BrainDAO Proposal: Expanding IQ Protocol-Owned Liquidity on Fraxswap V2

Governance Proposals
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BrainDAO Proposal: Expanding IQ Protocol-Owned Liquidity on Fraxswap V2

Executive Summary

BrainDAO’s treasury holds tens of millions in IQ, ETH, BTC, and stables. Much of this capital is currently idle. This proposal asks the DAO to approve a $12K pilot deployment into protocol-owned liquidity (POL) on Fraxswap V2.

This pilot is deliberately small (<0.1% of the treasury) so that the DAO can gather real on-chain data before scaling. POL has already been battle-tested by major protocols like Frax, Olympus, and Fei. Their results show consistent 8–15%+ yields from trading fees, plus upside from staked assets and market appreciation.

By deploying a pilot liquidity web across 7 IQ pairs on Ethereum and Fraxtal, BrainDAO will:

  • Generate recurring revenue (fees + yield + asset upside).

  • Stabilize IQ markets across stable, ETH, BTC, and FRAX pairs.

  • Increase intrinsic backing per IQ token.

  • Test results safely under DAO control.

Performance Reporting, and Monitoring will be handled by Astral Protocol, but custody will remains with the DAO multisig. Astral’s Compensation is performance-based only (0.9% of realized POL revenue), and subject to DAO approval.
**
Strategic Rationale**

Why POL now?

  • Idle tokens in the treasury could be working. POL means the DAO itself provides liquidity, turning a cost into a revenue stream.

  • Frax has proven that POL creates deep, stable markets and recurring income. Frax currently owns $100M+ in Curve Liquidity, generating continuous revenue.

  • Olympus grew a $700M treasury by bonding liquidity and earning fees.

  • Fei showed that Protocol Controlled Value can stabilize markets with permanent liquidity.

Why Fraxswap V2?

  • Fraxswap V2 is built on audited Uniswap V2, enhanced with TWAMM and LP swap fee customability between 0.01%-1%.

  • On Fraxtal (Frax’s L2), near-zero gas enables constant arbitrage, which drives fees and keeps IQ prices aligned across pools.

Pilot Design

Pools (6 total):

  • Ethereum: IQ/sfrxUSD, IQ/sfrxETH, IQ/WBTC

  • Fraxtal: IQ/sfrxUSD, IQ/sfrxETH, IQ/WBTC,

Deployment size: $12K - $2K in each pool

Revenue sources:

  • Trading fees (historical Frax POL range: 4–10% APR).

  • sfrxUSD yield (~4-10% APY).

  • sfrxETH yield (~3% APY).

  • BTC and ETH price appreciation.

  • Fees auto-compound into LP tokens, steadily growing positions.

**
Risk and Safety**

  • Impermanent Loss (IL): Normally a key AMM risk, but Fraxswap V2 pools can reduce IL by increasing each pools swap fee. IQ/sfrxUSD LPs also self-hedge, since stable side grows with yield.

  • Market exposure: DAO already holds BTC, ETH, stables. POL simply layers yield on assets it owns.

  • Smart contract risk: Fraxswap V2 = Uniswap V2 base + Frax enhancements, fully audited.

  • Scale: <0.1% of treasury, capped by design. DAO reviews before any scaling.

**
Governance Process**

  1. Astral Protocol sets up the liquidity web.

  2. DAO multisig deploys capital, keeps LP custody.

  3. Astral provides weekly blockchain-verified reports on fees, IL, and performance.

DAO reviews data, then votes on whether to scale.

Astral Protocol Role & Compensatio

  • Reporting: Regular data aggregation (volume, yield, IL, revenue).

  • Compensation: Astral asks for 0.9% of realized POL revenue from proposal deployed liquidity. No fixed fees, 100% performance-based.
    **
    Expected Outcomes**

  • More stable IQ markets across USD, ETH, BTC, FRAX.

  • Continuous DAO revenue streams.

  • Higher intrinsic value per IQ token.

  • A replicable POL framework for other treasury assets.

Extended Reading (Educational & Technical)

What POL Is and Why It Matters

Protocol-Owned Liquidity means the DAO provides its own liquidity instead of renting it. Frax, Olympus, and Fei all proved this model reduces reliance on mercenary LPs and makes liquidity a revenue source.

How the Liquidity Web Works

Instead of isolated pools, IQ will connect across stablecoins, ETH, BTC, and FRAX. Arbitrage across this sophisticated liquidity network generates volume, stabilizes prices, and compounds revenue. Frax calls this a liquidity web — interlinked pools that strengthen a token’s entire market structure.

Revenue Model in Detail

  • Trading fees: Frax POL positions historically have earned 4–15% APR.

  • sfrxUSD: Earns ~4-10% APY, steadily growing stable side and adding IQ buy pressure.

  • sfrxETH: Earns ~3%+ APY in ETH staking rewards.

  • BTC/ETH pairs: Capture upside during rallies while earning swap fees.

  • Fees auto-compound: LP tokens grow automatically over time.

Risk Analysis

  • Impermanent loss: V2 reduces IL by minimizing rebalancing events. IQ/stable pools self-hedge.

  • Market risk: The DAO already holds these assets — POL simply earns more yield on them.

  • Smart contracts: Fraxswap V2 is based on Uniswap V2 (most battle-tested AMM) with Frax engineering improvements.

Historical Case Studies

  • Frax Finance: Owns $100M+ In Curve liquidity

  • OlympusDAO: Built a $700M treasury with POL, supporting OHM.

  • Fei Protocol: Proved Protocol Controlled Value reduces volatility and guarantees liquidity.

These examples prove POL is battle-tested and data-backed.

Conclusion

This proposal is deliberately conservative: a $12K pilot, <0.1% of treasury, fully DAO-controlled. Yet it introduces BrainDAO to a model already proven by Frax, Olympus, and Fei.

It is a no-cost way to test if idle tokens can be transformed into productive assets. Revenue offsets inflation, liquidity deepens IQ’s market, and the DAO remains in full control.

If results match historicals, the DAO can scale with confidence. If not, assets can be withdrawn at any time.

In short: this is a safe, data-driven, and battle-tested way for BrainDAO to grow stronger while protecting stability.

Deploying BrainDAO Treasury Assets to Increase Treasury TVL and the value of IQ
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This proposal does not mention that BrainDAO already holds over $5 million in protocol owned liquidity making up more than 10% of the DAO’s assets. BrainDAO has held these positions for several years so there is not a need to test a $12k pilot of protocol owned liquidity. Especially since IQ also has even greater trading volumes and liquidity on centralized exchanges

There is $3.6 million in the IQ-FRAX pool, just under $1 million in the IQ-frxUSD pool, also additional liquidity pools like the IQ-ETH Sushiswap pool which has over $300k in assets plus $200k in the frxETH + IQ pool which totals over $5.1 million and with a total of ~$40 million in BrainDAO assets that is well over 10%

In addition the IQ token has significant liquidity on major centralized exchanges including Binance, Upbit, and Bithumb.

https://www.coingecko.com/en/coins/iq

Also OlympusDAO has just under $200 million in treasury assets not the $700 million mentioned in the proposal.

They list their treasury assets on their website.

Also Frax holds $42,520,583 in locked liquidity according to their balance sheet not the $100 million mentioned in the proposal.

Also as can you bring up specific numbers to back up the claim that IL will be mitigated by fee revenue?

1 Like
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Today’s Experimental IQ LP data on Fraxtal (based on the last 24 hours, quoted from BAMM on frax.com)

IQ/AIQ+: 58.26% APR

IQ/AIQ: 57.53% APR

IQ/WFRAX: 17.26% APR

IQ/NOIR: 7.72% APR

IQ/DKDEFI: 6.73% APR

IQ/sfrxETH: 4.19% APR

There is very little user trading of IQ on Fraxtal. Those returns are almost entirely from automated arbitrage trading.

Gains on ETH with the same pools would be significantly more, potentially over 100% higher gains. (Due to live user trading changing the price of IQ and thus stimulating additional arbitrage trade volume.)

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Hi their Chief brain Navin.

I sincerely appreciate your time on this matter. Additionally, thank you for correcting errors in my reporting. While I do cross reference numerous sources and use a multi layered AI process, 100% accuracy can be difficult to obtain on such sophisticated topics.

Addressing your corrections:

With OlypmusDAO, let’s assume your correct and that my original quote is outdated or otherwise incorrect. I’ll update that.

Regarding FRAX, the quoted total I used was for FRAX token assets deployed to curve and not neccesarily owned directly by the FRAX Treasury.

Regarding more facts to back up revenue gains and capital appreciation more then offsetting IL costs, that would be a seperate and very complicated research paper. Im happy to do so. However I am nearing the end of my efforts to support the BrainDAO without compensation.

Regarding BrainDAO’s existing POL, you are right this is well worth noting.

I very, very much approve of all of the BrainDAO’s recent treasury optimizations and Protocol Owned Liquidity deployments. Especially the newish WETH pools which are creating easily notable positive price impact on IQ as ETH surges.

This Proposal is intended to provide more and better data for the BrainDAO to continue expanding POL in the most efficient and effective method possible. Which is why the initial suggested deployment is $12K, which is fraction of a single day of IQs emissions, very negligible, yet still enough to collect reasonably accurate data with.

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To be Frank id prefer the BrainDAO start with a $100K deployment for more accurate data. We decided to shoot as low as possible for this Data collection Pilot.

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  • Should the BrainDAO Proceed to Vote on the Above ?
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Should the BrainDAO Proceed to Vote on the Above Proposal?

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