What is Frax? Frax is a stablecoin protocol powered by both asset collateral and mathematical cryptographic algorithms. In this article, you can access answers to questions that investors wonder, such as what is Frax, what it offers, what is FRAX coin, what is it for, how to buy it. As Kriptokoin.com, we have prepared it for you.
What is Frax? What Does It Do?
Frax does not only function as a specialized stablecoin. It also aims to serve as a decentralized finance (DeFi) money market. Accordingly, Frax users can provide liquidity provider (LP) tokens to various trading pairs on Uniswap. Additionally, they can staking as well as minting and redeeming the FRAX stablecoin. The Frax crypto protocol uses two different cryptocurrencies. First, the ecosystem has the Frax (FRAX) stablecoin pegged at 1:1 USD. Second, there is the governance and utility token Frax Shares (FXS).
What is FRAX Coin?
This project is one of the first to have a stablecoin that uses features of both collateralized and algorithmic models. The project aims for the token to function as a “scalable, secure, stable and on-chain currency”. The assets of this protocol have different use cases. For example, Frax (FRAX) is a stablecoin. Accordingly, the token was created to have a fixed value of $1. Frax Shares (FXS) is a governance and utility token. Thus, it is used to support various functions of the platform.
How Does Frax Work?
The project mint and redemption mechanism is key to ensuring the FRAX token is pegged to USDC. This is not just collateral tokens (currently USDC stablecoins). It also provides management tokens (FXS, local government tokens of the protocol). It can be printed by any user. The percentage rates of each token are given by the Frax collateral rate (CR). For example, a 50% margin rate means that one dollar of FRAX can be minted by providing 0.50 USDC and 0.50 USD worth of FXS. This mechanism works in reverse when a user chooses to use their FRAX for the USDC and FXS they originally provided. In this case, with 50% collateral, users are given 0.50 USDC and 0.50 USD FXS for each FRAX.
How to Buy FRAX Coin?
Frax is traded on many crypto currency exchanges with large trading volume. The coin is currently listed by exchanges such as Hoo, Gate.io, Uniswap (V3), Hotbit. To purchase the token, it is necessary to become a member of one of these exchanges and verify the identity. Investors who have created their accounts completely can buy FRAX coins by depositing money in their wallets.
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