What is Frax Share?

The Frax Share token, Frax Shares, or FXS is the utility token of the Frax Protocol. The latter is a hybrid stablecoin protocol. Frax is running on the Ethereum blockchain. The name Frax comes from its unique technology called the fractional algorithmic protocol.

Frax Protocol is powered by two tokens - FRAX and FXS.

FXS is based on the ERC-20 token standard and mainly serves as a governance token for on-chain governance of the Frax Share Protocol.

Frax Share token can be used to pay for features on the Frax platform. This includes key actions such as the minting and redeeming of FRAX stablecoins.

Moreover, FXS is paid out as a crypto reward for users who stake their tokens in liquidity pools.

Frax users can also lock in their Frax Share tokens and receive veFXS - a non-transferable token that grants farming boosts and exclusive governance rights. The maximum locking up period is set to 4 years.

Unlike the FRAX stablecoin, FXS tokens have a max cap. It stands at 100,000,000 FXS tokens. This means there will never be more FXS tokens than the max cap.

In addition, the max cap could translate to an increase in the value of the FXS token as it becomes more scarce.

Since FRAX is a cryptocurrency, its price tends to fluctuate. In order to make an informed purchase decision, you can have a more in-depth look at the FXS price history or the current Frax Share price on the graph above.

What is the Frax Protocol?

As discussed in the What is Frax Share section, Frax is a hybrid stablecoin protocol. What do we mean by hybrid? Frax takes the two types of stablecoins - fully collateralized and fully algorithmic - and combines them into one.

Fully collateralized stablecoins can also be divided into stablecoins collateralized with fiat currency and stablecoins collateralized with other cryptocurrencies. In turn, this makes three types of stablecoins. That was until Frax changed the game by creating a completely new type of stablecoins.

Some of the core benefits of the Frax Protocol are that it tackles issues prevalent to other types of stablecoins such as increased volatility, custodial risk, and sluggish growth.

It’s important to note that prior to the FRAX stablecoin, there have been many projects who have tried to implement a partially collateralized stablecoin. However, all of them failed except for the Frax crypto project.

There is no max cap of FRAX stablecoins. This is because the supply of FRAX is constantly changing.

The ratio of the collateralized supply and algorithmic supply is based on the market price of FRAX. If it’s over 1 US Dollar, the collateralized supply is decreased. On the other hand, if it’s under 1 US Dollar, the collateralized supply is increased.

For example, if the demand for the FRAX stablecoin dropped, FRAX would end up being almost 100% collateralized.

As a matter of fact, there was a point in time when FRAX was completely collateralized.
When the project was first launched, the team had to add collateral to the minting contracts. The latter is responsible for minting FRAX and burning FXS.

The mechanism lying behind the FRAX stablecoin is quite complex in itself. It’s a multi-chain fractional algorithmic protocol with a pool contract. 

The core function of these pools is to enable users to mint and redeem FRAX stablecoins. At the time of writing, there is only one type of Frax Pools which are collateralized with USDC.

Other types of Frax Pools can be implemented by successfully submitting a proposal to the Frax DAO.

Frax is an entirely open-source project. This means that the project’s code is publicly available for anyone to review.

One of the primary goals of the project is to provide a type of algorithmic money that comes with improved stability and scalability.

In addition, Frax aims to create a new stablecoin standard. They’re planning on doing this by introducing a crypto equivalent of the Consumer Price Index (CPI) called the FRAX Price Index (FPI).

Frax Share has been audited by independent blockchain security companies - Certik and Trail of Bits.

Who Developed Frax Share?

The Frax Share crypto project was launched in November of 2020. It’s a software development company co-founded by entrepreneurs Sam Kazemian, Jason Huan, and Travis Moore.

However, Sam Kazemian was the one who came up with the idea behind the project in 2019. He took notice of the fact that while stablecoins were increasing in popularity, they were either completely collateralized or based on an algorithmic monetary policy.

Therefore, he decided to combine these two aspects and provide the stablecoin market with a unique type of stablecoin that’s both collateralized and algorithmic.

Sam Kazemian has also co-founded Everipedia - a blockchain-based educational platform along with Travis Moore.

On the other hand, Frax Share was the first blockchain-based venture for Jason Huan.

Don't forget to check the FRAX price via the tracker above before making a purchase decision.