Frax Finance, a decentralized finance (DeFi) lending protocol, has recently approved a community governance proposal that allows for a $250 million allocation of Ethena Labs’ USDe to a new liquidity pool. This proposal is part of Frax’s Singularity Roadmap and will enable the creation of an automated market operation (AMO) that allows for the minting of new FRAX tokens backed by overcollateralized debt. The proposal was approved on April 5th.
According to Ethena Labs, this proposal will create one of the deepest liquidity pools in the DeFi space and will diversify Frax’s backing yield. As of 10:45 am UTC, the new Curve-based liquidity pool held $44.9 million worth of liquidity, with $30.6 million worth of FRAX coins and $14.6 million worth of the USDe synthetic dollar.
On April 6th, Ethena Labs surpassed $2 billion in total value locked (TVL), less than two months after the launch of USDe on the mainnet. The protocol is currently offering a 37.1% annual percentage yield (APY) on USDe to over 125,300 investors.
In an effort to further scale from its current $2 billion supply, Ethena Labs announced last week that it would be adding Bitcoin backing to its USDe synthetic dollar. This move garnered attention from large investment funds, making Ethena the highest-conviction bet for Delphi Ventures in the current cycle.
According to José Maria Macedo, the CEO of Delphi Labs, USDe could become the largest dollar-backed asset after Tether’s USDT and Circle’s USDC. However, concerns about the protocol’s financial sustainability have been raised within the community. Ethena Labs has clarified the stability of USDe amidst these worries.
Overall, Frax Finance and Ethena Labs are making significant strides in the DeFi space, providing innovative solutions and attracting attention from investors.