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What Is Frax Share (FXS) Coin

Frax is the first fractional algorithmic stablecoin protocol and the only stablecoin with parts of its supply backed by collateral and parts of the supply algorithmic. The ratio of collateralized and algorithmic depends on the market's pricing of the FRAX stablecoin.

Frax Finance is a dual token system comprised of the Frax (FRAX) stablecoin and the Frax Share (FXS) governance token. The FRAX Share token is a financial investment and governance asset, whereas Frax is a cryptocurrency-tokenized currency. The tokens operate on Ethereum, Binance Smart Chain, Evmos, Avalanche, Solana, etc.

The Frax protocol's objective is to create highly scalable, decentralized, algorithmic money in lieu of fixed-supply digital assets such as Bitcoin. One of the use cases of the Frax stablecoin is providing investors with the option to earn interest on their crypto assets through DeFi markets. As FRAX price is stable, it reduces the impacts of market volatility.

To maintain the 1:1 peg to the USD, Frax balances the collateralized and algorithmic portions of the FRAX stablecoin. So, in the case of the FRAX price surpassing $1, the protocol reduces the collateral ratio. If the FRAX price goes below $1, the system increases the ratio of collateral. In the process of minting new FRAX stablecoins, the circulating supply of Frax Shares decreases. Additionally, when the protocol reduces the ratio of collateralization, an increased number of FXS tokens are burned for a corresponding amount of FRAX, which increases FXS value.

The price of Frax Shares (FXS), on the other hand, is volatile. FXS empowers the system with the governance and utility carried out through it. FXS is needed to mint new FRAX stablecoins, vote on proposals, and pay for protocol fees. FXS accrues all value of new-minted FRAX, fees, and excess collateral.

How Does Frax Share (FXS) Coin Work

Frax Share plays a central role in the protocol.  FXS is a financial investment and governance asset, whereas FRAX is a cryptocurrency-tokenized currency.

The process of minting and redeeming FRAX tokens helps maintain the price stability of the stablecoin. Accordingly, the more people use the protocol, the more stable the FRAX token becomes. Furthermore, the demand for FRAX tokens influences the price of the FRAX token and can create arbitrage opportunities. 

FXS token holders can vote on proposals, including the addition of new collateral pools, proposals to make changes to fee structures, and "the rate of the collateral ratio."

The veFXS token model is a "vesting and yield system," and by locking up FXS tokens, holders receive veFSX in return. The number of veFXS tokens that a staker gets is proportional to the duration of their stake. The veFXS token is non-transferable and cannot be traded on liquid markets; instead, it aims to encourage long-term staking.

The project's vision is to become the first crypto native consumer price index (CPI), which FXS token holders will govern. Currently, the FRAX token is price-pegged to the US dollar. However, the project aims to support multiple currencies and become a worldwide permissionless unit of account in the future.

Unlike the FRAX stablecoin, the Frax Share price is volatile. FXS token was launched in November 2020, with its initial supply set to 100 M. However, there is no max supply as FXS tokens are minted and burned at algorithmic ratios.

Frax and UST Partnership

At the start of April 2022, FRAX stablecoin has been seeing a major increase in adoption, which means that a high number of Frax Share tokens have been burned to keep the price stable. As the number of FXS tokens in circulation decreases, the Frax Share price increases. One of the main reasons for FXS's current high demand is the launch of the liquidity pool, with TerraUSD (UST), Tether (USDT), USD Coin (USDC), and FRAX stablecoins. FXS current price has increased nearly 80% in the past week as Terra developers introduced the 4pool liquidity pool on stablecoin swap service Curve Finance. 4pool comprises two decentralized stablecoins, UST and Frax’s FRAX, and two centralized stablecoins, USDC and USDT. It aims to increase the utility of Terra’s UST stablecoins through a partnership with Frax and Redacted Cartel, a tool for earning yields on locked tokens.

Frax Share (FXS) Coin Founders

Sam Kazemian, an American software developer, came up with the idea of a fractional-algorithmic stablecoin in 2019 and founded the Frax Protocol.

The Frax team includes Travis Moore and Jason Huan, two of the company's leading engineers.

Sam Kazemian came up with the concept when he noticed that the number of stablecoins was rapidly increasing, but none of them combined algorithmic monetary policy with collateralization. Algorithmic monetary policy projects had either failed or been shut down because of a lack of traction in the real world. So, Frax was created to gauge the market's confidence in a stablecoin that is both partially algorithmic and partially collateralized.

Before the foundation of Frax Finance, Kazemian co-founded the decentralized online encyclopedia Everipedia in 2014.

Jason Huan is specialized in Computer Science. In 2017 he started a student-run blockchain community focused on blockchain applications' technological and business aspects at The University of California, Los Angeles. Huan taught general blockchain education and programming at UCLA Engineering School.

Travis Moore is a computer programmer, angel investor, and entrepreneur. He is the CTO and co-founder of Frax and Everipedia. Travis is also a graduate of the USLA, with degrees in Molecular Biology, Biochemistry, and Neuroscience.

How to Buy Frax Share (FXS) Coin

Frax Share is available on various crypto exchanges, including Binance, FTX, Sushiswap, Hoolgd, Uniswap, KuCoin, Gate.io, etc. Read more on how to buy FXS in our blog post: "How to Buy Frax | Where, How, and Why."