Fraxswap

Market Making

Fraxswap is the first constant product AMM with an embedded time-weighted average market maker (TWAMM) for conducting large trades over long periods of time trustlessly. It is fully permissionless and the core AMM is based on Uniswap V2.

Risk Rating
Watch Out
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Fraxswap is the first AMM with an embedded time-weighted average market maker (TWAMM) to permissionlessly execute large trades over long periods of time.
What we like less
Adoption of Fraxswap has been limited as there are not many assets. The TWAMM model is also not easily commercializable given its long trading window and public nature (e.g. trade size and period).
What it means for you
Fraxswap is a useful tool for users to slowly average into or out of large positions over time to allow for a better average price with less slippage.
Information
Exploit/Hacks
None
Info
  • Website
  • Token: FXS
  • Tags: Market Making
Key Metrics
  • TVL: $61.5M (Rank #81)
  • TVL Ranking by Market Making: #0
  • Blockchain: Ethereum, Fraxtal, Arbitrum, Polygon, Avalanche, Fantom, Moonbeam, Binance, Dogechain
  • Chain TVL
    • Ethereum: $38.5M
    • Fraxtal: $13.64M
    • Arbitrum: $2.09M
    • Polygon: $1.62M
    • Avalanche: $1.47M
    • Others: $4.23M
Risk Assessment
Watch Out
Protocol Code Quality
  • Code reviewed by at least one experienced auditor; Trail of Bits audited in August 2022
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Core protocol launched in 2022; maturity over six months reduces technical risk as smart contracts are moderately battle-tested
  • Top 10% by total value locked reduces risk
  • Multisig wallet controls protocol upgrades
  • Multisig consists of less than 4 signers, which makes the protocol more susceptible to centralization risks
  • Timelock is at least 48hrs, which provides users with sufficient time to exit if any malicious upgrades are approved
  • At least one critical governance issue documented
  • Low voting power concentration reduces risk
Protocol Design
  • Protocol could be susceptible to negative feedback loops
  • Robust controls to mitigate oracle price manipulation
  • This protocol is susceptible to risks related to decentralized exchanges (DEXs), such as impermanent loss
Things to know about Fraxswap

How Fraxswap works

Fraxswap is the first constant product AMM with a time-weighted average market maker (TWAMM) for conducting larger trades over long periods of time. The DEX is fully permissionless as the core AMM is based on Uniswap V2. Fraxswap is intended to help traders execute large orders more efficiently. The embedded TWAMM is based on Paradigm's original whitepaper specifications. The TWAMM is designed to slowly and reliably exchange assets over time to reduce slippage.

How Fraxswap makes money

Fraxswap was purposely built to be used by the Frax protocol to increase the stability of pegs for FRAX and FPI stablecoins, as well as return excess profits to FXS holders. The primary motivation was to create a unique AMM with specialized features for algorithmic stablecoin policy, forward guidance, and large sustained market orders to stabilize the price of one asset by contracting its supply or acquiring specific collateral over a prolonged period. Specifically, the Frax protocol will use Fraxswap to buyback and burn FXS with any profits, mint new FXS to buyback and burn FRAX stablecoins to stabilize the price peg, and mint FRAX to purchase hard assets through seigniorage.

How you make money on Fraxswap

Fraxswap is also intended to be used by other protocols, stablecoin issuers, and DAOs. Examples of use cases include: 1) accumulation of a treasury asset over time by slowly selling governance tokens; 2) buying back governance tokens over time with DAO revenues and reserves; 3) acquiring another protocol's governance token over time with the DAO's own governance token (e.g. a permissionless M&A); and 4) defending risk-free value (RFV) for treasury-based DAOs like Olympus where the backing of the governance token is programmatically guaranteed. To use Fraxswap for monetary policy, the protocol should first create a token pair and add protocol controlled liquidity (POL). Then, place TWAMM orders in any size in either direction as desired for forward guidance and rebalancing of the DAO's assets.