Frax Protocol - the first stablecoin system with a fractional algorithm. Frax is open source, permissionless and fully on-chain - currently implemented on Ethereum (with possible cross-chain implementations in the future).
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Description of Frax Protocol
The ultimate goal of the Frax protocol - to provide highly scalable, decentralized, algorithmic money instead of fixed supply digital assets like BTC. The protocol includes the following features:
Fractional-Algorithmic | Frax - a unique stablecoin with parts of its supply, backed by collateral and parts of the supply algorithm. The ratio of the cryptocurrency depends on the market price of the FRAX stablecoin. If the coin is trading above $1, the protocol lowers the collateral ratio. If the token is trading at less than $1, the protocol increases the collateral ratio. |
Decentralized and minimized management | Community driven and emphasizing a highly autonomous algorithmic approach without active management. |
Full chain oracles | Frax v1 uses Uniswap (ETH, USDT, USDC time-weighted average prices) and Chainlink (USD price). |
Two tokens | FRAX - a stablecoin, targeting a tight band around $1 per coin. Frax Shares (FXS) is a governance token that accrues fees, revenue and excess collateral value. |
Prior to Frax, stablecoins were divided into three different categories: fiat-collateralized, crypto-collateralized and algorithmic uncollateralized. Frax - the first type of decentralized stablecoin that classifies itself as a fractional algorithmic coin, entering the fourth and most unique category.
Platform feature
The founding team of Frax engineers includes Travis Moore and Jason Huang. Sam Kazemian originally developed this idea when he noticed that stablecoins were growing rapidly, but none of them mixed algorithmic monetary policy and collateral. Projects that had a purely algorithmic monetary policy failed or closed without any significant traction. Frax was developed as a response to measure market confidence in a partially algorithmic and partially backed stablecoin.
It is a fully decentralized protocol with onchain governance. It is also the first and only stablecoin to include a fractional-algorithmic hybrid design at the time of its launch in November 2020.
Project economics
The FRAX stablecoin supply is dynamic and constantly changing to keep the price at $1 due to its fractional algorithmic monetary policy. The Frax Shares (FXS) token supply is hard capped at 100 million tokens at genesis with no inflation chart in the protocol. The FXS token is a governance token that accumulates the entire value of new minted FRAX, fees and excess collateral. FXS is an investment and management asset, while FRAX is a currency token. FRAX, a stablecoin, is available on many major exchanges and DeFi platforms such as:
- Uniswap;
- DEXes.
Frax Shares (FXS) tokens are also available and just as liquid as a stablecoin. Investors, wishing to acquire the rights to purchase and manage the world's first fractional algorithmic stablecoin, must purchase Frax Shares (FXS). Users who want stability with the world's only fractional algorithmic stablecoin should purchase FRAX.