Frax Finance, a decentralized finance (DeFi) lending protocol, has recently gained approval for a community governance proposal. This proposal allows for a $250 million allocation of Ethena Labs’ USDe to be added to a new liquidity pool. The proposal, which was approved on April 5, is part of Frax’s Singularity Roadmap and will enable the creation of an automated market operation (AMO) that mints new FRAX tokens backed by overcollateralized debt.
According to Ethena Labs, this proposal will not only create one of the largest liquidity pools in the DeFi space but also diversify Frax’s backing yield. As of 10:45 am UTC, the new liquidity pool, based on Curve Finance, held $44.9 million worth of liquidity. This includes $30.6 million worth of FRAX coins and $14.6 million worth of the USDe synthetic dollar.
In other news, Ethena Labs reached a significant milestone on April 6, surpassing $2 billion in total value locked (TVL) just two months after the launch of USDe on the mainnet. The protocol currently offers a 37.1% annual percentage yield (APY) on USDe to its 125,300 investors.
Last week, Ethena Labs made headlines by announcing the addition of Bitcoin backing to its USDe synthetic dollar, aiming to further scale its $2 billion supply. This move followed the protocol’s success in becoming the highest-earning decentralized application (DApp) in crypto on March 8, offering a 67% APY on USDe. However, concerns about the protocol’s financial sustainability were raised within the community.
Despite these concerns, Ethena Labs has attracted the attention of large investment funds and has become the highest-conviction bet for Delphi Ventures in the current cycle. José Maria Macedo, the CEO of Delphi Labs and founding partner of crypto investment firm Delphi Ventures, believes that USDe has the potential to become the largest dollar-backed asset after Tether’s USDT and Circle’s USDC.