About the Frax Protocol (FRAX)

the Frax Protocol Frequently Asked Questions (FAQ)

What is the purpose behind the creation of the Frax Protocol (FRAX)?


The Frax Protocol was created as a decentralized stablecoin system with the purpose of providing a highly scalable, decentralized, algorithmic money in place of fixed-supply digital assets like Bitcoin. FRAX is the first stablecoin with a fractional-algorithmic design, aiming to provide a stable and trustless form of currency without a need for central authority oversight.




How does the Frax Protocol ensure the stability of the FRAX stablecoin?


Frax Protocol ensures the stability of the FRAX stablecoin by using a fractional-algorithmic mechanism. It adjusts the collateral ratio based on market conditions, using a combination of collateralized assets and algorithmic processes to stabilize FRAX’s price around the $1 USD target. By dynamically balancing collateralized and algorithmic responses to demand, Frax maintains the peg and ensures the stablecoin's stability.




In what ways can the FRAX stablecoin's monetary policy be described as fractional-algorithmic?


FRAX stablecoin's monetary policy is fractional-algorithmic because it employs a combination of collateral backing and algorithmic mechanisms to maintain its peg to the US dollar. A fraction of FRAX is backed by collateral in the form of cryptocurrency, while the remainder of its value is stabilized through algorithmic adjustments to its supply. This approach enables FRAX to adjust dynamically to changing market conditions, partially relying on collateral like a traditional stablecoin and partially using algorithms similar to purely algorithmic stablecoins.




Can you explain the role of oracles within the Frax Protocol and which oracles are used?


In the Frax Protocol, oracles play a critical role by providing accurate and timely price feeds for various assets. These price feeds enable the protocol to maintain the stablecoin's peg to the desired reference value. Frax primarily uses Chainlink as its oracle provider to ensure that the information for determining collateral ratios and stability mechanisms is reliable and tamper-proof. Chainlink's decentralized infrastructure offers high-quality data by aggregating multiple sources, reducing the risk of price manipulation and single points of failure.




What are the differences between FRAX and FXS tokens?


FRAX is the stablecoin within the Frax Finance ecosystem, designed to maintain a stable value pegged to the US dollar. FXS, or Frax Share, is the governance token of the Frax Finance system, which represents voting power and accrues value from fees and seigniorage. While FRAX aims for price stability, FXS has a variable supply and its price is subject to market conditions.




Is there a maximum supply cap for FXS tokens and what is its value?


Yes, there is a maximum supply cap for FXS tokens, which is fixed at 100 million FXS.




What mechanisms are in place for the governance of the Frax Protocol?


The governance of the Frax Protocol is driven by the Frax community through the ownership and use of Frax Shares (FXS) tokens. Holders of FXS can propose and vote on changes to the protocol, with proposals requiring a minimum token threshold to be considered, and voting weight proportional to the number of tokens held. This decentralized governance allows holders to directly influence the protocol’s rules, monetary policy, and upgrades.




How is the Frax Protocol different from other types of stablecoins available in the market?


The Frax Protocol is unique as it introduces the concept of a fractional-algorithmic stablecoin system. Unlike fully collateralized stablecoins that are backed 1:1 by fiat or crypto, or purely algorithmic stablecoins with no collateral backing, Frax combines both approaches. It uses a variable ratio of collateralized and algorithmic mechanisms to maintain its peg to the USD, intending to reduce over-collateralization and maintain stability efficiently. This design enables the protocol to adjust the collateral ratio based on market conditions to stabilize its stablecoin, FRAX.




Who founded the Frax Protocol and what was the inspiration behind it?


The Frax Protocol was founded by Sam Kazemian, with the inspiration to create the first fractional-algorithmic stablecoin system that is open-source, permissionless, and entirely on-chain.




Where can users purchase or trade FRAX and FXS tokens?


Users can purchase or trade FRAX and FXS tokens on various cryptocurrency exchanges. Availability may vary, so users should check the current listings on platforms such as Uniswap, SushiSwap, and centralized exchanges like Binance or Coinbase.