@Samkazemian So if the convex AMO effectively generates $1 of

collateral for every frax minted into it and then sold to a third party… can the excess protocol above CR be withdrawn from the pool and used for other purposes or is it integral to the functioning/programming of the AMO as currently designed?. understand there are trade offs regardless, but it seems our CR is currently way off as per @seba.the great thing is that if frax supply contracts, we don’t have to mint fxs, because the convex amo can easily rebuy with its current collateral, it doesn’t have to mint fxs. it seems the convex AMO was built extremely conservatively and we are no longer really at CR, or CR doesn’t mean the same thing as it did before convex AMO.it’s almost like v1 doesn’t matter any more, all Peg, frax minting, and burning go through convex AMO and v1 is just an emergency backstop. I would think considering the extreme stability and collateralization that CR would get driven down, why hasn’t it? Is it because v1 doesn’t really get used? Can we redesign convex AMO to free up capital for other purposes? Should we? @seba was suggesting it could be used for fxs burning or initial liquidity for fpi.

Only until recently did I realise the document is outdated and FRAX mint/burn/peg are mainly done through AMOs. I have a relevant quesntion on why FRAX minted through AMO don’t burn FXS as the v1 arb mint, what’s the rationale behind this design?

Because the profits that come from that AMO are used to collateralize new FRAX minted that buy back FXS with FXS1559. That's where the veFXS yield comes from. https://docs.frax.finance/amo/fxs1559

Does this describe this line of code https://github.com/FraxFinance/frax-solidity/blob/9885524fb275c253a790e02271031dc3d6deeebf/src/hardhat/contracts/Frax/FraxAMOMinter.sol#L244, or relate to AMO profit which mints FRAX with the excess collateral? I understand the latter (the FXS1559 bit from the doc explains well except the 50% burn part), but what about the former (the code) which, if I understand correclty, refers to FRAX minted into AMO to maintain peg? Why wouldn’t something like FXS.burn be there as well, just like how v1 does when FRAX gets minted

That line refers to the line of code which mints FRAX for AMO utilization. It’s not specifically for FXS1559. It’s general AMO usage.

Thanks for clarification. So my question is why wouldn’t that burn FXS? Becaues it mints FRAX into the market/reserve

Where would it get the FXS to burn? Like what’s the mechanism you’d propose to do that?

as in I was wondering if the statement “minting FRAX burns FXS” is always true. So I looked through the code and found that AMO minting doesn’t do that but v1 arb mint does. So I wonder why couldn’t the two align and both burn FXS

It is true only for the v1 minting/redeeming mechanism. The AMOs have a different mechanism where minting FRAX into a specific protocol (like Curve or Aave) will adjust the CR calculation based on the collatDollarBalance variable within each AMO. You'll see for example that the Convex AMO calculates the actual 3CRV collateral the AMO has claims to directly onchain and returns that amount in real time through a view function. It is dependent on the A factor of the pool itself and is extremely accurate. The profits from that AMO goes to then buying back and burning FXS (or in the current case giving it to veFXS holders because of the governance vote).

Sorry if I haven’t grasped the core idea behind minting FRAX for AMOs. As far as I understand, it can be a way to replace the v1 arb to a certain degree, so when FRAX > $1, the protocol mints FRAX into AMOs to rebalance and bring it back to peg. If this is correct, my confusion is why doesn’t it also burn FXS when it mints FRAX into the AMO pool. I understand that any excess profit/collateral from the AMO is used to buy back FXS and distribute to veFXS holders instead of burning as per the vote, but they are separate things aren’t they? When minting FRAX into AMO for rebalancing, the protocol can burn FXS. Again, I am not proposing anything or saying what is better. I am just trying to understand the design, and sorry for my poor english, I may sound like a troll 😅

You don’t sound like a troll at all. I’m happy you’re here asking questions.

"why doesn’t it also burn FXS when it mints FRAX into the AMO pool" as Sam explained AMO does not mint FRAX from $USDC+$FXS but something else. Also collateral stay exchange not in frax protocol , burn FXS for frax makes no sense at all.