This Week in Frax Oct 12, 2023

We cover the launch of sFRAX, Liquis liquid locker, Metronome Smart Farming, crvUSD + sFRAX, StableScarab's post, Aave adding FXS, and more.

Samuel McCulloch
Samuel McCulloch
Oct 13, 2023

Metronome to the Dome - Week 1

Flywheel is excited to announce that we will be covering Metronome on This Week in Frax over the next 6 weeks. We're going to take a look at Smart Farming, a looping system that makes it very simples to use leverage to increase yield using Metronome's synthetic assets.

In our video today we provide a walkthrough of how you can use Smart Farming to earn up to 28% yield on FRAX.

Partner Spotlight: Liquis

Liquis serves as a "Convex for Bunni," which operates on Uniswap acts as a liquid locker with extra incentives. Liquis provides a liquid version of oLIT, Bunni's Curve-like governance token. oLIT is like an option, it gives the right to buy LIT at a discount, which Liquis automates. 

Frax has a big showing on Liquis/Bunni, with frxETH and FRAX/USDC having 45% and 26% reward APR respectively. Additionally, the FRAX/alUSD is currently the largest pool, with an impressive 400k TVL and 23% APR.

sFRAX Launches, Earns $35m TVL in 24 hours.

While the sFRAX contract was deployed to Ethereum 9 days, it only went live on Wednesday when the Frax Investor Custodian wallet deposited 50,000 FRAX. The contract goes live as interest rates are at their highest in the past 15 years and the Frax stablecoin supply has contracted due to lack of "risk-free" yields.

Since the middle of 2022 when LUNA collapsed, FRAX has seen continuous drawdowns of its supply as DeFi yields decreased below the Fed Funds Rate. Investors moved their money into bonds and other safe have assets.

Now Frax is entering with sFRAX and it potentially is poised to compete at scale with Maker.

Notable depositors on Day 1 of rewards were C2tP, Sifu, FraxiMaxi, and Winthrope. As of writing this, 34,828,367 FRAX has been deposited and is earning a 7.77% yield. It probably won't be long before other notable DeFi investors move funds into the contract.

Crypto media even wrote about the launch, speaking to its potential impact on the market.

Curve Adds sFRAX LPs, crvUSD Borrowing Coming Soon

Curve Founder Michael dropped into the chat immediately after sFRAX was deployed and started cooking. In a few minutes he launched a crvUSD/sFRAX LP, which is the precursor to sFRAX being added as a collateral asset to borrow against.

The pool has no incentives yet, and TVL is low, but its a pool for future growth!

StableScarab Creates sFRAX Dashboard

Friend of Flywheel StableScarab made a great sFRAX dashboard to track the number of depositors, total TVL and yield generated by sFRAX. The chart is Up Only for now.

sFRAX gud, FXS Go Up

In the wake of sFRAX launching, FXS moved 10% higher to $5.80 on significant volumes. Matt made a handy Parsec dashboard to track flow of funds and see the impact sFRAX is having on FXS.

Alunara's Bull-Post

In the current doomloop environment I can't stop being super bullish on the upcoming combination of sFRAX + crvUSD. I'm trying to find some downsides to keep my hype in check. Basically, with sFRAX (and also sDAI and stUSDT) you can get about a 5% yield on stablecoins, mostly thanks to T-bills. That's not a big deal in itself, but when you leverage loop it 10x with the new crvUSD market, you're looking at ~62% APR just on stablecoins. It's kinda like the early 3crv cauldron on Abracadabra, but now the yield comes directly from the government instead of inflationary CRV emissions, and there's now also soft liquidations which means that even if FRAX/crvUSD takes a tiny dip to around 0.997, you won't face liquidation.

I haven't taken into account the crvUSD borrow & swapping fees yet. But let's say the market is somehow sorta efficient and fees match up with yield, we're still seeing a big boost in Curve and Frax TVL, which means a shit ton of more revenue. Right now, Curve has about $120m crvUSD borrowed, bringing in around $124k in weekly fees, which is 33% of its total $325k weekly fees. Now, if we assume $100m in sFRAX gets looped 10x, which makes borrow TVL around $1b, that's gonna rake in $1 million in weekly fees. Even if the market evens things out, this still makes me super bullish on Curve and Frax yields.

Now as people ape into this strategy the yield lags by about a week or so as it's being farmed by Frax's RWA custodian and later has to be deposited back into the ERC4626 vault, which then streams yields to stakers over the course of a week. This might slow down the TVL going up really fast, but it could still shoot up. So either way, even in a high interest rate environment I can see liquidity and volume pouring back into crypto this way. The biggest buzzkill I see is regulatory stuff, which I totally get. So, I’m hunting for other non-regulatory risks that could mess with my whole theory.

Alunara out with the big brain idea for sFRAX/crvUSD looping. We love the thought process around this idea and can't wait for sFRAX to be added as collateral to crvUSD. One thing to keep in mind though is that even if you loop 10x and achieve yield of 62%, the borrowing costs for crvUSD are variable and might negate the effects of this strategy. Looking forward to seeing it in action though.

Ouroboros Frax Analysis

Aave Votes to Add FXS to v3 Support

Aave is poised to add FXS to their v3 lending protocol in the next days after a successful governance vote. Up to 800k FXS will be available to deposit into the contract and 500k maximum will be available to borrow. It will have a debt cap of $4m and a maximum LTV of 35%.

FraxGod.eth Proposes Spanish Community Creation

The Spanish community came out bigly to support FraxGod after he posted his request in the governance forums.

Creation of Frax Finance Español 2024
🛤 Following Chainlink Labs’ Path with Chainlink en Español Following the same path as Chainlink Labs, with the creation a few months ago of Chainlink en Español, in a similar way I want to commit to creating and promoting the Frax Finance en Español Community. 🚀 Launching the First Crash Course…

Thor Raves About frxETH

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ZeroLiquid Integrates Frax

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