The Frax Share token (FXS) is an ERC20 token based on the Frax protocol, which offers an innovative stability mechanism underlying a new design of the algorithmic stablecoin. Launched in December 2020, the asset represents a utility token released by the Frax Finance platform and unlike the other token FRAX, it is meant to be unstable. In addition to the utility functions, FXS also provides governance rights to its holders.
Frax is an innovative platform that implements the concept of a fractional-algorithmic stablecoin, which is partially supported by the collateral and partially stabilized by the specific algorithm. The system uses a multi-chain Frax protocol with a bridging system which allows it to maintain a tight peg for its assets across all networks.
The founders of the platform stick to a governance-minimized approach and implement the trustless money design similar to Bitcoin. In their opinion, it is easier to avoid disagreement when the members of the platform don’t have to decide on numerous parameters of the system. Thus, keeping away from active management, they only have to decide upon such parameters as fees for minting and redeeming, addition, and adjustment of collateral pools. The community also decides upon the rate of the collateral ratio, but it doesn't participate in active management of collateral or the addition of human-modifiable parameters to the system. The only exception is a hard fork that presupposes a full shift to the implementation of a new protocol. The higher is the number of algorithmically generated FRAX, the more FXS are issued enabling the members of the community to obtain higher rewards.
In May 2020, the members of the community received the possibility to lock FXS and get veFXS instead. The new tokens enable users to earn special boosts that provide governance rights. The farmers can lock FXS for up to three years. Additionally, they get AMO (Algorithmic Market Operations) profits. The developers of the system also intend to introduce an optional anonymity feature using the zk-SNARKs technology for the members of the community who mint FRAX.
The Frax platform employs a deflationary economic model. Excess collateral is used to buy back and burn FXS. The platform uses on-chain Uniswap and Chainlink oracles in its work.
The development of Frax Price Index (FPI)
The platform tries to build the first “crypto native version” of the Frax Price Index (FPI) governed by the members of the community. FPI is an algorithmic stablecoin that is entirely a new unit of account, designed to be resistant to inflation. It is going to be pegged to a decentralized consumer price index (CPI) with cryptocurrency native elements built on top of a custom CPI oracle made specifically for FRAX. Frax Finance has expanded its integration with the Chainlink network to perform this task. The integration is implemented on Ethereum and involves Chainlink Any API functionality for the creation of a decentralized, on-chain contract storing most of the latest US Government CPI data.
Using Chainlink Data Feed, FPI manages an inflation-pegged stablecoin that is connected to consumer price data. The goal of the platform’s team is not only to create the first fully decentralized and permissionless unit of account with a higher level of resistance to inflation than the US dollar. It should also have a stable price linked to a basket of goods. Frax Finance and Chainlink announced the 200K USD award to encourage other developers to achieve their vision. With joint efforts, they hope to build a more censorship-resistant global inflation dashboard on the basis of the Chainlink oracle technology. The award was co-sponsored by Chainlink and angel investor Balaji Srinivasan, a former Andreessen Horowitz general partner.
Frax Finance employs high-end security research companies to implement the best security practices in its works. In November 2020, the platform was successfully audited by the leading auditing company Certik.
Trail of Bits security audit that was conducted in July 2021 also hasn’t found any critical flaws in the code. The famous auditing company only issued some recommendations on the internal security and improvement of code that were later implemented by the Frax team.
Frax Share token
Frax Share is used for governance, staking, minting, and redeeming, and rewards claimable for users depositing Uniswap LP tokens to incentivized pairs. FXS is a deflationary type of asset, the supply of which is connected with the FRAX demand. With the increase of the market cap of Frax Share, the capability of the system to keep FRAX stable also increases. Thus, the goal of developers is to attain a higher value of the FXS while keeping FRAX stable.
The initial supply of FXS is 100 million tokens while its market cap is calculated with regard to numerous parameters. It depends on the seigniorage of the FRAX token, the utilization of unused collateral, the cash flow from fees, etc.
Right after the release, the token was listed on the Hotbit and Gate.io exchanges. Binance listing followed in February 2021. Now the asset is available on numerous centralized and decentralized platforms such as Kucoin, BKEX, HitBTC, Uniswap, Sushiswap, etc.
The founder of the Frax Finance platform is Sam Kazemian, an American developer who came up with the idea of the algorithmic FRAX protocol in 2019. He co-founded the platform together with Jason Huan, Bachelor in Computer Science, and Travis Moore, Bachelor in Neuroscience, Biochemistry, Cell/Cellular, and Molecular Biology, who supported the concept and participated in the development of a new stablecoin design.
Before he joined the Frax team, Jason Huan, was one of the founders of a blockchain community at UCLA (University of California, Los Angeles) in 2017, while Travis Moore was interested in cryptocurrencies as an entrepreneur and investor. Since Travis is also a programmer, he became CTO of the Frax Finance platform. It is also worth mentioning that he is a former economic advisor of Donald Trump.