Frax Share (FXS) is the governance token of the Frax Protocol - the first fractional stablecoin protocol in the crypto market. Frax is an open-source, permissionless, on-chain protocol operating on Ethereum and 12 other blockchain networks.
The Frax Finance ecosystem aims to offer highly scalable, decentralized, algorithmic money that could replace fixed-supply digital assets like Bitcoin. The Frax Protocol delivers the world’s first fractional stablecoin and crypto-native consumer price index.
Frax Finance achieves its vision by offering two stablecoins - FRAX, which is pegged to the US dollar on a 1:1 basis, and FPI, which is pegged to the US CPI (Consumer Price Index). In addition to these two digital assets, the Frax ecosystem includes a native automated market maker (AMM), Fraxswap, and a permissionless lending market Fraxlend, for FRAX and FPI.
The FXS cryptocurrency is the non-stable utility token of the Frax Protocol. It gives token holders the right to vote and participate in the platform’s decentralized governance, including deciding on adding/adjusting collateral bonds, adjusting various fees such as minting or redeeming and refreshing the rate of the collateral ratio.
The Frax Share token supply is initially set at 100 million during genesis. Still, its circulating supply enjoys a deflationary mechanism as the demand for the FRAX stablecoin rises. The Frax Protocol is designed to maximize the value of the FXS token while maintaining the peg of the FRAX crypto, the US dollar.
In May 2020, Frax Protocol announced decentralized governance through the Frax Share token. FXS token holders can lock up their holdings to generate veFXS and enjoy unique benefits, including special governance rights and AMO profits.
The Frax Protocol utilizes a two-token system comprising FRAX and FXS. It also has a pool contract that holds USDC collateral in it. The governance mechanism powered by the FXS cryptocurrency decides whether additional pools need to be added or removed from the protocol.
Frax implements design principles that merge the best of collateralized stablecoins and algorithmic stablecoins. These principles aim to create a scalable, trustless, price-stable, and completely on-chain digital currency.
FRAX was founded in 2019 by American software developer Sam Kazemian along with Travis Moore and Jason Huan. The protocol was audited by CertiK in November 2020, followed by its testnet launch.
The Frax Protocol launched on the Ethereum mainnet a month later without any ICOs or pre-allocations. Instead, the FRAX stablecoin was distributed via Uniswap’s liquidity pools and was backed entirely by collateral during genesis. Since then, FRAX has expanded to other blockchain ecosystems, including Polygon, Avalanche, Fantom, Polkadot, BNB Chain, and more.
FRAX announced its upgrade, V2, in March 2021. The upgrade rolled out additional features, such as allowing the deposit of idle collateral into money markets, lending FRAX on DeFi protocols like Compound and CREAM, locked staking for FRAX, and more.
In January 2022, Frax Finance collaborated with Chainlink to bring US CPI data on-chain to support its second token, FPI - the Frax Price Index. The FPI stablecoin launched in April 2022, followed by the Frax Price Index Share (FPIS) governance token launch.
As the governance token of a protocol that aims to offer a highly scalable and innovative stablecoin, the FXS crypto could be a good digital asset to include in your portfolio. It is an incredibly sound investment if you wish to diversify your potential into the decentralized finance (DeFi) sector.
As the DeFi market booms and the demand for the FRAX stablecoin increases, the price of FXS will also climb higher as the Frax Protocol maintains its stable coin’s peg to the US dollar. This could make the FXS token a valuable crypto asset to invest in and hold.
When the Frax Protocol developers announce new features and expand their operations to more blockchain ecosystems in the future, the use of their stablecoins could rise further. This could also contribute to an uptrend in the FXS price in the future.
While it is impossible to make an accurate FXS price prediction over any duration, several factors drive volatility in the Frax Share price, including:
The price of FXS token could increase as the demand for the FRAX stablecoin picks up among users. This could also occur as Frax Finance expands to more blockchain networks beyond Ethereum and the 12 blockchains it supports as of January 2023.
When the team of developers behind Frax Finance announces new features, integrations, partnerships, and investments, investor confidence in the FXS crypto picks up. This, in turn, could drive the price of Frax Share token higher in the market.
Positive market sentiment towards cryptocurrencies, especially DeFi, could also play a massive role in supporting the price of FXS cryptocurrency. A bullish mood among investors could increase the FXS price, while a bearish or risk-averse mood could result in sell-offs that could lower the value of Frax Share token.
FXS is the governance token of the Frax ecosystem and has several use cases, including:
FXS token holders can participate in the decentralized governance of the Frax Protocol. They enjoy voting rights and can decide democratically on critical issues, such as adding or adjusting collateral pools, changing various fees within the platform, refreshing the rate of the collateral ratio, and more.
The FXS token is minted or burned based on the variations in demand for the FRAX stablecoin. Higher demand for the FRAX stablecoin would result in more FXS minted to maintain the stable coin’s peg to the US dollar.
Trade Frax Share against other cryptocurrencies to profit from changing market conditions and volatility. You can buy or sell FXS against other digital assets or hold long-term if you believe in the future potential of the Frax Protocol.
You can also stake FXS within Frax Protocol to generate veFXS and enjoy special boosts. Staking FXS lets you enjoy exclusive governance rights, and access to AMO profits and offers a lucrative way to earn passive income risk-free and conveniently.
Frax Finance has several established investors and backers, including Dragonfly Capital, ParaFi Capital, Mechanism Capital, Crypto.com Capital, Electric Capital, Synthetix, and more.
Staking Frax Share token gives you several benefits, including offering a convenient way to generate passive income. Here’s how to stake $FXS on Frax Finance:
1. Set up a crypto wallet that can store FXS tokens, e.g., MetaMask. Fund your wallet by buying Frax Share on KuCoin or other supported platforms and withdrawing your crypto to your wallet.
2. Connect your wallet to the Frax Finance app. Visit the veFXS Dashboard section of the app.
3. Head to the Lock FXS section and enter the number of FXS tokens you wish to stake. Select the Lock Period in weeks next and review the APR on offer.
4. Click on the Lock FXS button after entering the details to confirm the transaction.
5. Click on Stake on the pop-up window to process the transaction from your wallet.
6. Click on Initialise after creating your veFXS tokens for the first time. This will let the yield distributor contract track your claims.
7. Sit back, earn rewards, and watch your crypto holdings grow by staking FXS.