Been thinking about Fraxlend. A challenge to a permissionless lending

Question

Been thinking about Fraxlend. A challenge to a permissionless lending

market is setting the correct parameters based on token liquidity, etc to ensure the protocol doesn’t take on bad debt. See for instance the recent SOL debacle.

What if Fraxlend only let you borrow against Frax-Token LP? Example: you provide the protocol with your token and a little bit of Frax. In an atomic transaction Fraxlend mints Frax, deposits Frax-Token into Fraxswap, and gives you Frax back. The max loan amount would be say 40% of the LP value. If the token prices drops then Frax can liquidate the entire LP and get all its Frax back.

Benefits:
Encourages use of fraxswap and pairing against Frax token.
The LP moves with the sqrt(token price) so it’s less volatile and can be leveraged more.

Drawbacks:
You become exposed to impermanent loss.

#cryptocurrency #english #frax

0

29.06.2022

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Andrew Hitchcock Автор вопроса

4 years locked. veMAXI (as a millionaire)
i think thats already a thing. NFT lending, using...

Yeah Maker let’s you do this too with various Uniswap v2 LPs. I thought it would be an interesting synergy for Frax swap/lend to encourage use of both. Leveraged liquidity provision for your tokens.

0

29.06.2022

Andrew Hitchcock Автор вопроса

Andrew Hitchcock
Yeah Maker let’s you do this too with various Unis...

But i think there is still risk to the protocol based on the exploit. Would be nice to find a way to encourage pairing against Frax instead of ETH.

0

29.06.2022

4 years locked. veMAXI (as a millionaire) · Accepted Answer

4 years locked. veMAXI (as a millionaire)

i think thats already a thing. NFT lending, using a LP token as an NFT and using the NFT as collateral

0

29.06.2022

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Been thinking about Fraxlend. A challenge to a permissionless lending

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