Frax Finance — the first stablecoin protocol with a fractional algorithm. Frax is open source, requires no permissions and is completely online - currently implemented on Moonbwam and other chains.
Frax is trying to be the first stablecoin protocol. It implements design principles to create highly scalable, trustless, extremely stable and ideologically pure money on the network. The Frax protocol - a dual token system, comprising the Frax stablecoin (FRAX) and the Frax Shares governance token (FXS). The protocol also has a pool contract that contains USD collateral. Pools can be added or removed by using management.
The ultimate goal of the Frax protocol - to provide scalable, decentralized, algorithmic money instead of fixed-supply digital assets like BTC. Frax is a new paradigm in stablecoin design.
It combines familiar concepts into a protocol, never seen before:
| Decentralization and minimal management | There is community management and an emphasis on a highly autonomous algorithmic approach without active management. |
| Fully intranet oracles | Frax v1 uses Uniswap (ETH, USDT, USDC time-weighted average prices) and Chainlink (USD price) oracles. |
| Crypto Native CPI | Frax's ultimate goal - to create the first cryptographic version of the CPI, called the Frax Price Index (FPI), managed by FXS holders (and other protocol tokens). |
FRAX stablecoins can be mined by placing an appropriate number of its constituent parts into the system. When created, FRAX is 100% secured by collateral, meaning that FRAX minting only requires a collateral to be paid into the minting contract.
While the protocol has appeared to accept any type of cryptocurrency as collateral, this implementation of the Frax protocol will basically accept on-chain stablecoins as collateral to smooth out the volatility in the collateral so that FRAX can smoothly transition to more algorithmic ratios. It becomes easier and safer to include volatile cryptocurrencies such as ETH and BTC in future managed pool.