Onboard sfrxUSD as Collateral on FiRM

FiRM
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Onboard sfrxUSD as Collateral on FiRM

Summary

This post is a preliminary signal of intent to onboard sfrxUSD as a collateral asset on FiRM, pending:

  1. a full risk assessment and parameter recommendation by the Risk Working Group (RWG), and
  2. market and feed deployments.

The goal here is to align the DAO, core contributors, and the Frax community around the direction of travel, while the risk work is done in the background.

Why now: we’ve been working directly with the Frax team, and we have an understanding that if Inverse onboards sfrxUSD as collateral on FiRM, Frax will help push and support sDOLA being onboarded as collateral into various Morpho curated vaults (with frxUSD as the debt token). This is a strategically valuable distribution for sDOLA, especially in light of the recent Curve Lend / LlamaLend incident, meaning new sDOLA collateral integrations are vital.

Background

sfrxUSD is the yield-bearing (ERC-4626) “savings” version of frxUSD. Users stake frxUSD and receive sfrxUSD, which accrues yield via an increasing redemption rate back into frxUSD.

From FiRM’s perspective, this is a familiar collateral profile: a yield-bearing, USD-denominated asset that borrowers may want to lever while locking in FiRM’s fixed-rate borrow cost.

Motivation / Business Case

1) Direct product benefit for FiRM

Adding sfrxUSD gives FiRM another high-quality “stable yield” collateral option that should be attractive to:

  • stablecoin allocators who prefer levered yield with predictable borrow costs; and
  • borrowers who already hold frxUSD/sfrxUSD and want fixed-rate leverage without rotating out of their asset.

2) Strategic partnership value: unlock Morpho distribution for sDOLA

The bigger unlock is the partnership flywheel:

  • Inverse onboards sfrxUSD collateral on FiRM
    → Frax helps drive sDOLA onboarding into Morpho curated vaults (as collateral, with frxUSD as debt)
    → sDOLA gets new, credible collateral utility in a venue that is actively curated/risk-managed
    → Inverse benefits from increased sDOLA relevance and (by extension) DOLA ecosystem demand.

This is exactly the type of mutually beneficial DeFi partnership that compounds over time.

TBC Risk Parameters

RWG will run the full qualitative + technical risk process and return with recommended values for:

  • Market supply ceiling
  • Daily borrow limit
  • Collateral factor (CF)
  • Liquidation factor (LF) and liquidation incentive (LI)
  • Minimum debt, oracle staleness threshold, and any additional safeguards RWG deems appropriate

Oracle Approach (High-Level)

Final oracle design is owned by RWG, but the expected “clean” approach is:

  • price frxUSD in USD via a robust reference feed (such as Chainlink)
  • resolve sfrxUSD to frxUSD via the ERC-4626 exchange rate (utilizing convertToAssets)
  • apply appropriate staleness checks / guards consistent with FiRM’s oracle framework

Useful Links

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