Binance Host: Hi Sam, thank you for joining us, super excited to host you! , Could you please introduce yourself to the chat and also share a quick overview of Frax Finance?
Sam: Yes. I’m Sam Kazemian and the founder of Frax, the first fractional-algorithmic stablecoin. We introduced the concept of a stablecoin’s supply being partially unbacked and partially collateralized.
Before starting Frax in 2019, I co-founded Everipedia which has raised over $30m and is the largest dapp on EOS (and currently building on other chains like ETH L2s and Binance Smart Chain).
Frax was started about 2 years ago because we thought that a more capital efficient and partially collateralized stablecoin would be the next generation of innovation in the stablecoin space. Right now, I can confidently say that FRAX is the only stablecoin that is partly algorithmic that has never broken its $1 peg. We are growing very fast and love to work together with other projects. If you are a project that wants to incentivize a FRAX LP pool and work with us, please reach out. We will take care of you more than any other stablecoin project!
See the short project description below:
Frax is the first fractional-algorithmic stablecoin protocol. Frax is open-source, permissionless, and entirely on-chain — currently implemented on Ethereum (with possible cross chain implementations in the future). The end goal of the Frax protocol is to provide a highly scalable, decentralized, algorithmic money in place of fixed-supply digital assets like BTC.
Read more at: https://docs.frax.finance/
Host: Thank you Sam for that quick introduction and for the links, And now let’s jump right into our first segment of today’s AMA session.
Question 1: What makes FRAX unique among all stablecoins?
Sam: Yes that’s a great question. Let me answer that for you by explaining the differences between the 2 tokens FRAX and FXS.
The protocol has two tokens. FRAX is the stablecoin and FXS is the investment token. FRAX is the only stablecoin that has come out to remain perfectly stable at its peg while being undercollateralized. FRAX is the first fractional-algorithmic stablecoin meaning that some of the FRAX supply is not backed by collateral while some of it is backed by collateral. The collateral ratio increases if the price of FRAX is below $1 so that more FRAX is backed by collateral. If FRAX is above $1, then the collateral ratio goes down so that more FRAX is printed and goes to FXS holders in the form of FXS burn (like BNB).
No other stablecoin has managed to create this system ever before. That’s why it’s so revolutionary. We are leading the way in stablecoin and fractional-algorithmic research and have kept a very tight price peg of $1 since we launched in December 2020. If you want to be part of one of the fastest growing and most technical stablecoin communities, join our telegram @fraxfinance! We are there everyday discussing with the community.
If you want to learn the technical details of the protocol, the best place is docs.frax.finance. It has everything like the whitepaper and FXS token distribution.
Host: That’s awesome, thank you Sam, Question 2. Why will people use FRAX instead of other bigger stablecoins like USDC, BUSD or DAI?
Sam: There are a few reasons but the 2 most important ones I can explain are First of all, FRAX is more decentralized than all of the other major stablecoins. The goal for FRAX is to be purely on chain and with minimal governance.
Secondly, we’d like to announce during this AMA our special program that we are launching starting today called the FRAX Liquidity Ventures (FLV) which partners up with select DeFi projects that use stablecoin LP pairs. If you have favorite projects that can use FRAX let us know! We are committing to bring on the best projects that want to incentivize a FRAX-(their token) LP pair in place of DAI, USDC, or USDT by committing FXS rewards to their pool proportionally. This is a select program like SushiSwap’s Onsen Menu so if you’re a project that is interested in getting FXS rewards for your stablecoin LP pair, don’t wait too long since there are only select spots! We are also coming to Binance Smart Chain to help bring algorithmic stablecoins to Binance! This means that the most decentralized stablecoin will soon be on BSC soon! Soon you should see FRAX stablecoin pairs with the best project tokens like CAKE and more!
Host: Thank you for the announcement Sam! Coming to BSC, Question 3. Can you tell us more about Frax Liquidity Ventures (FLV)?
Sam: Yes of course, So right now there are many projects that are paying for DAI or Tether’s usage in their LP programs in their farms because that’s what they are used to doing. DAI and Tether don’t do anything for their project, they won’t help or collaborate. In fact, DAI, Tether, and USDC are very hands off and think that users need them rather than they need users. We want to change this dymanic and be the stablecoin that helps your DeFi project.
With FLV we take the opposite approach, we are interested in helping any DeFi project that needs to incorporate a stablecoin. We will channel rewards to your FRAX pool proportionally to how much your own protocol puts in. We will also help your community grow and do a lot of joint ventures together.
Now that FRAX has demonstrated deep liquidity and high stability projects should heavily consider building with our stablecoin so that we can help them in both liquidity, expansion, and joint collaboration. So if you’re a DeFi project on Ethereum, any L2, or Binance Smart Chain, make sure to reach out to us!
Host: Thanks Sam for sharing more about FLV!, Question 4. What are some innovations that set Frax apart from DAI or other stablecoins like Tether?
Sam: First, FRAX is fully decentralized and more capital efficient. More FRAX can be minted than DAI or Tether without needing collateral if the price of FRAX stays exactly $1. This will make FRAX able to grow much faster than any other stablecoin. This is the main advantage of algorithmic stablecoins. Once they stay stable for a long enough period of time, there is no competing with them, they will grow faster than any other type of stablecoin due to capital efficiency.
Second, we are heavily focusing on privacy and scalability in our roadmap. We currently have a proposal up in the Tornado.cash community to include FRAX https://torn.community/t/proposal-to-add-frax-as-deposit-asset/328
We also are exploring our own privacy solutions such as building our own mixer which mints FRAX directly into a privacy preserving anonymity set. If you are a developer who would want to help us with this or have privacy tech experience, please reach out to us! We can provide FXS grants for devs and researchers that want to improve Frax tech.
As you can see, we have a lot of different strengths than other stablecoins! And soon we will be the most community oriented stablecoin as well with the Frax Liquidity Ventures program. So we have a lot that separates us from the old generation of stablecoins.
Feel free to help us out if you are a dev! Please join us if you feel like you can build out some of our privacy technology and join the community. We can give FXS grants through governance votes!
Host: And On to the last question for this segment! Question 5. Why should the Binance community invest in Frax Share $FXS? What makes FXS a good investment compared to other DeFi tokens?
Sam: Ah good question. This is important because FXS is available for trading on Binance.
The Frax Share token ($FXS) is where all of the value accrues in the protocol. In order to invest in the growth of the Frax protocol, you must hold FXS because FRAX is the stablecoin and always stays at $1. FXS is the token that gets all revenue from fees, from seigniorage (new minted FRAX), and any extra collateral left in the system. It gets all value in the system since FRAX has to remain stable at $1.
Keep in mind that when you invest in FXS, you are investing in the growth of the protocol so there are obvious times when growth is negative that the price of FXS could go down as it is likely in crypto. But overall, make sure that you know FXS is the governance and value token where all protocol profit is channeled to FXS. Every time the protocol makes money through fees or interest rates and mints new FRAX, some of that value goes to FXS holders through a burn of FXS tokens which lowers the supply. As long as the protocol is earning revenue and growing the supply of FRAX stablecoins, FXS should be a great token to hold. But make sure to be responsible and do your own research about times that it can also go down such as if there are a lot of FRAX stablecoins being redeemed instead of minted.
Host: Thank you Sam for sharing your thoughts and answers with the chat.
1- How do we decide whether to stake and lock or just hold FXS and face the risk of IL if FXS moons? For that reason, I’ve been hesitant to stake and lock.
Sam: This is a great question. The FRAX-FXS farming pool has some of the highest yield in all of defi. You can check the stat at app.frax.finance/staking
My personal recommendation is that if you think the price of FXS will be over or under 30% the current price, then hold the rewards from the pair instead of compounding it. If the price of FXS goes up, then use that price to compound the LP.
I would highly recommend farming the pair though as it is very profitable.
2- Each project has interesting stories before it is created. So can you tell people about the story that gave you the motivation to build and develop a great project like yours?
Sam: Yes, FRAX was started when some of us before at Everipedia were discussing about stablecoins back in 2019. We thought that stablecoins that were backed by dollars in a bank were too centralized and eventually would be regulated.
We also didn’t think that no collateral stablecoins could be possible so we decided that no one else thought of a stablecoin that is a mix of both. A fractional stablecoin. We decided to name it FRAX because it sounds like fractional-algorithmic currency.
3- You mentioned something about developing with FRAX Team. What is this grant and the perks for Devs if they want to try building technology on FRAX?
Sam: This is a fantastic question. 5% of the FXS supply is given as a team treasury that we use to allocate to devs and community members that want to help us build the protocol.
First, the best way to get involved is to try to use the protocol and do some farming. Then, if you have developer experience, speak to us about a feature you want to build and show us if you’ve written some code for it.
We can then put the FXS grant to a governance vote to get you funded. We want to help fund privacy features and L2 + Binance Smart Chain usage. Reach out to use if you have any ideas after you’ve started using the protocol first.
4-Which pool will have the highest yield, FRAX/QUICK or FRAX/FXS ?
Sam: Right now the best pools are FRAX-FXS on quickswap.exchange and also the permanent pools on app.frax.finance/staking which are part of the protocol itself. You can lock your stake there and earn even a higher yield. It is one of the most profitable defi farms right now.
5-This protocol tests the price stability of the FRAX stablecoin changing the collateralization to see the market’s confidence. Is it risky to hold Frax during this test? How is the price stability ensured during the test?
Sam: FRAX has never broken its peg and it is not risky (at least not yet) to hold FRAX during the time the collateral ratio changes. This is because if the price of FRAX even slightly goes below 1 such as $.99 then the collateral ratio quickly goes back up to recover the price to $1.
That is why if you look at the price of FRAX on any site or our dashboard at app.frax.finance you will notice it has never broken the peg. No matter what the collateral ratio has been.
6-Revenue is an important aspect for all projects in order to survive and keep the project / company up and running. What is #FXS way of generating profit / revenue? What is the income model?
Sam: Frax actually is a very high revenue protocol where all excess value goes to burning FXS tokens. So far, the protocol has only been live for 2 months but has earned over $3 million dollars of revenue. The revenue is in the form of fees for minting, redeeming, swapping recollateraizing/buybacks. Also, FRAX earns revenue from idle collateral and the profits goes to FXS holders.
7-What your plans in place for global expansion, are FRAX focusing on only market at this time? Or focus on building and developing or getting customers and users, or partnerships? Can you explain this?
Sam: The goal for FRAX is to be even bigger than Tether and USDC. We want FRAX to be the largest decentralized stablecoin which means every country should know about the FRAX brand.
In a certain way, I like to think of FRAX as Bitcoin but stable. We want the FRAX brand to be like BTC. Right now we are focused on expanding FRAX in defi before going to different countries. But in a few months, we will try to expand to consumer users and non-crypto.
But first, we need everyone in crypto to know and use FRAX!.
8-Today- New Collaborations & Partnerships are very Important for the Growth & Developments of any Project Especially for Crypto Projects ! So- Can you tell us some Recent Major Partnerships of Frax Finance Project for project Expansion & Future Plans?
Sam: Yes! Almost every day FRAX has a new collaboration and partnership with important defi protocols.
Recently we become the stablecoin of choice for Matic and Quickswap.exchange in place of DAI. We are also working to integrate into Binance Smart Chain. Hopefully in the coming 2 weeks there will be even more exciting stuff to talk about on BSC with FRAX.
9-The idea of the FRAX project is really unique and incredible, how did this idea come about?
Sam: Thank you! That means a lot. We are the most unique stablecoin in the space. A lot of projects look at the design and really are impressed with the stability and how it is not fully collateralized but as reliable as Tether and DAI. If you want to learn more about the technical backstory please look at the whitepaper section docs.frax.finance
We are really proud that Binance also was early in understanding the uniqueness of the project to list as as the first algorithmic stablecoin, We are honored!
10-We all know that the Ethereum Network has many problems: scalability issues, high fees, slow speeds, and many more,
Why did you choose to build your token on the ERC20 network over the other networks that more fast and scalable?
Sam: Ethereum still has most of the value of all chains that’s why any serious defi project should start on Ethereum. But you are right that now we would like to also get FRAX on many scalable chains as we discussed we are actively bringing FRAX to BSC and many others soon. We will take special focus on BSC and the special relationship with Binance that we respect.
11-Do you have any token burn or buy-back plan to regulate the supply and increase the demand of the token?
Sam: Yes! FXS works like BNB where the protocol auto burns the FXS token with revenue from the system and it is all automated and decentralized.
12-Whenever the Recollateralization is called, are the rewards distributed only the person who provided the recollateralization?
Sam: Yes it is distributed only to the person who calls it. But since the buyback and recollateral function works in a way that either burns or mints FXS tokens depending on the situation, that means the total supply of FXS is changing so it does not matter that the caller only receives it because the FXS supply changes overall.
13-So it’s sort of like in the future, in V2 it will be like FRAX, currently every FRAX is backed with USDC but it could be a future where there will be several pools in FRAX, where big portion is backed by USDC, a smaller portion be backed by BTC, ETH and some LP tokens. Would it be sort of right to say it looks something like that?
Sam: Yes exactly. You got that right. In the future, we do not have to use USDC or other stablecoins as collateral for FRAX. In fact, we are already exploring more decentralized collateral options for v2.
If you join our community, you can discuss which collateral we are picking. Right now, we are looking into ETH and other native assets. Perhaps we can try BNB in the future!
14- Where do I get information about your team? Why do you prefer to be anonymous? Do you have a plan to identify your team later?
Sam: We are not anonymous ,Travis, Jason, and I are the core devs of FRAX. I am verified on Twitter. We are definitely not anonymous and you can trust us because we have founded reputable projects before like Everipedia (which is also listed on Binance and very successful). We are a professional experienced team.
15- Do the token holders have the right to participate in the governance of the project? What kind of decisions can they vote on about the project?
Sam: Yes, the entire protocol is owned by FXS holders. We do not control the protocol in the long term, only FXS holders can choose to vote for updates and new features. App.frax.finance/governance is where all of our governance votes happen.
Host: Thanks Sam, It has been great to have you Sam with us today to talk more about the Frax protocol.
Sam: Thank you! And thanks everyone you have been great! I hope you join the Frax community!
End of AMA
About Frax Finance
Frax is the first and only stablecoin with parts of its supply backed by collateral and parts of the supply algorithmic. The stablecoin (FRAX) is named after the “fractional-algorithmic” stability mechanism. The ratio of collateralized and algorithmic depends on the market’s pricing of the FRAX stablecoin. If FRAX is trading at above $1, the protocol decreases the collateral ratio. If FRAX is trading at under $1, the protocol increases the collateral ratio.
FRAX : is the stablecoin targeting a tight band around $1/coin.
Frax Shares (FXS) : is the governance token which accrues fees, seigniorage revenue, and excess collateral value.