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Forum Link: https://forum.inverse.finance/t/proposal-to-add-sfrax-market-to-firm/341
This proposal seeks to add the sFRAX market to FiRM, Inverse Finance’s fixed-rate lending protocol. Yield-bearing stablecoins, such as sFRAX, represent an emerging strategy for a growing number of DeFi users. sFRAX adheres to a compliant ERC4626 token standard, enabling integration into various protocols, bridges, cross-chain applications, and more. Integrating sFRAX into FiRM will enable users to borrow leveraging a high collateral factor while concurrently receiving sFRAX interest, currently yielding appealing 14.5% APY.
sFRAX is an ERC4626 staking vault which, on a weekly basis, circulates a portion of the Frax protocol revenue denominated in FRAX, generated from governance approved AMOs/strategies and/or RWA strategies from off-chain sources, to stakers. Representing pro-rata deposits within the vault, sFRAX can be seamlessly withdrawn anytime. The sFRAX vault APY is based on a utilization function that can be set by the frxGov governance module and aims to at least match the interest on reserve balances (IORB) rate of the U.S. Federal Reserve, AKA the “risk-free rate” of the US Dollar. However, the yield can be much higher. The commitment of the sFRAX vault is to pursue this rate, although it does not guarantee adherence.
The integration of sFRAX presents a significant market opportunity for both FiRM and Inverse Finance. It allows us to tap into the growing user base and liquidity of Frax Finance, which has exhibited substantial on-chain liquidity and stability. Furthermore, no competitors have integrated sFRAX into their lending markets, presenting a first-mover advantage for FiRM and potentially attracting a new user base seeking to earn stable yields on their holdings.
A comprehensive risk assessment was conducted by the Risk Working Group (RWG) to evaluate the implications of integrating sFRAX into FiRM and led to recommendations for market deployment parameters, presented below. The risk assessment document can be accessed here. Key considerations include:
The Total Asset Score (TAS) of 8.97/10, derived from a meticulous evaluation, indicates the asset's strength and low-risk profile.
The integration of sFRAX into FiRM aligns with our objective of expanding our offerings and showcasing FiRM’s unique features. Overall, the RWG believes the strong governance and security measures in place by Frax Finance, alongside the promising market opportunity, make sFRAX a compelling addition to FiRM.
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Members allowed to make Drafts can sign the fact that they reviewed the Draft Proposal
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