What is Frax (prev. FXS) (FRAX)?

Deep Dive

1. Purpose & Value Proposition

FRAX pioneered the fractional-algorithmic stablecoin model at launch in 2020 (CoinMarketCap). Unlike purely collateralized stablecoins (e.g., USDC), it dynamically adjusts supply using partial reserves and algorithmic mechanisms to maintain its USD peg. This hybrid approach aims to reduce overcollateralization risks while retaining decentralization.

2. Technology & Architecture

As the native token of Fraxtal, FRAX is used for transaction fees and securing the network via validators. The blockchain supports DeFi protocols like Fraxswap (AMM) and Fraxlend (lending), where FRAX acts as core liquidity. Unlike governance tokens, FRAX itself isn’t used for protocol votes but can be staked as veFRAX to govern parameters in affiliated DeFi apps (Frax Docs).

3. Tokenomics & Governance

FRAX has a fixed emission schedule: 8% annual inflation at launch, decreasing by 1% yearly until stabilizing at 3%. Emissions fund ecosystem growth, validator rewards, and community initiatives. The Frax Burn Engine (FBE) permanently removes tokens from circulation via fees (e.g., Fraxtal’s EIP1559 base fees), creating deflationary pressure (Frax Docs).

Conclusion

Frax is a dual-purpose asset: a stability-focused stablecoin and the foundational token of the Fraxtal ecosystem. Its hybrid design and deflationary mechanics aim to balance scalability with value preservation. How will Fraxtal’s infrastructure adoption influence FRAX’s role beyond stablecoin use cases?