Proposal to Add FRAX as Deposit Asset

Proposals

samkazemian February 16, 2021, 2:40am #1

Abstract

Stablecoins are one of the largest categories in both market share and opportunity in crypto. USDT currently sits #3 in market cap with nearly $40 billion and growing with USDC and DAI catching up. As users look for a stable unit of account and medium of exchange to transact, many will also prioritize an uncensorable stablecoin that allows users to transact their stablecoins in privacy. Already stablecoins such as USDT and USDC are listed on Tornado Cash yet there will always be an inherent risk that they will be forced to blacklist the protocol’s smart contracts. We propose adding FRAX, the first fractional-algorithmic stablecoin protocol. FRAX is currently the only algorithmic stablecoin which has kept a very tight peg (see below). As the founder, I can also commit to having our project build a “Frax Tornado Mint” feature within the Frax protocol so that minted FRAX stablecoins are directly minted into the Tornado anonymity set. This would exponentially expand the anonymity guarantees of FRAX and make Tornado our premier anonymity partner.

FRAX 30d price. Source: app.frax.finance

Proposal

Add FRAX to the list of supported tokens that users can choose to deposit on Tornado Cash.
Add 1000 FRAX and 100000 FRAX deposits as starting points. No other deposit size should be added if this proposal is accepted. These 2 deposit amounts should capture the entire market of FRAX from small payments to large movement of funds without fracturing anonymity sets into smaller deposit sizes. More could be added later if demand justifies.
The Frax Protocol core team (including myself) will commit to building a “Frax Tornado Minter” function into the protocol level which would allow a user to mint FRAX which is immediately deposited into Tornado, the note passed to the user on the front end, and the FRAX withdrawable at a later time. This would mean that FRAX expansions can directly fuse into Tornado anonymity sets, helping expand the privacy guarantees of FRAX and also growing Tornado’s volume proportionally to FRAX’s expansion. We currently have over 80m FRAX in circulation with 500,000 to 1m FRAX minted per day during growth phases.

Background

FRAX is the first partially-collateralized stablecoin implementation on Ethereum which aims to provide a highly scalable, decentralized, algorithmic currency. The FRAX protocol is based on 2 tokens: FRAX as a stablecoin and FXS as a seigniorage-governance token. FRAX is backed by collateral in proportion to Collateral Ratio (CR). When the price of FRAX is above $1 the CR decreases and when FRAX is below $1 vice versa which leads to a market set collateral ratio that is as capital efficient as possible. FRAX is always mintable or redeemable for $1 equivalent. For more technical breadth, please see docs.frax.finance.

Since its inception, the FRAX model has proven to be resilient and has always maintained its peg of $1. What makes FRAX unique compared to other stablecoin models is that it is robust enough to expand and contract with demand, keep a tight peg, and the first protocol to not be fully collateralized while doing so. This is opposed to USDT & USDC which is vulnerable to custodial risk and DAI which is dependent on the over-collateralization of assets.

Benefits

Allows users to execute transactions of a successfully working algorithmic stablecoin that is based on a fractional-algorithmic model
Unlike USDT or USDC, there is no central authority that can directly censor FRAX transactions or blacklist contracts.
FRAX team is a highly pro-cypherpunk, veteran team that has deep beliefs about privacy and anonymity and is looking for a highly technical privacy-solution project like Tornado to collaborate with.
FRAX team is willing to build a “FRAX Tornado Minter” into the protocol to mix expansions of FRAX directly into the anonymity set.
Expose Tornado Cash to a new community of users who otherwise would not have used the protocol
FRAX community has expressed interest in incentivizing Tornado deposits with their FXS governance token. After implementation of the Frax Tornado Mint feature, it would be an elegant privacy preserving solution to incentivize using the Tornado minter with FXS tokens. The minting user would remain private while also being rewarded for adding to the anonymity set.
First step in establishing a relationship between FRAX and TORN, paving the way for future collaborative activities that have yet to be conceived of

Thanks to Tornado & Frax community member Dave Liebowitz (https://twitter.com/davesaidthat_) for help preparing this proposal.

Specifications

Website: https://frax.finance/
Dashboard: https://app.frax.finance/
Docs: https://docs.frax.finance/
Staking and Lock-up data: Frax Finance
Contract address: 0x853d955aCEf822Db058eb8505911ED77F175b99e
Github: GitHub - FraxFinance/frax-solidity: Solidity implementation of the Frax Protocol

Right now there’s basically only DAI as a privacy-friendly stablecoin, however Maker DAO has had its issues in the past and as someone pointed out above they added centralized collateral for DAI.
Since FRAX is inherently different from DAI (most importantly for its algorithmic nature), I personally see no harm in an integration with Tornado Cash.
Team might look fresh but Sam Kamezian the founder isn’t new to the panorama (cofounded Everipedia and the Prediqt network).

Therefore, I support the idea of adding FRAX as a deposit asset.

1 Like

ethdev February 16, 2021, 8:52pm #8

I don’t particularly care much about FRAX, but if market demand exists for a tornado pool for any token, then that’s really all that should matter to TORN holders

That said, I am skeptical of FRAX because I’m not personally familiar with its protocol. I wouldn’t feel comfortable or confident voting on a proposal to add it without actually having some kind of provable market demand available as a data point. Bc after all, there is no way to know on a forum what is noise and what is signal. Who is a shill and who is a real user

I propose a trustless, market based approach to solve this problem:

2 Likes

franzhine February 16, 2021, 9:35pm #9

@ethdev
+1
a meta-protocol with pre-commitment pools seems like a great idea to screen out non-legit users.

2 Likes

samkazemian February 16, 2021, 10:12pm #10

It’s good to get various opinions, especially critiques so we can have good feedback to improve our proposal and address any concerns. It would help more if you actually looked into FRAX a bit more before having such a strong negative opinion because you’ve gotten some factual details wrong.

the devs aren’t known

First of all, FRAX is the only algo stablecoin with a non-anon team (unless you count AMPL/rebase coins). ESD, Basis Cash, etc are all anonymous. We are not. We are known in the community and most of us have been veterans in crypto for years. So, I’m not sure what you mean by the devs aren’t known. We’re the most known algo stablecoin in terms of being transparent and having a public team and point of contact with.

Why would anyone in their right mind use this instead of DAI

You can ask the $80m+ FRAX minted and being used in circulation that question. Growing numbers don’t lie. A lot of FRAX is used for farming right now but integrations like lending/borrowing on CREAM, SushiSwap’s Onsen menu, etc are happening every week. FRAX is quickly becoming the algo stablecoin to watch in the space. Hard to argue about that. Yes, we are very new but in the 2 months we’ve been out, we have kept our peg as tight as DAI. We aren’t saying to include FRAX in place of DAI. Of course DAI has deeper integrations in all of defi and a much larger supply. But FRAX is quickly showing itself to be a more interesting, more capital efficient, just as stable, and innovative protocol than Maker. Like we said in the propsoal, we are very interested in minting FRAX expansions directly into the Tornado anonymity pool to increase the set size with FRAX supply increases. This is something novel and new which Maker won’t be doing. As a newer, more nimble team, we are interested in innovating together and pushing the boundaries of stablecoin privacy which we’re very excited about. To us, privacy is extremely important. As you can tell, I’m a big fan of Tornado, taking the time to respond to everything here in our proposal.

Why the hell did you pick the scammiest domain name out there. The rug rate on .finance domain has to be over 70%

Do you live under a rock? Go tell this to compound.finance yearn.finance etc. I think you should do some more research and we’d be more than happy to take legitimate feedback to improve our proposal, but random troll comments like this isn’t worth anyone’s time to take seriously.

1 Like

DeFiDave February 16, 2021, 11:01pm #11

Frax Tornado Mint is an awesome idea that increases the utility and demand of both projects. I’m proud to have helped out with this proposal and support it 100%.

2 Likes

samkazemian February 16, 2021, 11:32pm #12

This is actually a pretty neat idea and as a fan of Tornado (entirely separate from Frax), I think it’s a great addition to the protocol. It sort of reminds me of Curve’s metapools that combine the 3Pool with a metapool.

This is like the Tornado version of a Curve metapool. In any case, if this metapool idea is adopted, we’d love to support our FRAX metapool and are confident it can definitely get a sizable amount of precommitments. Our community is very privacy oriented just like you guys. That’s why I think there’s genuine interest here.

2 Likes

ethdev February 17, 2021, 12:55am #13

Thank you

Great to hear your support. Perhaps FRAX can be the first token to exercise the proposal if/when it is passed then

I’m continuing to flesh out the (pre)commitment pool protocol here:

Any and all contributions/feedback are welcomed

3 Likes