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FRAX (Stablecoin)

FRAX is the of the Protocol and it is designed to be pegged to the US dollar.

Overview

FRAX is the stablecoin of the Protocol. The FRAX stablecoin is designed to be pegged to the US dollar. FRAX is the first and only stablecoin with parts of its supply backed by collateral and part of the supply algorithmically stabilized.

The price of FRAX and collateral are all calculated with a time-weighted average of the pair price and the :USD Chainlink oracle. The allows the protocol to get the true price of USD instead of an average of stablecoin pools on Uniswap. 

Historically, at genesis, FRAX was 100% collateralized, meaning that minting FRAX only requires placing collateral into the minting contract. During the fractional phase, minting FRAX required placing the appropriate ratio of collateral and burning the ratio of . The protocol is designed to accept any type of as collateral and this implementation of the Frax Protocol mainly accepted on-chain stablecoins as collateral to smoothen out volatility in the collateral in order for FRAX to transition to more algorithmic ratios smoothly. This design was implemented so that as the velocity of the system increases, it becomes easier and safer to include volatile cryptocurrency such as and wrapped into future pools with governance.

Price stability

FRAX remains pegged to the US dollar due to the Algorithmic Market Operations Controller (AMO), a framework for composable, autonomous central banking legos.

Frax Finance protocol expanded on the idea of fractional-algorithmic stability by introducing the idea of the “Algorithmic Market Operations Controller” (AMO).

An AMO module is an autonomous contract(s) that enacts arbitrary monetary policy so long as it does not change the FRAX price off its peg.

AMO controllers can perform open market operations algorithmically but cannot arbitrarily mint FRAX out of thin air and break the peg. The AMO controllers allows keeping FRAX’s base layer stability mechanism pure and untouched.

Properties of each AMO:

  • Decollateralize - the portion of the strategy which lowers the CR
  • Market operations - the portion of the strategy that is run in equilibrium and doesn't change the CR
  • Recollateralize - the portion of the strategy which increases the CR

Deployments

FRAX was deployed on 14 different networks (Arbitrum, Aurora, , Boba, , , Evmos, , , , , Optimism, , Solana).

Frax Staking

Frax Finance protocol allows FRAX holders to lock up FRAX tokens to generate yield on various pools on different chains.

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FRAX (Stablecoin)

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