” the following: 

The implications of timing games are manifold and significant. An honest-but-rational participant who engages in timing games will outperform honest participants, leading to a centralization of stake over time. Hypothetically, this could culminate in a breach of consensus security. In a more practical sense, it may encourage individual stakers to delegate their stake to professional entities adept at these practices, negatively impacting the network’s decentralization. Moreover, timing games can overload the messaging system within a short time span, potentially causing cascading failures at the peer-to-peer layer, particularly within client systems.”

Flywheel is Open to All

Flywheel is an open community for creators to write about Frax. We welcome anyone who has a passion for content creation and would like to support the growth of the best stablecoin protocol. Reach out to us on our Telegram channel or DMs to connect!

FPIS merge

The big discussion this week in Telegram revolved around the-yet-to-be-proposed merger of FPIS into FXS and the implications for FPIS holders. While many are supportive of the merge, several people raised concerns about it.

TreeClimbingBear kicked off the discussion by questioning the necessity of the merger and highlighting concerns about centralization risks and potential dilution of FXS.

Timothy pointeds out that merging FPIS into FXS would unify governance and benefits to FXS, but acknowledges the uncertain market value exchange rate for FPIS holders.

Cameron recalled that FXS was intended as the central token for the Frax ecosystem and suggested that introducing another token could complicate the system. FPIS's introduction split value out of FXS, and keeping it long term might be detrimental.

TreeClimbingBear also noted that FPIS holders might not benefit fairly from the current market exchange rate, which is $1.10 as of writing. Mark11 and Too Orangey argued that FPIS holders should receive more value due to the "unrealized potential" of FPIS compared to FXS.

The big question at hand is what the rate for buyback will be. Most people in the chat thought that 20% on top of today's price would be adequate. However, other's thought that this was too high of a valuation.

Grills and Luke Skywalkel2 mention the growth of FPIS's balance sheet and the potential for a merger, especially in the context of the upcoming launch of Frax Chain. Overall, the chat reflects a debate on the value proposition for FPIS holders and concerns about the governance structure post-merger.

All in all, the consensus for moving forward is most likely aligned, but questions remain over reacquisition specifics.

Takeo had a good comment about how Convex might vote and suggested leaving FPIS as is.

Big Year for Frax in 2024

Fraxchain and the Ethereum Roadmap

Blackie asked in chat where Frax fit in the Ethereum roadmap as a hybrid zk-rollup.

A Brand New DA Solution for Fraxchain?

WL Crypto asked Sam K about Fraxchain's modular rollup architecture, and asked about what DA it would use. Sam K's response was surprising... he said that it would use an "outside" solution that remained unnamed.

Fraxchain Points Idea

frxETH to be Added to Eigenlayer

Arthur's New Stablecoin

This past week Arthur Hayes dumped his FXS, raising questions in the community about his views on stablecoins. Arthur has publicly funded and supported Ethena, a new stablecoin that uses CEX perp DEX's to create delta-neutral positions agains stETH.

Sam K likes Ethena though, its design is novel and allows for a new type of revenue to incentive growth. Ethena passes back the yield earned from funding rates to its holders, and is currently offering 24% for holding USDe.

Guy Young, founder of Ethena, dropped into the Frax chat to offer his views on the discussion and to open pathways for future partnership with Frax.


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