# Frax Ether (frxETH) > Frax Ether (frxETH) is a liquid staking derivative and stablecoin system in the Frax Finance ecosystem, designed to simplify and reward Ethereum staking. - Canonical URL: https://iq.wiki/wiki/frxeth-frax-ether - Categories: Cryptoassets - Tags: Infrastructure - Created: 2023-10-09T15:33:39.000Z - Last updated: 2026-07-14T23:26:57.166Z - Source: IQ.wiki — the world's largest blockchain and crypto encyclopedia (https://iq.wiki) --- **Frax Ether (frxETH)** is a [liquid ETH staking](https://iq.wiki/wiki/liquid-staking) derivative and [stablecoin](https://iq.wiki/wiki/stablecoin) system that aims to simplify and secure the [Ethereum](https://iq.wiki/wiki/ethereum) [staking](https://iq.wiki/wiki/staking) process. It leverages the [Frax Finance](https://iq.wiki/wiki/frax-finance) ecosystem to provide a [DeFi](https://iq.wiki/wiki/defi)-native way for users to earn interest on their [ETH](https://iq.wiki/wiki/ether-eth) holdings while maximizing their staking yield. [\[1\]](#cite-id-rkn36wewxbe)[\[2\]](#cite-id-1kf1yks5bx8) ## Overview The Frax Ether system comprises three primary components, Frax Ether (frxETH), Staked Frax Ether (sfrxETH), and the Frax ETH Minter: ### Frax Ether (frxETH)  ![](https://ipfs.everipedia.org/ipfs/QmeWGAYsMFxxW9a4CDGhtAgo62MRFJRLeDEtHCjJjq8exf) frxETH acts as a stablecoin loosely pegged to ETH, so 1 frxETH always represents 1 ETH and the amount of frxETH in circulation matches the amount of ETH in the [Frax](https://iq.wiki/wiki/frax) ETH system. When ETH is sent to the frxETHMinter, an equivalent amount of frxETH is [minted](https://iq.wiki/wiki/minting). Holding frxETH on its own is not eligible for [staking](https://iq.wiki/wiki/staking) yield and should be thought of as analogous as holding ETH. [\[3\]](#cite-id-wum3k5wa07j) [\[2\]](#cite-id-1kf1yks5bx8) ### Staked Frax Ether (sfrxETH)  ![](https://ipfs.everipedia.org/ipfs/QmcjQ9b42H6hdEk2mwfXXGzu5ytdBRFv6SntPHBoo3i1Sq) [sfrxETH](https://iq.wiki/wiki/frax-ether-frxeth-and-sfrxeth) is an [ERC-4626](https://iq.wiki/wiki/erc-4626)-compliant vault that captures [staking](https://iq.wiki/wiki/staking) rewards generated by [Frax](https://iq.wiki/wiki/frax) ETH validators. Users can deposit frxETH into the vault in exchange for [sfrxETH](https://iq.wiki/wiki/frax-ether-frxeth-and-sfrxeth), which represents a proportional share of the vault’s total frxETH holdings. As [staking](https://iq.wiki/wiki/staking) rewards accumulate, new frxETH is [minted](https://iq.wiki/wiki/minting) and added to the vault. This causes the exchange rate between [sfrxETH](https://iq.wiki/wiki/frax-ether-frxeth-and-sfrxeth) and frxETH to increase over time, allowing users to redeem [sfrxETH](https://iq.wiki/wiki/frax-ether-frxeth-and-sfrxeth) for more frxETH than initially deposited. The design mirrors other auto-compounding yield-bearing tokens, such as aUSDC or [cUSDC](https://iq.wiki/wiki/cusdc), distributing [staking](https://iq.wiki/wiki/staking) rewards among holders based on their share of the total [sfrxETH](https://iq.wiki/wiki/frax-ether-frxeth-and-sfrxeth) supply. [\[7\]](#cite-id-wX1IMbXcrE) ### Frax ETH Minter (frxETHMinter) Frax ETH Minter enables exchanging ETH for frxETH. It brings ETH into the [Frax](https://iq.wiki/wiki/frax) ecosystem and [mints](https://iq.wiki/wiki/minting) new frxETH equal to the amount of ETH sent. The platform also sets up new validator nodes as needed. [\[2\]](#cite-id-1kf1yks5bx8) [\[8\]](#cite-id-m2SuZDsvDN) ## FrxETH v2 Launched in June 2023 by founder [Sam Kazemian](https://iq.wiki/wiki/sam-kazemian), the frxETH v2 protocol allows users to lend and borrow ETH. According to Kazemian, FraxETH v2 is designed to be more efficient and decentralized than other protocols. [\[4\]](#cite-id-38c45dfbpeq) In an X thread, Kazemian explained that FraxETH v2 works by creating a peer-to-pool lending market: Users who want to lend ETH can do so by depositing it into the FraxETH v2 pool, and Users who want to borrow ETH can do so by taking out a loan against their ETH collateral. [\[4\]](#cite-id-38c45dfbpeq) The interest rate for borrowing ETH is set by market forces and utilization rates. There are no hardcoded fees or commissions. This signifies a competitive interest rate and a high demand for ETH. [\[6\]](#cite-id-hlgjvbivgk8) > “If you treat it like a lending market \[frxETH v2 is] basically the most efficient LSD(Lending-Staking-Decentralized) protocol because everyone that is good at running a validator will want to borrow our ETH” at the lowest rates." - Sam Kazemian said in an interview[\[6\]](#cite-id-adht0240879) In comparison, frxETH v1 allows users to deposit [ETH](https://iq.wiki/wiki/ether-eth) and receive frxETH tokens. These frxETH tokens can be staked to earn sfrxETH tokens as staking rewards. Alternatively, users can also pair their frxETH tokens with ETH-frxETH on [Curve Finance](https://iq.wiki/wiki/curve-finance) to participate in CRV mining. In frxETH v2, users have the ability to borrow validators based on their loan-to-value (LTV) ratio. To “borrow” validators, users provide a specific amount of ETH as collateral, which can exceed 8 ETH. This collateral gives users the right to borrow and operate validators on [Frax Finance.](https://iq.wiki/wiki/frax-finance) Simultaneously, the interest on the loan is directly deducted from the user’s ETH and validator rewards. ![image](https://ipfs.everipedia.org/ipfs/QmdcUPDVUsqZgDDVbV8ZJxWsmTzfNP9DUG6dgLWWzwBeTw)