Increase the Collateral Fator of Frax to 60%

Summary

To increase the collateral factor of FRAX to 60%.

For

Increase the collateral factor of FRAX to 60%

Against

Do nothing, remain at 0%.

Motivation

FRAX is a stablecoin that has maintained a tight band around $1.00 since launch. To increase TVL on Cream and the utility of FRAX, the collateral factor of FRAX needs to be increased on Cream. Over time, I expect that FRAX will be treated similarly to fully collateralized stablecoins for collateral purposes. In the near term however, I believe that 60% is a reasonable starting point. For reference, each FRAX token is currently collateralized by $0.88 of USDC and interest bearing equivalents. This provides a significant margin of safety for Cream; in the event that the fractional algorithmic model suffers a crisis, there is more than enough collateral to fully cover Cream liabilities (88% collateral vs 60% CF on Cream). Increasing the CF should allow Cream to become an early hub of FRAX lending and borrowing.

Frax is also working on new products that incorporate Cream directly. Getting FRAX and FXS borrowing and lending on Cream is a first step towards realizing innovative products that could drive significant value to Cream. If you would like to see this happen, please engage with my proposal to add FXS to Cream here.

Background

More information about Frax can be found at https://frax.finance/ and https://docs.frax.finance/. The original proposal to list FRAX on Cream also has a lot of information, though FRAX has grown significantly since then.

FRAX had approximately $12.5m of volume in the past 24 hours on Uniswap.

Please let me know if you have any questions.

1 Like

Snapshot:

https://snapshot.org/#/cream-finance.eth/proposal/QmR4hEWEZbS5vZHBX8tsvWjXBKitVWtxVNACcHYUdBRfxc