Many stablecoin protocols adopt one design (full support) or the other extreme (full algorithmic without support). The collateralization-backed stablecoin either has asset custody risk or requires an excessive support on the chain.

Compared with pure algorithm designed stablecoins, these designs can provide pegged stablecoins with high reliability. Pure algorithm design projects such as Basis, Empty Set Dollar and Seigniorage Shares provide a highly trustless and scalable model, reflecting the vision of early Bitcoin, that is, a decentralized stablecoin. The problem with the algorithm design is that they are difficult to guide, slow in growth (as of the fourth quarter of 2020, no project has shown significant attraction), and extremely volatile, which erodes people's confidence in their actual use as stablecoins. They are primarily seen as a game / experiment rather than a serious alternative to guaranteed stablecoins.

Frax tries to become the first stablecoin protocol to realize two design principles, that is, to create a highly scalable, trustless, extremely stable and pure ideological on-chain currency. Frax protocol is a dual token system, including a stable token Frax (Frax) and a governance token Frax Shares (FXS). The agreement also has a contract pool of collateral (USDT and USDC in the creation stage). Pools can be added or deleted through governance.

Although there is no predetermined time frame for the change speed of collateral, we believe that with the increase of FRAX adoption, users will be more willing to see a higher proportion of FRAX supply stabilized through algorithms rather than through collateral. The collateral proportion refresh function in the protocol can be called by any user once every hour.

If the price of FRAX is higher or lower than US $1, this function allows the guarantee rate to be changed by 0.25% each time. When the price of FRAX is higher than $1, the function will reduce the mortgage rate once; when the price of FRAX is lower than $1, the function will increase the mortgage rate once. The refresh rate and adjustment rate parameters can be adjusted through governance. After future protocol updates, they can even dynamically adjust the PID controller design. The prices of FRAX, FXS and collateral are calculated based on the time weighted average of Uniswap trading pair price and Chainlink oracle to ETH / USD price.

Chainlink oracle enables the agreement to obtain the real price in US dollars instead of the average price of the stable pool on Uniswap. This allows FRAX to remain stable relative to the dollar itself, which will provide greater flexibility rather than just using the weighted average of existing stablecoins.

As long as the appropriate components are put into the system, FRAX stablecoins can be minted. In the initial state, FRAX is 100% collateralized, which means that FRAX can be cast only by placing collateral in the mint contract. In the mixing phase, creating FRAX requires setting an appropriate collateral ratio and burning Frax governance token FXS.

Although the protocol aims to accept any type of cryptocurrency as collateral, the implementation of Frax protocol will mainly accept the on-chain stablecoin as collateral to eliminate the volatility of collateral, so that Frax can smoothly transition to more algorithm ratios. With the improvement of system speed, it will be easier and safer to incorporate volatile cryptocurrencies (such as ETH and WBTC) into the future governance pool.

How does FRAX (FXS) Work?

Frax Finance is a decentralized cross-chain "score algorithm" stablecoin protocol. Frax Finance's goal is to build a scalable open-source currency through flexible products. The native FRAX token is a stablecoin backed by algorithms and collateralization, making it the first stablecoin of its kind.

The Frax Finance ecosystem includes two major assets. The first is the FRAX token, a stablecoin pegged to the US dollar. The second is FXS governance and utility tokens, which allow holders to earn excess fees and collateral value. In addition, the holder can vote on the proposal to change the agreement.

Frax Finance does not seek a single support channel (i.e., 100% algorithm or guarantee) like many stablecoins, but provides a highly scalable and "ideological" stablecoin system. The proportion of guarantee and algorithm support is determined by the market price of FRAX tokens. When the transaction price of FRAX tokens is less than $1, the Frax Finance protocol will increase the collateralized rate. On the other hand, when the trading price of FRAX tokens is higher than US $1, the collateral index will drop.

The vision of the project is to become the first cryptocurrency local consumer price index (CPI) managed by FXS token holders. Currently, FRAX tokens are pegged to the US dollar price. However, in the future, the project aims to support multiple currencies and become an unlicensed unit of account worldwide. In addition, with the improvement of Frax Finance system speed, cryptocurrencies with large fluctuations such as ETH and WBTC may be regarded as collateral.

What is FRAX (FXS)?

Frax Finance is a "score algorithm" stablecoin protocol, which combines algorithm support and collateral support. Most stablecoins tend to use collateral or algorithmic support. However, Frax Finance provides a solution that switches between two types of support to reflect market confidence.

FXS tokens are native utility and governance tokens. The protocol automatically buys tokens FXS and burns them to control supply. In addition, FRAX token is the native stablecoin of the Frax Finance ecosystem. The only way to mint FRAX tokens is to lock the value in the protocol.

FRAX (FXS) Crypto Wallet

In addition to placing FXS in the Gate.io exchange to facilitate trading, FXS can also be placed in a crypto wallet.

Frax Share wallet is a software in which users can store and manage their FXS. In fact, Frax Share is stored in the blockchain, and you can access cryptocurrency using a public key and a private key (a password). The wallet looks like any financial application, allowing you to save, send, receive, exchange and perform other operations using Frax Share.

One of the best places to store Frax Share (FXS) is a crypto hardware wallet made by Ledger or Trezor. Hardware wallet uses extremely high-end encryption technology to protect your funds from complex network attacks and even simple phishing scams that users may encounter when they deposit their funds in software or website wallets. Hardware wallets even allow users to recover money through mnemonic phrases to prevent the wallet from being stolen, damaged or otherwise damaged.

Trust Wallet is one of the most popular wallets among traders and investors. It is a good place to store Frax Share (FXS). If you are just starting to use cryptocurrency, or just want to store your FXS on a secure device, mobile wallets may be appropriate because they provide convenience, security and backup options.

Frax Share (FXS) can be stored in Atomic Wallet, which is a wallet that supports Android, IOS and multiple desktop versions. Atomic Wallet supports more than 300 cryptocurrencies, including FXS and all other ERC20 and BEP2 tokens. Atomic Wallet also provides Atomic Swaps and a built-in Exchange. Users can use it to exchange back and forth among all supported assets, including Frax Share.

You can also store Frax Share (FXS) in one of the most trusted and proven wallets: MyEtherWallet. All ERC20 tokens including Frax Share (FXS) can be stored on the Ethereum blockchain using MyEtherWallet without downloading any client or software.

MyEtherWallet provides traders and investors with a web-based solution that allows them to log in from anywhere. Although users need to be cautious about phishing attempts through fake copies of websites, through secure devices and Internet connections, you can use your Ledger or Trezor hardware wallet, mnemonics or various other login methods to access your funds.