Frax Share

Frax describes itself as the first fractional-algorithmic stablecoin protocol. It introduces the concept of cryptocurrency both backed by collateral and algorithmically stabilized. It aims to create decentralized and scalable algorithmic money, as opposed to assets with a fixed supply. It's a multichain protocol available on multiple blockchains like ETH, or AVAX. Frax also envisions the creation of Frax Price Index (FPI), which would be the first crypto version of the Consumer Price Index (CPI).

The Frax network has two native tokens. FRAX is the stablecoin, which is pegged to the USD by the fractional-algorithmic stability mechanism. The other token is Frax Share (FXS), the non-stable governance and utility token.

The FXS token has a hard, maximum supply of 100 million units, but the circulating amount may vary due to deflationary mechanisms. This is connected to the supply of the FRAX stablecoin. FXS supply will be mostly deflationary, as the demand for FRAX grows. Also, as the market cap of FXS grows, so does the stability of FRAX. The Frax Protocol also takes inspiration from the seigniorage model, making it a hybrid (fractional) model. In it, FXS tokens are required in order to mint new FRAX stablecoins. During the fractional-algorithmic phase, as FRAX gets minted, FXS is being burned. Identically, as FRAX is redeemed, new FXS tokens get minted.

FXS tokens are also given as rewards to users who deposit Uniswap Liquidity Pool tokens to incentivized token pairs. Any liquidity pool may lock up their LP tokens up to a time period of 3 years. Two factors go into calculating rewards for providing liquidity. Locking time increases the amount of FXS tokens the specific user will receive. While a higher collateral ratio raises the FXS rewards distribution across the entire system. If an LP emission rate changes, for example as a result of governing action, the time lock ends automatically.

FXS may also be staked to receive veFXS tokens. veFXS rewards users with additional voting power in the decentralized governing system. They also give farming boosts and give yield in the form of FXS.