Frax Finance is an innovative decentralized stablecoin protocol dedicated to issuing and supporting a variety of stablecoins. The protocol currently issues three stablecoins: FRAX, FPI, and frxETH, and also contains multiple sub-protocols to integrate and support these stablecoins. This article will delve into the core concepts of Frax Finance and its application in the field of decentralized finance (DeFi).
Three Stablecoins from Frax Finance
FRAX: FRAX is the first stablecoin issued by the Frax protocol and is pegged to the US dollar. This means that each FRAX should be equivalent to one dollar. FRAX is designed to provide a stable and reliable store of value, especially suitable for DeFi applications and financial transactions.
Frax Price Index (FPI): FPI is the world’s first stablecoin linked to a basket of consumer goods. Unlike traditional stablecoins, FPI creates a unit of account that is independent of any national currency, making it more globally adaptable. The value of FPI is not affected by the economic policies of a single country and can provide more stable purchasing power.
FraxEther (frxETH)
frxETH is a stablecoin linked to Ethereum (ETH), mainly used to replace WETH (wrapped Ethereum) in smart contracts. frxETH is designed to provide more efficient liquidity and transaction convenience in DeFi protocols.
Core sub-protocol: Fraxswap: Native AMM: Fraxswap is a native automatic market maker (AMM) within the Frax protocol. It is the world's first AMM with time-weighted average market maker orders. Fraxswap’s main features include rebalancing collateral, minting and redeeming stablecoins, expanding and contracting the stablecoin supply, and deploying protocol-owned liquidity on-chain.
Fraxlend: a permissionless lending marketplace
Fraxlend is a lending tool based on the Frax stablecoin that allows users to originate debt, customize non-custodial loans, and incorporate collateral assets into the Frax Finance economy. This allows users to manage their assets more flexibly and participate in the DeFi ecosystem.
Fraxferry: Frax-based token transfer protocol: Fraxferry is a Frax-based token transfer protocol that allows the transfer of locally issued Frax protocol tokens between multiple blockchains. This greatly improves the liquidity and adaptability of the Frax token, allowing it to be more widely used across different blockchain platforms.
Frax Share (FXS): Governance Token
Frax Share (FXS) is the base layer governance token of the Frax smart contract ecosystem. FXS holders can participate in the governance of the protocol and determine the future development direction of the protocol. FXS tokens also accumulate fees, income and excess collateral value, providing holders with a stable source of income.
FPIS is FPI’s governance token and shares its value with FXS holders. This means that users who hold FXS can also enjoy the value-added benefits of FPI, further enhancing the value and appeal of FXS.
Metered Reward System: Frax Finance has also designed a metered reward system that allows community members to propose new metered rewards for integrating Frax-based stablecoin strategies. The issuance of FXS is fixed, halved every year, and flows entirely to different meters based on the votes of veFXS stakers. This design ensures the scarcity and value stability of FXS while incentivizing community members to actively participate in the development of the protocol.
Conclusion
As an innovative decentralized stablecoin protocol, Frax Finance provides a complete and efficient DeFi ecosystem by issuing multiple stablecoins and designing multiple sub-protocols. The three stablecoins, FRAX, FPI and frxETH, have their own characteristics and can meet the needs of different users. The sub-protocols Fraxswap, Fraxlend and Fraxferry further enhance the functionality and application scope of Frax Finance.
In addition, Frax Share (FXS), as a governance token, not only provides users with the opportunity to participate in protocol governance, but also accumulates fees and income, increasing the value of the token. The metered reward system encourages community members to actively participate and ensures the continued development and innovation of the protocol.
In summary, Frax Finance is leading the future development of decentralized finance through its innovative design and diverse applications. Whether for ordinary users or professional investors, Frax Finance offers a wealth of opportunities and potential that are worthy of in-depth understanding and participation.