Learned by 33 usersPublished on 2024.04.01 Last updated on 2024.10.15
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Frax is an algorithmic stablecoin designed to maintain price stability equal to 1 USD. Unlike traditional overcollateralized stablecoins like DAI, Frax is partially backed by USDC and its native token FXS.
The Frax Finance ecosystem includes several components:
Frax's algorithmic stablecoin design model maintains price stability through dynamic adjustments and releases stablecoin dividends to participating users.
Sam Kazemian is the founder of Frax Finance. He is the primary founder of the project, with other co-founders including Travis Moore (CTO) and Jason Huan.
Specific VCs investing in the cryptocurrency Frax are not directly mentioned according to the provided information. However, core members of the Frax team have successful entrepreneurial experiences, such as Everipedia receiving a $30 million investment from Galaxy Digital and completing a token issuance. This indicates that the Frax team has collaborations with some prominent cryptocurrency investment firms, but specific VC firms investing in Frax are not explicitly listed.
How Frax cryptocurrency (FRAX) operates:
Hybrid Design: FRAX is a partially algorithmic stablecoin combining design principles of fully collateralized and fully algorithmic stablecoins. It allows the market to determine its long-term collateralization rate rather than presetting a fixed ratio.
Dual Token System: The FRAX protocol uses two tokens: stablecoin FRAX and governance token FXS. The minting of FRAX requires collateral and FXS, with the specific ratio determined by the market collateralization rate.
Algorithmic Market Operations (AMO): The Frax protocol uses AMO to maintain stability of FRAX. AMO automatically provides surplus collateral and FRAX to the liquidity pool, ensuring a 1:1 exchange rate with the USD.
Liquidity Pool: FRAX primarily maintains deep liquidity through the Curve's FRAX3CRV pool, allowing low slippage or no slippage swaps between FRAX and other stablecoins.
Multi-Chain Support: The Frax protocol supports multi-chain deployment, enabling FRAX to maintain consistency and interchangeability across different blockchains.
Governance Mechanism: The Frax protocol uses a Voting Escrow (ve) governance token mechanism, similar to Curve's veCRV but with modifications.
In conclusion, FRAX achieves stability and scalability through its unique hybrid design, dual token system, algorithmic market operations, and multi-chain support.