In the rapid development of blockchain technology, stablecoins have become an important part of the cryptocurrency market. The FRAX stablecoin and its related AMO (Algorithmic Market Operations) contracts play a vital role in this field. This article will deeply explore the operating mechanism of FRAX stablecoin and its AMO contract, and combine it with relevant knowledge to give readers a more comprehensive understanding.
FRAX Stablecoin and AMO Contract
FRAX stablecoin is an algorithmic stablecoin that aims to maintain a stable value through automated market operations. AMO contracts are self-executing contracts that apply pre-programmed monetary policies to specific sub-protocols, such as Fraxlend and Fraxswap, or external protocols such as Curve. This means that AMO controllers can conduct open market operations, such as minting FRAX stablecoins in the AMM or lending newly minted FRAX to money market protocols, subject to meeting certain conditions or receiving approval from on-chain governance.
Curve AMO
Curve AMO is an important part of the FRAX ecosystem. It works by minting the FRAX stablecoin in governance-approved Curve pools and extracting FRAX and burning the supply based on the USD price range of the reference oracle to keep the exchange rate of each Curve pool within a tight range.
Fraxlend AMO: Fraxlend is a permissionless, isolated loan market sub-protocol that belongs to the Frax Finance ecosystem. Anyone can lend FRAX stablecoins to isolated Fraxlend markets, where users deposit collateral to lend FRAX and pay dynamic interest rates to lenders. The Fraxlend AMO lends newly created FRAX to Fraxlend pairs approved by the frxGov process and earns interest from the borrower.
Fraxswap TWAMM AMO
Fraxswap TWAMM AMO loads time-weighted average market making orders into the Fraxswap AMM to buy or sell collateral over longer periods of time. This allows the FRAX balance sheet to be expanded by purchasing collateral using the FRAX stablecoin, or the FRAX supply to be contracted by selling balance sheet assets. AMOs can also be used to buy back FXS tokens via protocol revenue/fees.
FXB AMO: FRAX Bonds AMO provides the FRAX ecosystem with the ability to sell FRAX “bonds” to the market at a discount, which is done through FRAX governance. Each unit of FRAX Bond (also known as FXB) is equal to one unit of locked FRAX, and on a predetermined date, holders of FXB can burn their FXB and receive an equivalent amount of FRAX. Through the FXB AMO, the Frax team auctions FXB to the public, and the FRAX received by the AMO is subsequently sent to FinresPBC.
Technical specifications of the AMO contract: The technical specifications of the AMO contract include interfaces and access control. These specifications can be found on Github (TODO: make repo public). These technical specifications ensure the security and operability of the contract and provide detailed operational guidelines.