ConcaveFi Gitbook

Frax Finance

Stable coins have over time become a huge market in crypto, worth over $167 billions at the beginning of 2022 and shows no signs of slowing down. There are two main categories of stable coins, centralized fully backed stable coins which are backed by $1 in a bank somewhere in the world (USDC/Tether) or algorithmic stable coins backed by crypto (DAI/Terra UST). Both categories of stable coins have their inherent flaws (centralized stable coins can blacklist funds and are reliant on an actor to ensure their promise to keep their backing, algorithmic stable coins are prone to losing their peg if the collateral crashes in a back swan event).
Frax is the first fractional-algorithmic stable coin that aims to combine the best of both worlds and minimize the drawbacks of each model.
Frax is open-source, permissionless, and entirely on-chain – currently implemented on Ethereum and other chains. The end goal of the Frax protocol is to provide a highly scalable, decentralized, algorithmic money in place of fixed-supply digital assets like BTC.
  • Fractional-Algorithmic – Frax is a stablecoin with parts of its supply backed by collateral and parts of its supply algorithmic. This means FRAX has part of its supply floating/unbacked. The stablecoin (FRAX) is named after the "fractional-algorithmic" stability mechanism. The ratio of collateralized and algorithmic depends on the market's pricing of the FRAX stablecoin. If FRAX is trading at above $1, the protocol decreases the collateral ratio. If FRAX is trading at under $1, the protocol increases the collateral ratio.
  • Decentralized & Governance-minimized – Community governed and emphasizing a highly autonomous, algorithmic approach with no active management.

Concave and Frax partnership

Concave is excited to announce that FRAX will be one of our first batch of partners, we believe in Sam's (Founder of Frax) vision to create a truly decentralized stable coin and also recognize the lindy effect that FRAX has on the entirely DeFi ecosystem. As Sam quotes "We aim to have every holder of Frax to have more than $1 worth of seigniorage value" . Having FRAX in our treasury aligns us with our core principles on being part of the Olympus and wider DeFi ecosystem.
We aim to accrue FRAX and FXS in our treasury. Once we aim to get our contracts whitelisted to stake our FRAX to earn revenue to grow our treasury and distribute dividends to our token holders.
(example of the yields offered by Frax, with an strong emphasis of long term locked LP being rewarded more)

Frax has implemented a veFXS model since last year (similar to curve). Convex has also announced the introduction of cvxFXS and their plans to accumulate it. Frax also has the largest position of CVX of any dao out there at the moment. All these factors have led us to believe that other protocols will start to accumulate and stake FXS to vote for gauges as well, leading to Frax wars in the near future. We aim to become a major player in the upcoming wars.

Frax offers an excellent value proposition in helping realize our dreams of becoming a big player in the DeFi space. With its excellent value accrual mechanics and safe store of value, we can rest assured that every Frax we take into our treasury truly does offer us more than 1 dollar in return.

Frax stands to gain from us a permanent sink of FRAX in the form of our treasury, more liquidity for their tokens with our trading pairs and a strong community collaboration/cross pollination of devout followers from both sides. The future is bright for Frax and Concave.
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