What is Frax (prev. FXS) (FRAX)?

Deep Dive

1. Purpose & Architecture

FRAX serves as the foundational asset of Fraxtal, a Layer 1 blockchain. Unlike traditional governance tokens, it operates as a “commodity asset” akin to Bitcoin in scarcity mechanics but with tailored utility:
- Gas Token: Powers transactions and smart contracts on Fraxtal
- Security Backbone: Validators stake FRAX to secure the network (post-upgrade)
- Restaking Utility: Used in Frax Finance’s DeFi protocols (e.g., veFRAX) for governance and cryptoeconomic security

2. Tokenomics & Scarcity

FRAX combines controlled inflation with deflationary burns:
- Tail Emission: 8% annual inflation at launch, decreasing 1% yearly to a 3% floor
- Burn Engine (FBE): Permanently destroys tokens from activities like domain registrations (FNS) and base fee transactions
- Fixed Supply Rules: Emission schedule is immutable, preventing arbitrary dilution

3. Ecosystem Integration

Frax’s design supports both Layer 1 functionality and DeFi innovation:
- Fraxtal Chain: Issued natively, with wrapped versions (e.g., WFRAX) for cross-chain interoperability
- Stablecoin Stack: Underpins Frax Finance’s yield-bearing stablecoins (e.g., sfrxUSD, frxUSD)
- Institutional Adoption: Partnerships like Crypto.com custody enable institutional participation

Conclusion

FRAX evolved from FXS to become Fraxtal’s foundational asset, blending Bitcoin-like scarcity with Ethereum-esque utility. Its dual role as gas token and DeFi primitive raises a critical question: Can it maintain scarcity while fueling an expanding ecosystem?