FRAX Smart Vaults
Fraxlend yield + ARB rewards
In cooperation with Frax Finance, VaultCraft is excited to announce the release of the Fraxlend Smart Vault on Arbitrum.
Features:
- Automated borrow/lend in FRAX’s money markets
- Auto-compounding
- ARB rewards as part of the Short Term Incentive Program STIP v2 https://flywheeldefi.com/article/exclusive-first-look-how-frax-is-allocating-its-stip-funds-on-arbitrum
How does it work?
Step 1) Get FRAX here: https://app.frax.finance/
Step 2) Input your deposit amount and select lockup time. Your deposit determines rewards and lock-up time, meaning the longer you lock your FRAX, the more rewards you get.
- Max locking for 6 months gives you 100% of the pro rata share of your vault deposit
- 3 months gives you 50% of your pro rata share
- 1.5 months gives you 25% of your pro rata share
Step 3) Sit back and earn! You can claim your ARB rewards throughout the lock-up period, and you will be able to withdraw your initial FRAX deposit once the lock-up period is over. You will be able to manually withdraw your FRAX after the lock matures.
How ARB will be deployed with FRAX’s Algorithmic Incentive Distributor
TL:DR, the more TVL, the more rewards!
Frax debuted an innovative way to distribute the ARB STIP grant rewards to individual pools using a mechanism called the “Algorithmic Incentive Distributer” (AID).
The AID distributes ARB STIP rewards based on proportional TVL of all the pools, with a max budget for each tier.
What sets the AID apart from simple manual distribution is that it dynamically will adjust rewards to any pool based on its growth.
At the beginning of the STIP period, all pools will be set with a fixed distribution amount. After this “kickstarting” period is over, the AID will dynamically adjust each pool based on its TVL. If a pool attracts more capital, it will receive more rewards, and if it loses TVL, then the ARB rewards will be diverted to other pools.
The FRAX Smart Vault will kick things off with:
- Maximum Incentive APR: 4%
- Kickstart Period: 2 weeks
- Kickstart Maximum Budget: $500 per week
What is Fraxlend?
Fraxlend is part of the Frax Finance ecosystem, a DeFi protocol known for pioneering the concept of a fractional-algorithmic stablecoin. Fraxlend is a money market platform that allows anyone to create an isolated market between a pair of tokens.
What does the Fraxlend Smart Vault do?
Users can deposit their FRAX on Arbitrum into the Smart Vault to create a money market on Fraxlend for up to 6% APY. The Smart Vault deposits your FRAX deposit as collateral on Fraxlend for fTokens in return. These fTokens represent your deposited amount and accrue interest over time. The interest is generated from the borrowers who pay to borrow funds against their collateral.
How Fraxlend works
Fraxlend, a DeFi platform, enables lending and borrowing among ERC-20 tokens, with each pair creating a unique market. Leveraging Chainlink oracles for real-time data, it adjusts interest rates dynamically. Lenders earn from deposited collateral through fTokens, while borrowers use collateral for FRAX, benefiting lenders.
How liquidations work on Fraxlend
When a borrower’s LTV exceeds 75%, any user can liquidate the debt, receiving collateral plus a 10% fee. During high volatility, if LTV hits 100%, bad debt is shared among lenders, safeguarding against bank runs and protecting the value of fTokens.
Conclusion
This is the first of many strategic partnerships we’ve established with DeFi protocols. If individuals or organisations want to specifically work with VaultCraft to launch a flagship vault, we now have the Flagship Proposal template you can submit on our forum!
https://forum.vaultcraft.io/c/proposals/flagship-smart-vault-proposal/14
