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After the 2017 bull run, the crypto market in 2018 experienced a massive crash that took most prices down by over 90% by the end of it. While the industry now knows that it was simply a part of the crypto cycle, many were fleeing the industry at the time, fearing that the media reports were right, and that crypto was a scam, or that Bitcoin is dead and alike.
Some, who did not want to completely abandon crypto, but were also not too keen on losing massive amounts of money in a bear market, turned to a relatively new and still unknown solution of stablecoins at the time. Thanks to the fact that they are backed by other assets of value, stablecoins figured out a way of being cryptocurrencies and still maintaining stability, and the community loved them.
Ever since then, stablecoins became an established category, and countless ones were launched, both centralized and decentralized, trying out different solutions and possibilities and attempting to be there for when the crypto market needs its own safe haven. This experimentation with different types and approaches led to the birth of Frax Share, which claims to be the world’s first fractional-algorithmic stablecoin.
What Problems Does Frax Share (FXS) Solve?
Stablecoins already solve a major issue of crypto volatility, but Frax Share aims to provide solutions through an innovative approach to this concept. Therefore, it can offer the following:
Scalable money with algorithmic supply
The Frax Share project uses the Frax Protocol, which is the first fractional-algorithmic money in the world featuring the FRAX stablecoin. The project’s goal is to use the Frax protocol to provide a highly-scalable, decentralized, algorithmic money that would replace fixed-supply digital assets. In other words, the project has quite an ambitious goal of offering a more attractive solution than cryptos like Bitcoin.
A decentralized stablecoin
Thanks to being a unique, new type of stablecoin that is partially backed by collateral, while the other part of its supply remains algorithmic, the project manages to act as collateralized and decentralized at the same time. The ratio of collateralized vs algorithmic depends on the market pricing of the coin itself. If FRAX coin starts going above $1, the protocol decreases the collateral ratio, while it can also be increased if FRAX starts trading under $1.
A new category of stablecoin
Before Frax, there were three different categories of stablecoin. The first one was fiat-collateralized, which is what most people think of when they hear the term stablecoin. Next, there are stablecoins that are overcollateralized with cryptocurrency, and finally, there were algorithmic stablecoins but without collateral. Frax, on the other hand, is the first decentralized stablecoin to classify itself as a fractional/algorithmic, allowing it to establish its own unique category, where it currently exists as the only stablecoin of this kind.
Benefits of Frax Share (FXS)
Frax Share is certainly a revolutionary project in the stablecoin sector, but while it may benefit the sector as a whole as a hybrid solution that grants it certain advances, we were interested in seeing what benefits can it offer to its users?
One thing to note about Frax is that it actually has two tokens. The first one is FRAX, which is a stablecoin that we talked about in the previous segments. The other, however, is known as Frax Shares (FXS), and that is the project’s governance token, which accrues fees, seigniorage revenue, and excess collateral value.
This is a non-stable, utility token that is volatile, and which is meant to be volatile. However, the project highlights that it took a highly governance-minimized approach to design trustless money. It says that “We eschew DAO-like active management such as MakerDAO. The less parameters for a community to be able to actively manage, the less there is to disagree on.” In other words, this is not a typical governance token.
But, the community still has some activities left, as the project lists parameters that are up for governance including adding/adjusting collateral pools, adjusting various fees, and refreshing the rate of the collateral ratio. However, no active management is required from the community, as human interference is not necessary.
Frax allows staking to its users, where any LP can stake their LP tokens for up to 3 years. LP stakes are multiplied by two boost factors — time that the tokens spent locked and collateral ratio.
How Does Frax Share (FXS) Work?
Frax is a community-driven, unique design stablecoin, where more than 60% of its supply of FXS is issued over a number of years to yield farmers and liquidity providers. The project is 100% decentralized, with on-chain governance. However, the governance doesn’t include voting on proposals or submitting them, as the project seeks to minimize the conflicts and differences of opinion in its community.
The project also acts as the first and only stablecoin for now that uses a fractional-algorithmic hybrid design.
FXS is its governance token, and it is a volatile, utility token, while FRAX is the project’s stablecoin, which trades at $1.
How to Buy Frax Share (FXS)
Currently, Frax Share (FXS) is available for purchase on the following exchanges:
Uphold – This is one of the top exchanges for United States & UK residents that offers a wide range of cryptocurrencies. Germany & Netherlands are prohibited.
Kraken – Founded in 2011, Kraken is one of the most trusted names in the industry with over 9,000,000 users, and over $207 billion in quarterly trading volume.
The Kraken exchange offers trading access to over 190 countries including Australia, Canada, Europe, and is a top exchange for USA residents. (Excluding New York & Washington state).
Uphold Disclaimer: Terms Apply. Cryptoassets are highly volatile. Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment, and you should not expect to be protected if something goes wrong..
Frax Share (FXS) — The world’s first fractional-algorithmic stablecoin
Frax is a unique project among stablecoins and even the broader cryptocurrency industry. For years now, stablecoins have been highly popular in the crypto industry, acting as safe haven during the bearish periods, and they were also used by pretty much everyone at some point to easily purchase less popular cryptocurrencies, which are often only paired against stablecoins.
The project has seen the issues that can come from centralized stablecoins such as Tether, and it decided to make its own token a fully decentralized one. However, it also saw the issues of uncollateralized stablecoins, which is why it decided to improve on that model by inventing its own, partially-collateralized token that we see today, as potentially the most advanced stablecoin solution to date.
Ali is a freelance writer covering the cryptocurrency markets and the blockchain industry. He has 8 years of experience writing about cryptocurrencies, technology, and trading. His work can be found in various high-profile investment sites including CCN, Capital.com, Bitcoinist, and NewsBTC.
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