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Audits & Exploits



Admin Keys





Token Distribution


Other Details

  • Leverages a two-token model to create an algorithmic, partially-collateralized stablecoin.


  • Has the FRAX stablecoin.


  • Whitepaper can be found [insert here].
  • Code can be viewed [insert here].


How it works

"Whenever FRAX trades above $1 the protocol’s collateralization ratio is lowered and its algorithmic mechanics become more pronounced, while this collateralization ratio is increased whenever FRAX trades below $1."

"FRAX maintains its price stability by offloading its volatility to FXS, which is the governance token that also partially collateralizes the system. As long as there is a buyer on the open market for FXS, FRAX should be able to maintain its peg."

"The FRAX model claims to be under-collateralised but rather a more accurate description is that it’s algorithmically collateralised through a two token system. Here’s how it works:

  1. The system starts off being 100% collateral based, which means that in order to mint FRAX you need 1 USDC per FRAX. However, if this is anything below 100% then an equivalent amount of FXS (Frax Shares) need to be deposited. Think of it that rather than depositing 1 USDC you would deposit 0.9 USDC and $0.10 worth of FXS. It’s not really under-collateralized since you still need to deposit at least $1 of value, however it isn’t over-collateralized.
  1. Now, as time goes on, if the price of FRAX is above $1, then the collateral ratio reduces by 0.25% each hour. If the price of FRAX is below $1 then the collateral ratio increases by 0.25% each hour.
  2. The net result is that the system can become something like 90% collateralized meaning only 90% of USDC needs to be deposited and 10% of FXS per FRAX minted.

However, this isn’t what helps FRAX maintain its peg. The crucial part here is that anyone who buys and holds FRAX can redeem it for $1 worth of USDC and/or FXS. This means that the peg can be a lot stronger since arbitragers can buy cheap FRAX if it goes below $1 and redeem it for $1 of real collateral. Similarly if the price of FRAX goes above $1 then arbs can come in and mint 1 FRAX for $1 and then sell it for $1.10 (or whatever the above-peg price is)."

"FRAX is unique; it is the most central bank-like of algorithmic stablecoins I have seen. If you take a real central bank, most of their assets are other sovereign currencies. Similarly, the assets on FRAX’s balance sheet are other stablecoins. In crypto, this might seem like a strange design choice. But also like a true central bank, FRAX is able to adjust its collateralization level according to the demand for its own currency. When there is more demand for FRAX, the system can run looser, and when demand wanes, it can tighten. Like with Seigniorage Shares, the money supply of Frax is elastic. When demand for the FRAX stablecoin increases, the system can expand the money supply beyond the total collateral in the system. But unlike with Seigniorage Shares, FRAX can also tighten monetary policy when market conditions call for discipline.

But perhaps the most interesting element of Frax is its Algorithmic Market Operations (AMOs). Frax allows anyone to propose an AMO strategy via governance (a la Yearn), and if the strategy is good for the Frax ecosystem, it is free to be adopted.

One such AMO involves minting FRAX into a Curve pool to strengthen the peg. (This is essentially like the central bank minting unbacked currency to defend the peg in the market.) Another example might be minting FRAX to lend on Compound to improve its liquidity, and so on. If it is profitable, or accomplishes a socially useful goal, it can be minted just-in-time and funded via an AMO. But if that AMO overreaches and triggers a decrease in confidence in FRAX (as measured by FRAX going below the peg), the AMO can automatically pull back using the same predefined algorithm."



"Unveiled its V2 system, which involves underpinning the FRAX stablecoin with + zero-coupon bonds."


Liquidity Mining

  • From Yield Farmer (16-1-2021):

"Has launched a liquidity mining campaign centered around its FXS governance token."



Other Details

Oracle Method

Privacy Method


Their Other Projects


  • Can be found [Insert link here].


Projects that use or built on it


Pros and Cons



"While the FRAX model does move in the right direction, it still has a few major problems:

  1. Right now FRAX only supports USDC meaning it’s a wrapped for USDC in some ways. FRAX v2 attempts to add volatile currencies through the introduction of FRAX bonds.
  2. FRAX can’t be used effectively for leverage (like MakerDAO or ARCx) since depositors have no guarantee that they’ll receive their exact amount and type of collateral back. This may be okay assuming FRAX aims to be a primary MoE exchange coin. However, like others, the main beneficiaries of the FRAX stablecoin are the FXS holders who will have increasing power to mint FRAX with their FXS.

The last point around early holders is something I think that plagues all algorithmic stablecoins, and that’s the fact that they enrich early holders at the expense of later holders. Ultimately this will hinder their ability for real adoption since the late adopters will become the early adopter’s exit liquidity."

Team, Funding, Partners


  • Full team can be found [here].


"Frax recently closed a strategic round, which was led by us at Dragonfly Capital, with participation from Electric Capital, Robot Ventures (Robert Leshner & Tarun Chitra), Balaji Srinivasan, and Stani Kulechov."



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