The cryptocurrency world has been a bloodbath these days, with many copycats’ market values cut in half and some even losing 70% of their market value. I didn’t feel dizzy, but instead felt that an opportunity had come!
Today, let’s take a look at the stablecoin project Frax Finance.
Today, Frax Finance's official token FXS was very strong, rising by 48% at one point, from 2.439 to a high of 3.6. It has now fallen back to 3.26 US dollars. The current market value of FXS coin has reached 280 million US dollars, and its current market value ranks 245th.
Introduction
The Frax Protocol is the first fractional algorithmic stablecoin system. Frax is open source, permissionless, and entirely on-chain - currently implemented on Ethereum (with the potential for cross-chain implementation in the future). The ultimate goal of the Frax Protocol is to provide a highly scalable, decentralized algorithmic currency to replace fixed-supply digital assets like BTC. The protocol encompasses the following concepts:
Scoring algorithm: Frax is a unique stablecoin, with part of its supply backed by collateral and part algorithmically supported. The ratio of collateral to algorithm depends on the market pricing of the FRAX stablecoin. If the trading price of FRAX is above $1, the protocol will reduce the collateral ratio. If the trading price of FRAX is below $1, the protocol will increase the collateral ratio.
Decentralization and minimal governance: Community governance emphasizes a highly autonomous algorithmic approach without the need for active management.
Fully on-chain oracle: Frax v1 uses Uniswap (ETH, USDT, USDC time-weighted average price) and Chainlink (USD price) oracles.
Two tokens: FRAX is a stablecoin targeting a narrow range around $1/coin. Frax Shares (FXS) is a governance token that generates fees, minting tax revenue, and excess collateral value.
Project practical application
Fraxswap trading platform: Fraxswap is the first AMM with an embedded time-weighted average market maker (TWAMM) for conducting large trades over a long duration in a trustless manner. It is completely permissionless and based on the constant product invariant (xy=k).
Fraxlend: Fraxlend is a trustless, permissionless, and non-custodial lending platform that provides lending markets between any two ERC20 tokens. Each pair is an isolated market, allowing anyone to participate in lending activities.
Fraxferry: Fraxferry is a permissionless, non-custodial, and secure method for transferring natively issued Frax protocol tokens across multiple blockchains without bridges or third-party applications.
The Frax protocol is managed by two tokens:
Frax: Frax Share (FXS) is a utility token that can be staked as veFXS to manage the ecosystem's stablecoins and infrastructure protocols. The FXS token has various utilities and functions throughout the Frax economy.
FPIS: Frax Price Index Share (FPIS) is a utility token that can be staked as veFPIS to uniquely manage the novel CPI peg attributes of the FPI stablecoin. FPIS is interconnected with the Frax Share (FXS) token, and the utility of both grows together.
Project background
The backers can only be described as luxurious!
Today's token rally for Lafite was also due to a piece of news:
The brokerage firm Securitize behind the tokenized BlackRock dollar institutional liquidity fund (BUIDL) proposed to add BUIDL as collateral for the Frax USD stablecoin.
This proposal was submitted in the form of a Frax Improvement Proposal (FIP), highlighting the advantages of using BUIDL, invested in U.S. government securities, as reserve assets.
[In this round of the bull market, anything related to BlackRock is very strong]
FXS token economic model
Current maximum supply: 100 million
Currently, it has basically been fully unlocked. This token is different from others; as mentioned earlier, it is pegged to two tokens and can be exchanged with each other, so the circulation will decrease.
Frax Finance adopts a dual-token model, using USDC and its governance token Frax Share (FXS) to partially support its stablecoin Frax (FRAX). The collateral ratio for Frax is variable, meaning the amount of collateral supporting the stablecoin will change based on market conditions.
On-chain ecological data
The on-chain TVL data is relatively balanced, primarily due to the astonishing growth rate of frxETH. In my personal opinion, FXS's TVL will gradually increase and could become a major player. Moreover, the final version from the project team is coming, and I wonder what surprises it will bring us.
Summary
Looking back at the development over the past two years, Frax Finance's product strength stands out among many 'DeFi veterans':
From being on par with Terra in 2022 to the astonishing growth of frxETH in 2023, along with the late-stage RWA layout like sFRAX, now claiming to be the 'most important version' of Fraxtal. Although adjustments like removing stabilization factors and launching fraETH are passive adjustments, Frax Finance has overall made timely shifts and miraculously coupled new products, building a self-contained DeFi matrix without missing a single hot narrative.
Moreover, it is currently connected with BlackRock, and its ecological matrix + strong background indicates that the project team is active.
The market cap is low enough, fully unlocked, and without selling pressure, which I really like! Our Black Continent Research Institute has already entered at a price of 1.7, currently waiting for takeoff. For those who haven't bought, you can look for opportunities to try it; stablecoins are a battleground, and it's highly likely that one will emerge during a bull market!
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