Decentralized finance (DeFi) lending protocol Frax Finance has recently passed a community governance proposal that greenlights a $250 million allocation of Ethena Labs’ USDe to a new liquidity pool.

As part of Frax’s Singularity Roadmap, the proposal enables the creation of an automated market operation (AMO) that will allow the minting of new FRAX tokens backed by overcollateralized debt. The proposal was approved on April 5.

The proposal will create one of the deepest liquidity pools in the DeFi space, while enabling Frax to diversify its backing yield, according to Ethena Labs, which wrote in an April 8 X post:

“As of yesterday, FRAX has begun adding USDe POL which will create one of the deepest pools of dollar liquidity on-chain, and enable FRAX to diversify their source of backing yield.”

According to Curve Finance data, the new Curve-based liquidity pool held $44.9 million worth of liquidity as of 10:45 am UTC, with $30.6 million worth of FRAX coins and $14.6 million worth of the USDe synthetic dollar.

Related: Largest Ethena airdrop recipient gets nearly $2M

Ethena Labs surpasses $2 billion in TVL

Ethena Labs surpassed the $2 billion mark in total value locked (TVL) on April 6, less than two months after USDe was launched on the mainnet on Feb. 19, according to DefiLlama data.

According to its homepage, the protocol is currently offering a 37.1% annual percentage yield (APY) on USDe to over 125,300 investors.

Ethena Labs made headlines last week after it announced it was adding Bitcoin backing to its USDe synthetic dollar in an effort to further scale from its current $2 billion supply.

Ethena Labs became the highest-earning decentralized application (DApp) in crypto on March 8 when it offered a 67% APY on USDe, prompting widespread community concerns about the protocol’s financial sustainability.

Following its success, Ethena also caught the attention of large investment funds, becoming the highest-conviction bet for Delphi Ventures for the current cycle.

USDe could become the largest dollar-backed asset after Tether’s USDT and Circle’s USDC, according to José Maria Macedo, the CEO of Delphi Labs and the founding partner of crypto investment firm Delphi Ventures, who wrote in an April 2 post:

“sUSDe will offer the highest dollar yield in crypto at scale. USDe will become the largest stablecoin outside of USDC/USDT in 2024. Ethena will become the highest revenue-generating project in all of crypto.”

Related: Ethena Labs founder clarifies USDe stability amid high yield worries