Frax Finance

Frax Finance is a decentralized finance protocol built around stablecoins, described by its own publications as a self-sufficient DeFi economy that uses stablecoins as currency. Its FRAX token launched on December 20, 2020 and originally used a fractional-algorithmic design, in which the dollar peg was maintained partly through code-based adjustments rather than solely through backing assets. The protocol later moved to a fully collateralized model, and its current stablecoin, frxUSD, is partly backed by BlackRock's tokenized treasury fund. Frax also issued the Frax Price Index (FPI), described as the first crypto-native index pegged to the Consumer Price Index rather than a national currency, a category referred to as a "flatcoin."

The ecosystem has expanded well beyond a single token. Protocol documentation covers governance and staking tokens (FXS and veFXS; FPIS and veFPIS), Algorithmic Market Operations (AMO) modules including Curve, Uniswap v3 and lending AMOs, real-world-asset collateral and the yield-bearing sFRAX token, Frax Bonds (FXBs), the Fraxswap AMM, the Fraxlend lending market, Frax Ether liquid staking (frxETH and sfrxETH, including a v2 design), BAMM, the Frax Oracle system, and Fraxtal, an associated chain with its own bridge and Snapshot-based voting. Bridging options include Fraxferry, LayerZero/Stargate and the Fraxtal bridge. The documentation states FRAX is deployed on more than 20 chains, with Ethereum, Fraxtal and Arbitrum the largest, and that sub-projects such as Fraxlend and Fraxswap exist to generate utility for ecosystem tokens and to help stabilize and collateralize the FRAX peg rather than to compete with larger incumbents.

Beyond issuing its own products, Frax Finance has appeared as an investor in other crypto projects, listed among the participants in seed rounds for Curvance (December 2023) and Anzen (May 2024) and in a May 2023 round for Prisma.

Founding story

Sam Kazemian began development of Frax, a fractional stablecoin protocol, in 2019, after co-founding the wiki-based online encyclopedia Everipedia (now IQ.wiki) with Theodor Forselius in December 2014; Kazemian graduated from UCLA in 2015. Fortune dates the company's founding to 2020 and names Sam Kazemian, Jason Huan, Travis Moore and Stephen Moore, a former economic advisor to Donald Trump, as founders, with Kazemian as current CEO. Frax's own FAQ states that the FRAX token was launched on December 20, 2020 by Sam Kazemian, Travis Moore and Jason Huan, and that Kazemian and Moore were also among Everipedia's creators, where they remain advisors.

Business model

Frax operates as an on-chain protocol governed by token holders. Revenue-generating and utility-generating components include stablecoin issuance backed by collateral and real-world assets, Algorithmic Market Operations that deploy protocol collateral into venues such as Curve, Uniswap v3 and lending markets, the Fraxlend lending market, the Fraxswap AMM, Frax Ether liquid staking, yield-bearing sFRAX and Frax Bonds. Documentation states these sub-projects exist primarily to create utility for ecosystem tokens and to stabilize and collateralize the FRAX peg. Forbes cited $86 million of revenue in the project's first year of operation with only eight employees.

Value accrues to the protocol and its governance/staking tokens (FXS/veFXS, FPIS/veFPIS) from stablecoin collateral deployment through AMOs and real-world assets, lending spreads on Fraxlend, trading activity on Fraxswap, and liquid staking through frxETH/sfrxETH, with yield products such as sFRAX and FXBs distributing returns to holders.

Traction

Frax's documentation reports FRAX deployment on more than 20 chains and a team of 13 as of November 8, 2024. Forbes, in naming Sam Kazemian to its 2023 30 Under 30 finance list, cited $86 million of revenue in the project's first year of operation with only eight employees. FRAX ranked as the fifth-largest stablecoin by market capitalization in January 2022 per DeFi Pulse, and Frax Finance is listed in Fortune's Crypto 100. Frax has also participated as an investor in seed rounds for Curvance and Anzen.

Latest developments

Fortune's Crypto 100 profile notes the pivot to a fully collateralized stablecoin in 2023 and that frxUSD is partly backed by BlackRock's tokenized treasury fund. Governance discussions in 2024 addressed shutting down or allowing penalty-free exits from legacy Convex FRAX liquidity vaults, including a proposal to close the Convex rETH/frxETH vault for an 8,300 FRAX fee, with related proposals on legacy crvUSD/FRAX vaults continuing in later forum threads. Documentation also covers a frxETH V2 design.