Article Summary, Automatically Generated By AI
Summary of Frax Protocol
Key Points
- Frax Protocol is a fractional-algorithmic stablecoin system.
- It’s open-source, permissionless, and on-chain, currently on Ethereum.
- Goal: provide a scalable, decentralized, algorithmic money.
Features
- Fractional-algorithmic: parts of supply backed by collateral, parts algorithmic.
- Decentralized & governance-minimized.
- Fully on-chain oracles: Uniswap and Chainlink.
- Two tokens: FRAX (stablecoin) and FXS (governance token).
<h3
About Frax Finance
Introducing the Frax Protocol (FRAX): A Pioneering DeFi Solution
The Frax Protocol pioneers the concept of a fractional-algorithmic stablecoin system, boasting an open-source, permissionless, and fully on-chain architecture, currently anchored on Ethereum with potential cross-chain implementations on the horizon. The ultimate vision of the Frax protocol is to usher in a highly scalable, decentralized, and algorithmic monetary system, poised to supplant fixed-supply digital assets like BTC. The protocol seamlessly integrates the following key concepts:
Fractional-Algorithmic – Frax is a distinctive stablecoin that combines a collateral-backed component with an algorithmic element. The proportion of collateralized and algorithmic supply is dynamically adjusted based on the market’s valuation of the FRAX stablecoin. When FRAX trades above $1, the protocol reduces the collateral ratio, whereas when it trades below $1, the protocol increases the collateral ratio, ensuring a responsive and adaptive approach to maintaining stability.
Decentralized and Governance-Minimized – Embracing a community-driven ethos, our approach prioritizes autonomy and algorithmic decision-making, eschewing active management for a truly decentralized experience.
Fully on-chain oracles – Frax v1 leverages Uniswap (ETH, USDT, USDC time-weighted average prices) and Chainlink (USD price) oracles, ensuring seamless integration and unparalleled accuracy.
Two Tokens – FRAX, a stablecoin designed to maintain a narrow fluctuation band around $1 per coin, and Frax Shares (FXS), the governance token that accrues fees, seigniorage revenue, and excess collateral value, thereby empowering holders with a stake in the ecosystem.
Prior to Frax, the stablecoin landscape was segmented into three distinct categories: fiat-collateralized, overcollateralized with cryptocurrency, and algorithmic with no collateral. Frax, however, has pioneered a novel approach, establishing itself as the inaugural decentralized stablecoin to embody a fractional-algorithmic model, thereby introducing a fourth and most distinctive category.
The Circulating Supply of FRAX and FXS Coins: A Closer Look
The supply of the FRAX stablecoin is dynamically adjusted to maintain a stable price of $1, courtesy of its innovative fractional-algorithmic monetary policy. In contrast, the supply of Frax Shares (FXS) tokens is capped at 100 million at genesis, with no provision for inflation embedded in the protocol. As the governance token, FXS accrues the value of newly minted FRAX, fees, and excess collateral, serving as both an investment and governance asset, while FRAX functions as the currency token.
Unveiling the Uniqueness of Frax
The Frax Protocol is a pioneering, community-driven stablecoin, boasting a unique design. Notably, over 60% of the FXS supply is allocated to liquidity providers and yield farmers over an extended period. As a truly decentralized protocol, governance is facilitated on-chain. Moreover, Frax Protocol made history as the first and only stablecoin to pioneer the innovative fractional-algorithmic hybrid design at its inception in November 2020.
The Visionary Founders Behind the Frax Protocol
The Frax Protocol is the visionary brainchild of American software developer Sam Kazemian, who pioneered the concept of a fractional-algorithmic stablecoin in 2019, revolutionizing the landscape of digital currencies.
The founding team of Frax comprises esteemed engineers Travis Moore and Jason Huan. The concept was initially conceived by Sam Kazemian, who observed the rapid growth of stablecoins, yet noted the absence of a hybrid model that combined algorithmic monetary policy with collateralization. Notably, projects that relied solely on algorithmic monetary policy had either failed or ceased operations without gaining significant traction. In response, Frax was designed to gauge the market’s confidence in a stablecoin that strikes a balance between algorithmic and collateralized elements.
Acquiring FRAX and FXS: A Comprehensive Guide
FRAX, the pioneering stablecoin, is widely available on prominent exchanges and decentralized finance (DeFi) platforms, including Uniswap and decentralized exchanges (DEXes). Furthermore, Frax Shares (FXS) tokens boast impressive liquidity, mirroring that of the stablecoin. Investors seeking to capitalize on the upside and governance rights of the world’s inaugural fractional-algorithmic stablecoin are advised to acquire Frax Shares (FXS). Conversely, users prioritizing stability can opt for FRAX, the world’s sole fractional-algorithmic stablecoin.