FRAX – Hybrid Stablecoin by Frax Finance
1. Overview
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Stablecoin: FRAX
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Issuer: Frax Finance
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Blockchain: Ethereum (ERC-20)
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Launch: December 2020
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Type: Fractional-algorithmic (partially collateralized, partially algorithmic)
2. Use Case
FRAX is designed to be a decentralized, capital-efficient stablecoin used for:
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Minting and redemption via FXS governance token
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Algorithmic Market Operations (AMOs)
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A scalable, non-fiat dependent alternative
3. Governance & Compliance
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Managed by the Frax DAO
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No traditional regulatory licenses
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Key contributors include Sam Kazemian, Jason Huan, and Travis Moore
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Smart contracts audited by Trail of Bits
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Full documentation via Frax Docs
4. Customer Feedback & Reputation
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No Trustpilot presence; feedback from DeFi communities
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Generally seen as innovative and trusted within Web3
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Some concerns raised about model complexity and peg risk
5. CU Background Check
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Transparent team and public contributors
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Strong DeFi reputation; expanding into RWAs via Securitize and BlackRock BUIDL
6. Crypto-Economics
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Minting requires a mix of USDC and FXS
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Dynamic collateral ratio managed algorithmically
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Protocol generates yield through AMOs
7. Backing & Value Stability
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Backed by crypto assets (USDC, FXS, and frxETH)
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Peg maintained through arbitrage and monetary policy tools
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frxUSD is a fiat-backed RWA extension of FRAX
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Risk factors: algorithmic reliance, oracle accuracy, and partial collateral
8. Final CyberFinance Compliance Rating
| Category | Rating | Notes |
|---|---|---|
| Authorization | 🟠 ORANGE | DAO-governed; no regulatory license |
| Transparency | 🟢 GREEN | Open-source, on-chain data, audit logs |
| Client Feedback | 🟠 ORANGE | Trusted in DeFi; limited retail visibility |
| Financial Soundness | 🟠 ORANGE | Efficient model but carries design risk |
🟠 Final Rating: ORANGE SIGNAL
FRAX is a well-engineered stablecoin pushing DeFi boundaries, but its partial collateral model, lack of licensing, and reliance on algorithmic assumptions call for cautious use by institutional participants.
Ratex42 Summary
Frax is a trusted component in DeFi infrastructure, offering innovative tools and real-world asset expansion. Its strengths lie in transparency and smart design, but institutional-grade stability requires further collateralization or regulatory alignment.
