--- title: 'Frax Finance' disqus: Frax Finance --- Frax Finance === [website](https://frax.finance/) | [twitter](https://twitter.com/fraxfinance) | [github](https://github.com/FraxFinance) ## Table of Contents [TOC] ## What’s the problem? Decentralized Stablecoins ### How the problem has been addressed? Since the inception of DeFi, there has been a lot of effort to address the stable coin problem. Tether and Circle which have created USDT and USDC respectively dominate this market, Despite this fact there is still a huge demand for decentralized stable coins in the DeFi space. UST's rapid growth is evidence of that. Frax stands somewhere between Maker's DAI and Terra's UST in terms of collateralization, Which makes it the first fractionally backed stable coin. ## Team [Sam Kazemian](https://en.wikipedia.org/wiki/Sam_Kazemian): Founder ## Project's Complexity It's a complex project in terms of technicality, adoption and execution. It's not a easy job for other teams or people to imitate the solution. ## Solution (Technical Details) 1 FRAX can always be created or redeemed for $1 but when market conditions change, the Collateral Ratio (CR) changes, and the composition of that $1 changes. For Example if CR is 0.80 if you want to mint 1 FRAX you have deposit 0.80 USDC/DAI and burn 0.20 worth of FXS (Frax Shares). #### Algorithmic Market Operations (AMO) An AMO module is an autonomous contract(s) that enacts arbitrary monetary policy so long as it does not change the FRAX price off its peg. This means that AMO controllers can perform open market operations algorithmically (as in the name), but they cannot arbitrarily mint FRAX out of thin air and break the peg. The *Collateral Investor* AMO puts idle USDC collateral from the Frax treasury to work across several DeFi protocols such as Aave, Compound, and Yearn. The *Curve AMO* moves idle USDC collateral and/or new FRAX to the FRAX3CRV Curvel pool to create more liquidity and tighten the FRAX peg. The *Uniswap v3 AMO* (or Liquidity AMO) puts FRAX and idle collateral to work by providing liquidity Uniswap v3. ### Is there a possibility of technical failure? Similar to Terra's UST undercollaterized stable coins are prure to failure and bank run. ### The offered solution is unique, or it has been developed earlier by others? It's unique. ### How much is it easy for another group to imitate the solution? It's not easy. Such group has to have huge amounts of capital and technical knowledge. ## Project's Roadmap #### Adding more AMO to increase FRAX supply Frax finance aims to add new AMO through its governance mechanism to increase the FRAX supply and adoption. #### Frax Price Index The Frax Price Index is a brand new, unique protocol within the Frax ecosystem. Centered around its own native stablecoin (FPI) and governance token (FPIS), the system will adjust every month according to an on-chain Consumer Price Index oracle so that holders of the FPI will increase their dollar-denominated value each month according to the reported CPI increase. It does this by earning yield on the underlying FPI treasury, created from users minting and redeeming FPI with FRAX. ## What are the revenue engines? Frax treasury is earning an average of ~$500K income daily (~$180M annualized) through the AMOs, Algorithmic Market Operations Controllers. ## Tokenomics The FXS supply has been initially set to 100 million tokens at genesis. As more FRAX is used in DeFi ecosystems, this drives value to the FXS holders because minting FRAX requires burning FXS (thus decreasing FXS supply, and increasing value to FXS holders). ### Fund Raises ### Allocations 60,000,000 FXS distributed to the community for liquidity/farming programs and DeFi initiatives. Max 1 year emission of between 18m and 30m depending of the collateral ratio of FRAX. 5,000,000 to community governed Project Teasury. | Name | Allocation | | -------- | -------- | | Investors | 12% | | Team and Founders | 20% | ![](https://i.imgur.com/9CVFJAd.png) ## How can we invest in the project? FXS is available on reputable exchanges including Binance ## Costs that we should expect for transferring money in and out of the project ## What is the investment horizon?