MIP - Listing FRAX on Morpho-AaveV2

Morpho Optimizer General
2

Thank you @Nader.Frax for your post!

Morpho Labs is in favor of this proposal.

Before listing any asset we follow this asset listing checklist. This is what we applied to assess whether listing FRAX on Morpho should be considered. Below, is a brief summary of our research.

Smart contracts study

To conduct our research, we referred to FRAX’s documentation and checked the different asset implementations that the Morpho protocol would interact with:

The FRAX token conforms well to the ERC20 standard and both Aave token’s implementations are standard aToken and variable debt tokens implemented by Aave which would greatly work with Morpho’s Implementation.

FRAX smart contracts have been audited several times by Trail Of Bits, a leading audit company that also audited Morpho, and all high-severity issues have been resolved. No hacks have been reported yet and a bug bounty of 50K FRAX is available for white hack hackers.

Frax Finance is mostly using the USDC asset as collateral and also uses different well-known and secure protocols (such as Aave, Compound, Yearn) to generate yields on top.

Data study

FRAX has kept a steady peg against USD; the price has deviated less than $0.03 USD since in January 2021.

Governance discussions

We also read the governance discussion about FRAX listing on Aave V2 Mainnet, which are well-documented resource:

The FRAX asset has been listed on Aave V2 to be supplied and borrowed but cannot be used as collateral. It would be the same on Morpho.

Opportunities

  • Frax Finance recently released FraxLend with competitive borrowing rates (mostly < 0.5%) compared to the Aave market. Yet, rates have not been well arbitraged. Eg. Borrowing on FraxLend to supply to Aave where the supply rate is around 1%. Thanks to Morpho, the arbitrage opportunity could be amplified!

  • FRAX lenders and borrowers would benefit from $MORPHO rewards distributed to Morpho users.

    N.B.:

    • The opportunity for FraxLend arbitragers becomes even stronger.
    • If the community decides to adopt the Morpho Gauges, it would enable voters to distribute additional tokens to FRAX users.
    • The $MORPHO distribution on the FRAX market would start at the epoch following the listing.

  • Frax has conducted AMOs on different protocols in the past. This could be done also on Morpho. For example, the DAO could accumulate $MORPHO tokens to vote in gauges (if the MIP is adopted) and grow its ecosystem!

  • Morpho positions could be listed later on in the Frax’s gauges system!

We would be happy to discuss further the topics mentioned above with the Frax community if the proposal goes through.

Next step

Morpho Labs is supporting the listing FRAX on Morpho. We will wait a few more days before creating a snapshot vote for the community to vote.

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