The Frax Finance community is reviewing a proposal to allocate up to $15 million to World Liberty Financial (WLFI), a decentralized finance project linked to the family of US President Donald Trump.
According to the proposalInitially, $5 million would be allocated to acquire WLFI tokens and establish a partnership. Another $10 million is dependent on the success of this initial investment.
Proponents believe this move could position Frax Finance within the WLFI ecosystem, leveraging Trump’s commitment and pro-crypto stance.
The proposal states that WLFI could transition millions of Americans to decentralized finance. By joining WLFI, Frax Finance aims to strengthen its position in the American crypto landscape.
WLFI has invested over $70 million in major DeFi projects such as Aave, Chainlink, Ethereum, Tron and Ethena.
WLFI’s governance model allows token holders to influence critical decisions, and its partnerships with Chainlink and Ethena Labs are key benefits.
The connection between Frax co-founder Stephen Moore, a former economic adviser to Trump, and WLFI is also cited as a strategic advantage.
According to the proposal:
“By partnering with WLFI, FRAX would solidify its status as a leading US stablecoin while benefiting from WLFI’s ecosystem and governance capabilities.”
Community backlash
Despite these potential benefits, the proposal faced resistance from community members. Critics express concerns about the financial risks and wonder whether Frax Finance can afford such a significant commitment.
One community member stated:
“Investing $5 million at a fully diluted valuation of $5 billion in a project with no proven track record is extremely risky and unreasonable. Such a high FDV relative to current market capitalization suggests significant potential for future dilution, which could negatively impact token value. This valuation level is reminiscent of the exuberant and unsustainable valuations during the 2021-2022 crypto bull market.”
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