Frax community approves $100M to the Goldfinch Senior Pool
An AMO providing liquidity to Goldfinch’s Senior Pool will help Frax weather the bear market via Goldfinch’s real-world yields
The Frax community passed a governance proposal with 99.98% support in favor of creating a $100M Goldfinch AMO to provide liquidity to the Goldfinch Senior Pool. The move will help Frax weather the bear market by earning the protocol yields uncorrelated to the rest of crypto.
The proposal notes the importance of Frax diversifying its stablecoin collateral mix into safe yield assets with interest rate revenues coming from non-crypto correlated economic activity. Participation in Goldfinch achieves this by design, by bringing off-chain yields from real-world lending on-chain.
Specifically, the Frax community chose to participate in Goldfinch’s Senior Pool due in part to the Senior Pool being protected by a significant buffer of Backer capital, as well as being liquid and diversified across all deals on Goldfinch.
Frax is the 6th largest stablecoin by market cap, with nearly $2B in assets. It is primarily backed by collateral including USDC and a range of other assets, creating a central-bank style balance sheet that can hold value under changing market conditions. It’s also partially stabilized algorithmically — a first-of-its-kind design in the stablecoin space.
Algorithmic Market Operations Controllers (AMOs), self-described by Frax as ‘composable, autonomous central banking legos,’ are smart contracts that enact monetary policy for the Frax protocol, passed by governance and designed to be additive to Frax’s basic stability mechanisms.
Goldfinch is a decentralized credit protocol with a mission to empower financial inclusion by building a single, globally accessible, on-chain credit marketplace. The protocol allows Borrowers to access dollar-denominated stablecoins for real-world business activities, with returns from those off-chain investments providing the stablecoin yields for lending participants.
Backers on Goldfinch actively assess loans and earn higher yields by supplying first-loss capital to individual Borrower Pools. Investment in the Goldfinch Senior Pool represents a diversified senior position on all outstanding loans on Goldfinch, with its capital allocated across all Borrower Pools to earn a passive yield. At the time of writing, the Goldfinch Senior Pool has a combined est. 19.33% APY, with a 9.8% USDC APY generated from off-chain interest and an additional estimated 9.52% APY in GFI rewards.
By providing $100M in liquidity to the Goldfinch Senior Pool via the newly-passed Goldfinch AMO, Frax will grow their treasury with sustainable, attractive stablecoin yields that are truly uncorrelated with the rest of the crypto markets — just real economic growth from over two dozen countries.
The news of the Frax community’s coming investment in the Goldfinch Senior Pool comes on the heels of Goldfinch crossing $100M in active loans across 28 countries, along with launching support for FIDU-USDC Curve LP positions to be staked for liquidity mining rewards on the protocol. You can learn more about the governance process of launching the Curve pool, which now has over $7M in liquidity, in community member Alvin Hsia’s post.
Sign up for Goldfinch Updates here for weekly information on upcoming Pool launches and other news from the Goldfinch ecosystem. Backers can also sign up for real-time information when new Borrower Pools launch for investment here. You can learn more about Goldfinch, and how to get involved, at goldfinch.finance.