Frax milestones in 2022
-only large stablecoin that didn’t break peg (other than DAI)
-launched Frax Ether – an ETH-pegged stablecoin and liquid staking derivative
Products
-Frax stablecoin (Frax USD) has ~$1B TVL
-FPI – CPI pegged stablecoin
-Frax ETH – ETH pegged stablecoin
-Considering a BTC pegged stablecoin
Only 8 employees at Frax, all engineers (!)
Focused only on building stablecoins
Use Curve and FraxSwap for liquidity
Increasing Frax USD collateral ratio to 100% (currently 90%, 10% is FXS) – still more capital efficient than Maker (130+% collateral)
Believes it’s impossible to have a USD pegged stablecoin at scale ($1B+ TVL) without having at least one single real world asset
No one has solved the stablecoin trilemma
Central Banks don’t lend directly to Apple, Tesla – they create money, give it to commercial banks – and the banks lend it
Frax isn’t a commercial bank – “it wants to be the Central Bank of DeFi, the digital economy”
On-chain, closest thing to risk-free asset is USDC – “call a spade a spade”
Blackrock manages all USDC treasury assets, in money market fund, buys reverse repos from NY Fed trading desk
Should a stablecoin have ONE or MANY real world assets?
Frax believes should just have one – “deposits on the Fed ledger”
Not going to lend to others – too hard to assess that risk
Maker plans to do this – it’s profitable, you take more risk
Goal is:
One entity – Frax DAO
One RWA (Fed deposits), not 50, not many counterparties
Whole stack simple – no intermediaries
Frax ETH – stablecoin pegged 1:1 to ETH, fully backed (100% CR), no interest, like wETH
Can stake in ETH PoS vault to earn interest – separate token from Frax ETH – currently offering 10% yield (but will likely drop as it grows), part of this is because people need to choose between staking Frax ETH or putting into eg Curve pool
Already 4th largest LSD
Frax core teams runs all the PoS validators – commodity hardware, geo-distributed – will eventually allow others to run validators
Protocol takes 10% cut of staking yields – 2% put aside for slashing risk
Lido has whitelist – to become a validator, have to ID and KYC – if slashed, losses are socialized
Measure of currency’s usage = amount of spot demand, amount of spot holdings
Like USDC, Tether, and Dai – they don’t incentivize any stablecoin holders, only way to measure organic demand for currency
Frax USD goal is to get as close to USDC as possible (100% CR, “risk free”, only one real world asset), but without blacklist