What is Frax Finance?
Frax Finance is a decentralized finance (DeFi) protocol that introduced the concept of fractional-algorithmic stablecoins. Launched in 2020, its main product is the FRAX stablecoin, which maintains its peg to the US dollar through a combination of algorithmic stabilization and collateral backing. This approach dynamically adjusts the collateralization ratio based on market conditions, ensuring stability and efficiency.
Frax Finance also includes Frax Share (FXS), the governance and utility token of the ecosystem, which allows holders to participate in governance and absorb volatility. Additionally, Fraxlend is a decentralized lending market within the ecosystem, enabling users to borrow and lend assets using FRAX. Fraxswap is an automated market maker (AMM) designed for trading and liquidity provision, enhancing liquidity and trading efficiency.
Moreover, Frax Finance offers frxETH and sfrxETH, ETH derivatives aimed at optimizing staking and liquidity. These tokens enhance yield opportunities for users by integrating ETH within the Frax ecosystem. The protocol's Fraxtal, an Ethereum Layer 2 network, has been launched using frxETH as its native gas token to increase scalability and utility within the DeFi landscape.