Original author: Frax Finance founder Sam Kazemian and multiple contributors and community members
Original compilation: Peng SUN, Foresight News
Frax Post-Singularity Era
The launch of the modular L2 blockchain Fraxtal and the effective realization of full collateralization means the beginning of a new era for Frax. Fraxtal is the foundation of the Frax ecosystem and the operating system of Frax. Fraxtal has refined the core Frax product and is adding new sub-protocols and Frax assets, but all the necessary building blocks are already in place. The community can now explore additional opportunities and other paradigm-changing products and issue native Frax assets across various tracks.
To reach this goal, Frax has raised more than $45 million and achieved a 100% effective mortgage rate. Many users have made sacrifices to improve the overall health of Frax. In the process, the FRAX stablecoin was ignored by the market and FXS revenue share was cut by 90% to protect the asset. It’s time to change this for good!
Frax: the only full-stack protocol
Fraxtal is the home of the Frax Nation and the Fraxtal Cyber Nation. With Fraxtal, the Frax community has its own sovereign nation, culture and digital space. Frax has issued native tokens that are fully managed and owned on-chain by FXS stakers. Now, Frax has its own mature network like Fraxtal.
Fraxtals L3 will be available soon. L3 is like a fractal, akin to a sub-community with a unique identity and culture, but is part of the overall Frax network nation. They can benefit from Frax Asset Return, RWA Return, Fraxtal Settlement and Security Guarantees, and earn FXTL Points on an ongoing basis based on usage and TVL of the Fraxtal L3 contract. These are managed by FXS, which represents the interests of Frax Digital Nation.
Fraxtal builds the most developer-friendly L2 on Ethereum based on Optimism. Although most L2s simply copy the incentive mechanism of Ethereum, Fraxtal said that it has made further innovations in the basic incentive mechanism to better attract developers and users, and will continue to innovate. Across the entire stack, Frax can introduce features such as account abstraction, new precompilation, privacy features, aggregated DA, and hyperchain interop. These features will greatly improve the on-chain experience, making Fraxtal the go-to place for crypto users in the future.
* In view of this, CEX and payment service providers who can integrate Fraxtal deposit and withdrawal services as early as possible will be allocated FXTL points until the end of the program.
Start Fraxtal
Fraxtal’s Flox blockspace incentive mechanism has just completed its first epoch of distributing FXTL points to users and smart contracts, now becoming the only network to automatically distribute rewards to users and developers on a block-by-block basis. These incentives will last for many years and will be a core innovation of Fraxtal as users and developers will become accustomed to being rewarded for using block space unlike any other network.
Fraxtal TVL’s road to $100 billion is now on, with the goal to be achieved by the end of 2026. All Frax assets including FRAX, sFRAX, frxETH (and new Frax assets) will be issued on Fraxtal first. Frax core developers are issuing Frax assets on Fraxtal, including native 4626 yield vaults, minting and redemption. When the Frax asset reaches its all-time high supply, Fraxtal TVL will also reach new highs. This is a unique synergy of the Frax full-stack system.
Frax assets will interoperate with different networks, but the underlying contracts and assets will be issued on the Fraxtal mainnet.
Fraxtal’s fractal scaling roadmap
Fraxtal plans to launch 23 L3s over the next year to launch the Fraxtal Nation community. Frax has always taken a positive-sum approach, directly supporting the community and developers who integrate with us. We believe that 23 L3s is a good number and we can actively support these networks through direct developer access/incentives/investments etc. The first 2 L3s are under development and the remaining 21 L3s are expected to be launched in the coming months. Not only can L3 earn FXTL points through Flox, but these 23 L3 slots are for official partners, who will receive additional support from Fraxtal core developers and a large allocation of FXTL points.
If you are deploying any form of L3 or AppChain and would like to join the Fraxtal Network Nation sooner rather than later, please contact the Frax core developers and our strategic Rollup as a Service Provider partners: Conduit.xyz, Gelato.network and Caldera.xyz.
Frax Asset Overview
Frax is the only protocol with 4 independent tokens/assets among the top 200 projects by market cap. The number of these protocols will increase as the ranking of Frax assets increases. It is therefore important to stay up to date on all Frax assets and their utility, hooks and design specifications.
As the Fraxtal chain matures, all Frax assets will become available as Gas tokens on Fraxtal.
New Frax assets that may be launched this year include: frxNEAR, frxTIA, frxMetis, and more.
FRAX, the USD stablecoin launched by Frax Finance, is now fully collateralized, allowing us to enter the new FXS token economic era described below.
FXS Singularity Token Economics
All roads lead to Rome, and FXS is the ultimate beneficiary of the Frax ecosystem. Fully collateralized now, FXS has access to all the utility and benefits of the entire Frax stack. We propose recharging protocol fees with 50% of proceeds going to veFXS and the other 50% being used to purchase FXS and other Frax assets to be matched in the FXS Liquidity Engine (FLE). FLE will allow Frax to continue building its balance sheet while significantly increasing liquidity in FXS and Fraxs matching assets. According to DefiLlama, Frax’s annual revenue has exceeded $40 million as of this writing, even excluding various revenue streams such as Fraxtal fees and Fraxlend AMO.
veFXS revenue share + handling fee
Once the proposal passes, veFXS stakers will receive total protocol fees, which will be transferred to the veFXS revenue allocator contract on the Ethereum mainnet and soon to the veFXS revenue allocator contract on Fraxtal.
The FXS liquidity engine will create an increasing number of FXS POLs (Protocol Owned Liquidity) for the first Frax assets, but can also be expanded to other trading pairs as voted on by the community.
FXS Liquidity Engine (FLE)
The FXS Liquidity Engine (FXS Liquidity Engine) is a Schelling point of liquidity for each Frax asset on the FXS protocol. Revenue allocated to FLE is used to buy back half of the FXS and half of the Frax assets to increase the depth of liquidity in the trading pair. Revenue allocated to FLE is based on FXSs trailing price. If the FXS 30-day trailing price is lower than the previous month, 25% of the protocol revenue will be allocated to the FXS liquidity engine instead of veFXS. If the FXS 30-day trailing price is higher than the previous month, 25% more protocol revenue will be allocated to veFXS.
FLEs long-term goal is to increase FXSs utility, liquidity and lending credit to unprecedented levels as revenue increases block by block.
Powered by Fraxswap+BAMM, these will be the initial FLE POL pairs:
FXS-frxBTC
FXS-sfrxETH
FXS-sFRAX
FXS-FPI
The FLE dashboard will be released soon to support different FLE trading pairs (including custom FLE trading pairs). The FLE trading pairs listed together with this vote are FXS-frxETH and FXS-FRAX.
The Frax liquidity engine runs entirely on the Fraxtal mainnet, so Frax’s profits directly increase Fraxtal’s TVL, liquidity and lending capabilities.
The revenue that Frax Finance brings to FXS and the FXS liquidity engine is non-cyclical and generates stable revenue through all market cycles, thereby continuously increasing POL under all macro conditions. When volatile asset values decline, income from FXB and (s)FRAX should increase. Therefore, FLE can bring long-term, direct value-added to FXS holders and stakers.
Note: Certain strategic assets will remain on the balance sheet/treasury, including CVX (vlCVX after staking), cvxCRV, cvxPRISMA, and cvxFXN, as well as others that will be added as strategic assets in future governance votes. These strategic assets will not be sold or distributed to veFXS holders, nor will they be sold to FLE.
FPIS solution
Having a separate token and alternative governance process can be mentally taxing. Frax has been using FXS as its token until FPIS is released in 2022. In order to release the growth potential of FPI, simplify the structure of Frax, and reduce the overhead of developers and communities, Frax proposes to merge FPIS into Frax. In addition, this will bring an additional $4.5 million to Fraxs balance sheet to strengthen its financial position. Importantly, the entire Frax community supports FXS and Fraxtal. Therefore, for the sake of simplicity, Frax recommends reducing the exchange rate of FPIS to veFXS by 67%, that is, 1 FPIS can be exchanged for 1.33 veFXS, with a lock-in period of 4 years. This significantly reduces the governance and utility capabilities of FPIS while still consolidating it into a single FXS token allocation. veFPIS is also eligible for the April 3 FXTL Points Snapshot with an exchange rate of 1.33.
sFRAX and sfrxETH update yield and sfrxETH LRT functions
At the same time, sFRAX will be set at a cap rate of 50% and an IORB floor rate of 5.4%. This means that, compared to the current model where the IORB rate is the maximum cap rate, the sFRAX APR will have a maximum rate of 50% and a minimum rate of 50% at the IORB rate when the proposal is passed. This new mechanism will make sFRAX the benchmark DeFi rate for all sFRAX integrators. Users who currently hold sFRAX or mint/swap sFRAX will be updated with the new cap rate as soon as the proposal is passed. To keep sFRAX at a 50% cap rate, Frax will increase sUSDeFRAX POL via Curve AMO. Therefore, this proposal also sets a cap of 250 million for sUSDeFRAX Curve AMO.
With the launch of Frax Ether v2, the sfrxETH annual interest rate will be higher. In v2, the APR on sfrxETH can be as high as anyone wishing to pay to borrow a validator, which means the APR on sfrxETH is likely to be close to, or even exceed, that of LRT tokens. In addition, Frax Ether v2 will support direct re-staking, officially turning sfrxETH into LRT. This governance proposal facilitates EigenLayer restaking pods and EigenLayer direct deposits into sfrxETH. This way, sfrxETH stakers can enjoy above-average LSD yields, FXTL points (if held/used on Fraxtal), and EigenLayer points. Frax has also worked with EigenLayer to design a Fraxtal AVS that can use both FXS and sfrxETH re-staking, making Frax one of the only full-stack integrations in every aspect of EigenLayer and providing FXS blockchain-level re-staking capabilities. In the Singularity era, sfrxETH will become the main LRT in DeFi.
Accumulate and make progress: full stack
Launching Fraxtal and achieving full staking on FRAX was a tortuous process, but it was finally successful. Fraxs strategy is to build core infrastructure in-house, which requires a significant investment of time and effort in the short term. If the community is overly concerned, it will feel like no progress is being made and the parts will be disjointed. Indeed, some say Frax has done too much, but in reality, if the community looked beyond the horizon now, they would begin to see the massive flywheel that has just been completed. We just launched the highly innovative L2 and closed a $45 million asset gap to secure FRAXs balance sheet. Frax Ether v2 will be released soon, and the yield rates of LSD+LRT and FRAX will also be extremely competitive and attractive. The protocol fees can flow to veFXS again to prevent the FXS liquidity black hole from appearing on your chain. Frax assets will also be integrated with every leading protocol to win the hearts and minds of users and promote token appreciation.
Now, Frax and other companies can quickly build on that foundation. Fraxtal will be at the center of this growth, and FXS will be the ultimate beneficiary.
In addition, the second part of this roadmap will be released at a later date after passing the community governance vote.
