This article summarizes the evolutionary history of Frax. Why is Frax v3 a major update?
Original author: CM (Twitter/X: @cmdefi)
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Editors note: On October 6, Frax Finance officially released the official documents of the FRAX v3 version, which will introduce a variety of new features, including full collateral, anchored to the US dollar, IORB oracle, elimination of multi-signature assumptions, non-redeemable and other features. Why is Frax v3 a major update? From v1 to v2 and v3, what changes have occurred in each version of Frax? Encryption researcher CM published an article sorting out the evolutionary history of Frax. Odaily summarized it as follows:
FRAX v3 can be said to be the biggest update and is expected to be launched on $sFRAX this week. sFRAX is similar to sDAI, with interest rates starting at 10% and gradually decreasing based on market demand.
Most peoples understanding of Frax is a partially collateralized decentralized stablecoin, but in fact, from v1 -> v2 -> v3, each version of $FRAX has undergone significant changes.
Let’s sort out the evolutionary history of Frax to help you understand it better:
The goal of Frax v1 is to build an algorithmic stablecoin
The core function is"Fractional algorithm", is also the first generation AMO. Simply put, it dynamically adjusts the CR (collateralization rate) of FRAX, gradually de-mortgaging from the integer stage (CR= 100%), and the CR gradually decreases.
For example, CR= 100%, FRAX is completely minted by USDC, CR= 80%, then FRAX is minted by 80% USDC + 20% FXS (governance token).
Frax v2 version suspends de-collateralization and launches AMO entry Curve war
The v2 version coincided with the collapse of many algorithmic stablecoins. The Frax community turned around and decided not to insist on de-mortgaging FRAX, but to make full use of the funds that entered the treasury when minting FRAX to make profits for the protocol.
This version of AMO is an open market operation controlled by a pre-established algorithm, which distributes the assets in the treasury to various DeFi protocols. Currently, Curve AMO has accumulated the most funds. At the same time, Frax has also accumulated a large amount of funds in the process. of$CRV $CVXBecome one of the biggest winners in Curve war.
At this time, Frax began to gradually use its own profitability to increase the CR (collateralization rate), instead of continuing to use the fractional algorithm to reduce the CR (collateralization rate).
Frax v3 version enters RWA and becomes a diversified fully collateralized stablecoin
An important move of the v3 version is to join the RWA track. Users can deposit FRAX into the contract to obtain sFRAX and obtain RWA treasury bond income. At the same time, FRAX Bond will be launched and deployed to Curve. AMO will also continue to run, using the accumulated Curve and Convex Voting rights will continue to gain DeFi income, and theoretically the comprehensive income will be higher than most stablecoins on the market.
Through the profitability of RWA, Frax will also continue to increase CR until >= 100%, eventually becoming a diversified, fully collateralized stablecoin.
The above only briefly summarizes the development of the stablecoin business in Frax Finance. At the same time, it is also expanding its business in LSD (sfrxETH), lending (FraxLend) and other fields, which will be published in a complete article later.
