Frax (FRAX)
Frax Finance is a stablecoin protocol that issues decentralized stablecoins and incorporates subprotocols to support these assets. Frax currently issues three stablecoins: FRAX, pegged to the US dollar; the Frax Price Index (FPI) stablecoin, pegged to a basket of consumer goods as its own unit of account; and FraxEther (frxETH), pegged to Ethereum for use in smart contracts. The Frax Protocol also includes three subprotocols: Fraxlend, Fraxswap, and Fraxferry.
Origin and development
Frax Finance introduced the concept of a fractional stablecoin, initially having parts of its supply collateralized. In February 2023, the community voted to fully collateralize the FRAX stablecoin. The testnet was released on November 16, 2020, followed by its official launch on the Ethereum mainnet on December 20, 2020.
Growth and milestones
Shortly after its launch, Frax Finance achieved a total value locked (TVL) of over $43 million. By January 2021, 100 million FRAX tokens had been minted. Frax Finance became the fifth most liquid token on Uniswap and was the first fractional stablecoin listed on Binance in February 2021. In January 2022, Frax expanded its collaboration with Chainlink to enhance the Frax Price Index.
| Ticker | FRAX |
| Category | Stablecoins |
| Website | https://frax.finance |
| @fraxfinance | |
| Telegram | fraxfinance |
| Contract Addresses | |
|---|---|
| ethereum | 0x85...9e Copied! |
| sei-v2 | 0x80...dfCopied! |
| moonbeam | 0x32...fbCopied! |
| polygon-zkevm | 0xff...4dCopied! |
| optimistic-ethereum | 0x2e...75Copied! |
| moonriver | 0x1a...7dCopied! |
| boba | 0x75...d9Copied! |
| aurora | 0xe4...b6Copied! |
| arbitrum-one | 0x17...6fCopied! |
| fantom | 0xdc...55Copied! |
| polygon-pos | 0x45...89Copied! |
| avalanche | 0xd2...64Copied! |
| evmos | 0xe0...d8Copied! |
| harmony-shard-0 | 0xfa...00Copied! |
| binance-smart-chain | 0x90...40Copied! |
Evolution of Frax Protocol
Frax V1
Initially, stablecoins were categorized as fiat-collateralized, overcollateralized with cryptocurrency, or algorithmic with no collateral. Frax introduced a new type, the fractional-algorithmic stablecoin, designed to transition from fully collateralized to varying levels of fractional backing. This is a two-token system comprising the stablecoin FRAX and the Frax Share token (FXS), which handles seigniorage revenue and governance. A third token, Frax Bonds (FXB), is planned for future release.
Frax V2
Frax V2 introduced the "Algorithmic Market Operations Controller" (AMO), allowing autonomous contracts to perform monetary operations without affecting the FRAX price peg.
Frax V3
Frax V3 employs AMO smart contracts and non-custodial subprotocols to maintain stability. It utilizes Fraxlend and Fraxswap as internal mechanisms and integrates external mechanisms like Curve. The protocol aims for full exogenous collateralization, maintaining a 100% collateralization ratio (CR) through specific real-world assets. The protocol also introduced the Federal Reserve Interest on Reserve Balances (IORB) oracle for dynamic collateral strategies.
Tokenomics of Frax Finance
Frax Share Token (FXS)
FXS is structured to be deflationary, with a supply initially set at 100 million tokens. It accrues the protocol's seigniorage and revenue flow, representing an ownership stake rather than debt. It follows a yearly halvening schedule for emissions.
Token distribution
A majority, 60%, of FXS tokens are allocated for yield farming and liquidity incentives. A smaller portion is allocated to the team, advisors, and private investors, with specific vesting schedules.
veFXS
FXS holders can lock their tokens to generate veFXS, which grants governance rights and additional boosts. The veFXS system encourages long-term staking by decreasing balance as lock periods approach expiry.
Frax Price Index and Related Tokens
Frax Price Index (FPI)
The FPI stablecoin, launched in collaboration with Chainlink, is designed to be inflation-resistant and pegged to a decentralized consumer price index.
Frax Price Index Share (FPIS)
FPIS is the governance token for the FPI stablecoin, introduced in April 2022.
Frax ETH
Launched in October 2022, Frax Ether involves a liquid staking system with components like frax ether (frxETH) and staked frax Ether (sfrxETH). This system allows users to stake ETH and earn rewards while maintaining liquidity.
Features and Partnerships
Gauges system
The FRAX gauge system enables FXS holders to control token emissions and stablecoin expansions, favoring long-term contributors with governance power.
Fraxswap
Fraxswap is an automated market maker launched by Frax Finance to facilitate large trades over extended periods.
Partnerships
Frax Finance has established partnerships with entities like Ondo Finance and Sacred Finance, enhancing liquidity and privacy. Collaborations have extended to platforms such as Pangolin on the Avalanche network.
Innovations and Governance
Fraxtal
Fraxtal is an EVM-compatible layer 2 rollup chain, set to launch in early 2024, designed to reduce Ethereum congestion. frxETH and FRAX will play integral roles within this ecosystem.
FrxGov
FrxGov introduces on-chain governance, allowing veFXS holders to participate in decision-making. It features two governor contracts, GovAlpha and GovOmega, each with specific voting requirements.
Investors and Backers
Frax Finance has garnered support from prominent investors, including ParaFi Capital, Mechanism Capital, Dragonfly Capital, and more, contributing to its growth and development.