The Dawn of the "Fraxtal Era": Is Frax Finance's DeFi Ambition About to Materialize?

introduction

Today, Frax Finance announced the launch of the modular L2 blockchain Fraxtal. The testnet and mainnet have been opened to select launch partners, and ordinary users will be able to connect to the chain in the next few days and call it”The most important version since the birth of Frax Finance in 2020”。

So what kind of chain is Fraxtal, what is unique about it, and what kind of DeFi ambition does Frax Finance carry?

Fraxtal: Modular Rollup based on OP stack

As early as November 2023, Frax founder Sam Kazemian revealed on the official Telegram that Frax Finance plans to launch the Ethereum L2 network Fraxchain, and the test network hopes to be online in early January 2024 (currently it is expected to be February).

He also specifically emphasized that the L2 chain is “not an application chain”, and that Frax Finance’s liquidity staking product frxETH will be used as a Gas payment token, and FXS is Fraxchain’s sequencer staking token to capture Rollup sequencer revenue.

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Then in January this year, Sam Kazemian revealed that the chain planned to be launched in the first week of February and was officially named “Fraxtal”.

According to the latest official document information, Fraxtal, as an L2 network, is also a modular Rollup blockchain with a “fractal scaling” roadmap. Its functions and features include:

• EVM equivalence. Fraxtal uses the OP stack as its smart contract platform and execution environment, allowing project parties to deploy applications as quickly, securely and cost-effectively as Optimism and Base;
• Modular Rollup. Fraxtal will have multiple components and middleware for other chains and networks to use, connect to, deploy L3 and build on top of it, currently Fraxtal uses a separate Data Availability (DA) module developed by the Frax Finance core team;
• Blockspace incentives (called Flox). This feature is used to reward users and developers - any account and smart contract that spends Gas and interacts with any smart contract on the network will be rewarded with “Fraxtal Point System” (FXTL) points based on the Flox algorithm, which can later be used Convert to tokens;
• frxETH as Gas payment token;

In addition, according to official disclosures, Fraxtal will be launched with major Ethereum infrastructure providers, including Etherscan’s Fraxscan and various DeFi-related services such as Safe, Chainlink, Axelar Network and LayerZero.

Just after today’s official announcement, Frax Finance co-founder Travis Moore stated in the official Telegram group that “the mainnet browser will be launched soon.”

Fraxtal’s unique block incentive mechanism

Among all the features of Fraxtal, the most eye-catching one is Fraxtal’s unique block incentive mechanism, which specifically includes the points system FXTL and the “block space incentive” (Flox) algorithm.

Fraxtal Points System FXTL

What is FXTL?

It is the “Fraxtal Point System” specially launched by Frax Finance for Fraxtal to reward and motivate participants in the ecosystem - includingCreate and interact with smart contracts, leverage new protocols deployed to the chain, and hold specific types of assets/tokens.

In other words, any user or developer who spends Gas on Fraxtal to create contracts, contract interactions, etc. will have the opportunity to obtain corresponding FXTL point rewards, and the accumulation of these points is tracked and managed through the FraxtalPoints main contract:

This contract serves as a ledger for all FXTL related transactions and balances, and users can access and view accumulated FXLT points through this contract.

at the same time,FXTL points will be tokenized within 12 months of the creation of the Fraxtal chain,But it is unclear whether FXTL points will be tokenized into a separate staking token (FXTL) on the chain, or converted to FXS at a specified ratio.

“Block Space Incentive” (Flox) algorithm

The “Block Space Incentive” (Flox) algorithm isAutomatic algorithm to calculate the specific number of FXTL points earned by users and smart contracts,It calculates rewards on a block-by-block basis based on Fraxtal chain usage.

The calculation period is every epoch (initially 7 days), and all EOA addresses that spend Gas on Fraxtal and smart contracts that use Gas will receive proportional FXTL point rewards based on the Flox algorithm.

more importantly,The Flox algorithm encourages users to interact with widely used contracts, rather than trying to maximize their incentives through less used or proprietary contracts.

In order to do this, the Flox algorithm mainly contains two innovations:

• The transaction trace of Gas used by any smart contract can be traced;
• In any random block of each epoch, a special algorithm can be applied to rank the importance of smart contracts (e.g. according to users and assets held by the contract);

On this basis, smart contract developers can specify a Flox proxy address for each contract at deployment time, which is authorized to manage Flox incentives on behalf of the specified contract.

For example, if a user uses 1inch to implement USDC/FRAX exchange transactions through the Curve pool, then:

• At the user reward level, the FXTL points balance will automatically change at the end of each epoch and be directly added to the FXTL point balance of the corresponding address;
• At the smart contract reward level, FXTL incentives will be intelligently allocated to the 1inch router contract, Curve pool contract, USDC contract and FRAX contract;
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In short, by leveraging FXTL as an incentivized currency, Flox plans to move beyond the network’s early transaction fee sharing model.Distribute value to users and developers, thereby incentivizing DApps to proactively deploy on the network out of profit considerations.

FXTL points airdrop for veFXS

veFXS is the pledge token of FXS. Before the launch of Fraxtal, it could only be pledged on the Ethereum mainnet. With the launch of Fraxtal, users will be able to pledge veFXS on Fraxtal through the improved pledge contract:

A separate veFXSCounter contract is responsible for reading the status of the veFXS contract on the Ethereum mainnet and combining it with the user’s veFXS balance on Fraxtal, thereby unifying the user’s veFXS balance between the Ethereum mainnet and Fraxtal.

And the combined balance shown in the veFXSCounter contract is used for Fraxtal utilities such as Flox boosts, governance voting, and various new features. In a nutshell, veFXS staked on Ethereum mainnet or Fraxtal functions the same.

also,At 7:59 on March 7, 2024, Fraxtal will airdrop FXTL points to veFXS stakers based on the veFXS balance for one week. The specific amount and distribution model have not been disclosed as of the time of publication.(Perhaps proportional to the pledge amount and time).

The Flox mechanism will then go live and users who deploy DApps and bring assets to Fraxtal will start earning FXTL Points on every block they use the chain.

summary

Looking at the development history of the past two years, Frax Finance’s product strength is unparalleled among the “DeFi veterans”:

From being a “stable giant” as famous as Terra in 2022, to frxETH’s astonishing growth rate in 2023, and the RWA layout such as sFRAX being the first to arrive, until now Fraxtal, which claims to be the “most important version”, has surfaced.

Although the removal of calculation stability factors and the launch of fraETH are passive adjustments, Frax Finance has generally turned around in a timely manner and magicallyThe new products are coupled with each other and a self-contained DeFi matrix is ​​built, with almost no hot narrative left behind.

The latest Fraxtal also carries its ultimate ambition to a certain extent - to build a DeFi universe with the L2 chain as the core, collect fees and traffic into one place, and create its own “Fraxtal” era.

Objectively speaking, this may help it become the project with the furthest reach on the DeFi track, but the narrative is sexy and the timing is unpredictable. Whether Frax Finance in 2024 can truly create its own “Fraxtal” era remains to be seen. .

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