Summary:
Propose that Olympus trial to deploy 333,333 (this amount has been edited up from 100,000) excess FRAX from the treasury to the FRAX pool in Convex Finance in order to accumulate trading fees, CRV tokens and CVX tokens.

Background:
The purpose of this proposal is to improve treasury capital efficiency, where our stablecoin assets are earning trading fees, CVX tokens and CRV tokens. Convex is a protocol that is allows for automated management of CRV pool assets. Convex does not charge deposit or withdrawal fees - it takes 16% of the CRV rewards which are distributed to Convex stakeholders. Convex currently has $3.8 in TVL. I consider Curve deposit directly is not appropriate because in order for smart contract wallets to receive CRV rewards directly from Curve those wallets have to be whitelisted by a Curve governance vote. Such votes have not been well received by Curve governance where solutions like Convex exist. (For a background of why we would not deposit directly to Curve and pursue our own gauges please see this thread which presented an immovable roadblock to the FRAX protocol from pursuing just that strategy). This proposal has been discussed on #Goverance in the discord and in the General section of this forum. The original number of 500,000 FRAX was reduced to 333,333 FRAX following risk concerns raised in discussion.

Abstract:
Olympus has about 3.6 million FRAX sitting idle in the treasury when it could be earning interest. Currently the Convex FRAX pool is paying 0.41% apr in trading fees, 7.82% apr in CRV tokens and 5.91% apr in CVX tokens - this is a substantial amount of value not currently being captured by Olympus. This proposal seeks to trial a deposit of 333,333 excess treasury FRAX into the Convex FRAX pool in order to capture some of this value for Olympus. The sum of 333,333 represents about 2.1% of our current FRAX holdings. In terms of risk, given FRAX itself has deposited 72 million FRAX into Convex through an AMO, we are to some extent already holding the protocol risk for the stack of Frax, Convex and Curve. I propose that the treasury retain the CRV and CVX token rewards. In that circumstance it is reasonable and appropriate for us to pursue a low risk trial strategy to collect interest available to us through our FRAX holdings. The amount can be raised above 333,333 by a further OIP when and if the community is comfortable in taking on more risk in the future.

Motivation:
This would allow us collect CRV tokens, CVX tokens and trading fees on a portion of our FRAX holdings.

Voting period: voting period will be for 5 days from the date of scattershot voting commencement.

For:
Deploy 333,333 FRAX to the Convex FRAX pool.

Against:
Do not deploy FRAX to the Convex FRAX pool at this time.

Do you support this proposal?

Could not agree more. Should 100% be done.

Like I said in your draft proposal- we already hold a significant % of Frax total supply + a significant amount of Frax is already in convex. I personally believe it’s more a risk to not pursue depositing a portion of our Frax holdings into convex.

This an effective yet conservative use of the treasuries funds! +3

I support the allocation proposed and pursuing yield on our Frax holdings! We now hold 5.38M FRAX so the amount is actually less than 2% now. Great idea Mark!

I 100% support the allocation. Howeever, I do wonder if we might prefer to stake FRAX in Curve directly instead of with Convex. While this would have the obvious downside of having to allocate DAO resources to managing the claiming of CRV rewards and manually boosting the FRAX pool, it would also enable the DAO to participate in CRV governance.

I think we have all seen how beneficial our relationship with Sushi has been in terms of boosted Sushi rewards. If we take the long view, we could pursue a similar relationship with Curve and keep in mind that OHM could eventually be part of a Curve v2 pool like Tricrypto, and it will be beneficial to have a voice in that discussion when the time comes.

Again, I am 100% in favor of allocating FRAX to stake on Curve, but I think its worth considering managing the position ourselves directly instead of through Convex.

    voted no because 100,000 is not worth the trouble and won't move the needle in a meaningful way. would consider 500k or even more worthy

      psq Thanks for the feedback - it is intended as a trial and to ramp up in a cpl of weeks as people become comfortable. We can still also increase this initial amount as a number of people have provided similar feedback on the number being low.

      • psq replied to this.

          Mark11 testing sounds like a good approach, missed that

            Bento Thanks for the feedback - I would say there are a few things which make Convex preferable - 1) Convex is complimentary to Curve we receive CRV rewards from our Convex staking 2) we wouldn't receive Convex rewards with Curve direct which is a big chunk of the apy value and 3) Curve rewards direct with Curve require whitelisting for smart wallets by a Curve governance vote which they have shown resistance to before when things like Convex exist - I tried to explain this in the proposal it is a bit technical but:

            I consider Curve deposit directly is not appropriate because in order for smart contract wallets to receive CRV rewards directly from Curve those wallets have to be whitelisted by a Curve governance vote. Such votes have not been well received by Curve governance where solutions like Convex exist. (For a background of why we would not deposit directly to Curve and pursue our own gauges please see this thread which presented an immovable roadblock to the FRAX protocol from pursuing just that strategy).

              👍 in favor of putting our treasury assets to work by taking low-risk steps. If you're eventually putting up a vote, might as well gauge here what the community is comfortable with. I think up to 500K FRAX makes sense but would be most comfortable with 330K FRAX.

                unbanksy33 or 333,333 FRAX🙌 - Alright everyone following further feedback here and via dm I propose the increase the amount when it goes to snapshot to the memeable 330,000

                    Mark11 I think 333,333 FRAX would be a better/memeable number that we can market as well.

                    Voted yes.

                      Unless I'm mistaken, excess Frax is used to mint Staking Rewards. I believe aDAI is still considered part of our Runway as it's just yield bearing DAI at 1%. However, I'm not sure we should considered Convex Staked fraxCrv as part of our Runway. Trading Fees are paid in Frax so you can argue that it extends runway, but those fees are only 0.45% and Convex takes 16% of that in fees so we're left with 0.38% in Frax denominated trading fees. Hardly enough to justify the risks and, in my opinion, not enough to justify being counted towards Excess Reserves. What this misses is the CVX, CRV, and FXS rewards we would receive, but Stakers wouldn't see those benefits directly as they increase Intrinsic Value and not Runway.

                      All that said, I would be For this proposal with some modifications. I don't think we should consider any Frax we use for this proposal as part of Excess Reserves, which means we'd be spending our Runway. If people agree with me on that then we should make that clear in this proposal. I also think we should highlight that this would gain us Frax Governance Token FXS, which would give us more of a voice in governance and/or could be staked in Frax to earn further yield.

                        JFry4 i agree if convex is getting 16 percent and so we are left with a minuscule percentage of the trading fees. If its possible to talk to convex to have them change it to 15 or 14 that I think would make it more compelling. Not sure if its possible

                            Hi jdp630 - Convex's 16% is already accounted for in the quoted numbers in the proposal

                                Mark11 changed the title to OIP-14 - Deploy 333,333 excess treasury FRAX to Convex Finance .

                                JFry4

                                This is a really good take. This could be optically uncomfortable to do (spending runway). The added FXS and therefore voting power in Frax is a nice benefit not to be overlooked, however.

                                    Convex is barely three-month old and I don't feel comfortable in depositing FRAX there. The argument that Frax Finance has deposited 72 million into Convex justifies us doing so does not convince me. If an exploit were to happen which resulted in a loss of fund, FRAX might still be able to hold its peg. Frax FInance would incur a loss in this situation, but Olympus wouldn't if we didn't deposit FRAX into Convex in the first place.

                                    We saw what happened to the token price and TVL of projects such as Alpha Homora and Alchemix when an exploit occurred. I don't think the risk/reward ratio is justifiable for us to pass this proposal.