What is Frax Finance (FXS)? How does it work?

Frax Finance (FXS) is a pioneering project in the stablecoin sector, combining an algorithmic model with collateral assets to maintain price stability. With the development of this platform, the FXS token has become a key component in the governance and creation of the FRAX stablecoin.

In this article, AZCoin will provide an overview of how Frax Finance operates, the key features of FXS and the factors to consider when investing in this project.

What is Frax Finance (FXS)?

Frax Finance is a DeFi protocol designed to issue and manage the FRAX stablecoin—a unique stablecoin supported by a fractional model. The Frax protocol uses a combination of collateral and algorithmic mechanisms to maintain the stablecoin’s value around 1 USD. The FRAX stablecoin is not only fully collateralized but also algorithmically adjusted to ensure stability in various market conditions.

Development team, investors and partners

Development team

Frax Finance was founded by Sam Kazemian, an engineer and entrepreneur in the blockchain field, renowned for proposing the world’s first fractional stablecoin concept. Alongside Sam, Frax Finance has attracted several top experts in the blockchain and decentralized finance sectors.

Investors & partners

Frax Finance has received support from major investment funds such as Multicoin Capital, Parafi and Mechanism, among others. These funds have played a crucial role in advancing the project’s development.

Frax Finance has two notable partners: Olympus DAO and Ondo Finance:

• Olympus DAO: Olympus DAO collaborates with Frax to enhance liquidity for the OHM-FXS pair through a bond issuance mechanism.
• Ondo Finance: Projects can use Ondo to pair their tokens with FRAX in trading pairs, from which Frax earns a 5% fee from liquidity.

How Frax Finance works

Frax Finance operates based on a fractional-algorithmic stablecoin mechanism. In this model, FRAX is partially backed by collateral assets (such as USDC) and partially adjusted algorithmically.

• When demand for FRAX increases, the protocol requires less collateral and relies more on algorithms to stabilize its value. Conversely, when demand decreases, the system increases collateral to protect the stablecoin’s value.
• FXS plays a governance role and absorbs system fluctuations. As demand for FRAX rises, the value of FXS also increases because the non-collateralized supply is used to buy back FXS.

This model creates a flexible mechanism that ensures high liquidity while maintaining the value of FRAX around 1 USD.

Key features of Frax Finance

Frax Finance has several standout features compared to other stablecoin projects:

• Hybrid Algorithmic Stablecoin: Frax is the first stablecoin combining algorithmic and collateral models, providing flexible stability. A portion of FRAX’s value is guaranteed by collateral, while the rest is algorithmically adjusted.
• Dynamic Collateral Ratio: The collateral ratio of FRAX changes over time based on market volatility. As the price of FRAX stabilizes around 1 USD, this ratio can gradually decrease, enhancing system efficiency.
• Flexible Minting and Redeeming Process: FRAX can always be minted or redeemed at a price of 1 USD. This ensures liquidity and price stability, even during market fluctuations.
• Scalability and Integration: Frax integrates easily with other DeFi protocols, with the ability to scale the collateral model to support various asset types, including other stablecoins and cryptocurrencies.
• veFXS Governance Model: Frax implements the Escrow Vote (veFXS) model, where users can lock FXS to receive veFXS, participating in governance and earning rewards from the ecosystem.
• Self-Adjusting Growth Mechanism: Frax can expand its supply without relying entirely on collateral, maintaining flexibility and stability in the long term.

Basic information about FXS token

Technical specifications of FXS token

• Token Name: Frax Shares (FXS)
• Ticker: FXS
• Blockchain: Ethereum
• Token Standard: ERC-20, BEP-20, PRC-20, SPL
• Contract Addresses:
  • ERC-20: 0x3432b6a60d23ca0dfca7761b7ab56459d9c964d0
  • BEP-20: 0xe48a3d7d0bc88d552f730b62c006bc925eadb9ee
  • PRC-20: 0x1a3acf6d19267e2d3e7f898f42803e90c9219062
  • SPL: 6LX8BhMQ4Sy2otmAWj7Y5sKd9YTVVUgfMsBzT6B9W7ct
• Token Type: Utility, Governance
• Total Supply: 99,854,345 FXS
• Circulating Supply: 35,648,060 FXS

FXS token allocation

• Liquidity Mining: 60%
• Team: 20%
• Token Sale: 12%
• Treasury: 5%
• Advisors: 3%

Uses of FXS token

FXS Token has the following primary uses:

• Project Governance: FXS is used to participate in governance decisions and vote on proposals within the Frax ecosystem.
• Minting FRAX: FXS is combined with collateral to generate FRAX, supporting the stablecoin’s minting process.

Where to buy and sell FXS token

You can buy and sell FXS tokens on the best crypto exchanges such as Binance, Coinbase Pro, Uniswap, SushiSwap and Curve Finance. Be sure to check the exchanges for updated information on trading pairs and liquidity.

Where to Store FXS Token

You can store FXS tokens in cryptocurrency wallets that support ERC-20 tokens, such as MetaMask, Trust Wallet and Ledger Nano X. These wallets offer high security and easy management of Ethereum-based tokens like FXS.

Should you invest in Frax Finance (FXS)?

Investing in Frax Finance (FXS) can be an attractive option if you believe in the platform’s potential to revolutionize the stablecoin and DeFi ecosystem. Frax Finance combines an algorithmic model with collateral, providing a stable and scalable solution.

However, as with any investment, you should carefully consider factors such as market risk, price volatility and project development. Conduct thorough research and personal evaluation before making any investment decisions.

Conclusion

Overall, Frax Finance and the FXS token represent a significant advancement in improving the stability and scalability of stablecoins. To stay updated with more information and detailed analysis of cryptocurrency trends, you can refer to articles and reviews from AZCoin!