Frax

Frax Finance is a decentralised finance (DeFi) protocol launched in 2020 that builds and operates a family of on-chain assets and sub-protocols: a fiat-redeemable dollar stablecoin (frxUSD) with a yield vault (sfrxUSD), an ETH liquid-staking system (frxETH/sfrxETH), an inflation-indexed asset (FPI), zero-coupon bonds (FXBs), and the Fraxtal Layer 2 network. Following the 2025 “North Star” upgrade, the FRAX asset (formerly FXS) became Fraxtal’s native gas and base monetary unit. Although the project maintains that FRAX is not a governance token, voting rights are obtained only by locking FRAX to mint veFRAX, making governance participation functionally dependent on holding FRAX.

How the ecosystem is organised (high level)

• Fraxtal (L2): An OP-Stack rollup where FRAX is used as gas. Activity earns FXTL points via the Flox blockspace incentive system. FRAX is issued natively on Fraxtal L1; official wrapped/bridged forms exist on other chains.
• Cross-chain strategy: FRAX supports a multi-chain footprint via LayerZero’s OFT approach, while maintaining native issuance on Fraxtal.

Core assets (quick reference)

• frxUSD: Fully collateralised, fiat-redeemable USD stablecoin issued through governance-approved “enshrined custodians” that hold cash-equivalent reserves; on-chain mint/redeem contracts support permissionless access.
• sfrxUSD: An ERC-4626-style savings token for frxUSD. Allocates backing dynamically via a benchmark yield strategy across DeFi AMOs, carry trades and short-dated T-Bills/RWAs. Redeemable for the underlying frxUSD at an increasing conversion rate.
• FRAX (prev. FXS): Fraxtal’s native gas and base money. The project states FRAX is not a governance token; in practice, voting rights are accessed by locking FRAX to mint veFRAX, making participation functionally dependent on holding FRAX. Issuance follows a tail-emission schedule (8% initially, decreasing by 1 percentage point per year to a 3% floor).
• frxETH & sfrxETH: ETH liquid-staking pair. frxETH tracks ETH within a tight peg band; sfrxETH is an ERC-4626 vault that accrues validator yield and increases its exchange rate over time.
• FPI: A stable asset pegged to the US CPI-U basket to target constant purchasing power; FPIS is being phased out with a future conversion path to FRAX as per governance.
• FXBs (Frax Bonds): Zero-coupon bond-like tokens that convert to Legacy FRAX (LFRAX) at maturity and are used by AMOs to manage liquidity and help stabilise the frxUSD peg.

Key protocol components

• Fraxlend: Isolated-pair lending markets used both by users and by the protocol’s AMO strategies.
• Fraxswap (with TWAMM): An AMM that embeds time-weighted long-horizon orders, enabling programmatic rebalancing and monetary operations.
• AMOs (Algorithmic Market Operations): On-chain strategy modules that deploy protocol assets/liquidity across venues (e.g., Fraxlend, Fraxswap) to manage pegs, collateral and income without altering core token contracts.

Recent governance changes (2025)

• FIP-419 introduced frxUSD/sfrxUSD and set an upgrade path for legacy FRAX/sFRAX holders across chains.
• FIP-428 (North Star) renamed FXS→FRAX and veFXS→veFRAX, switched Fraxtal gas to FRAX, introduced tail emissions, and formalised FXTL/Flox mechanics.

On 29 April 2025 Frax executed the “North Star” hard fork, implementing a token rename and network changes centred on Fraxtal. The event switched Fraxtal’s gas to FRAX (formerly FXS) and began the post-fork token architecture for the ecosystem.

Token renames and scope

• FXS → FRAX as the ecosystem’s base monetary unit; veFXS → veFRAX with the same lock-based mechanics and no position unlocks. The original USD stablecoin “FRAX” was reclassified as Legacy Frax Dollar, with the new frxUSD/sfrxUSD pair introduced via a separate proposal and upgrade path.
• Issuance model: FRAX is issued natively on Fraxtal L1; wrapped/bridged variants exist for other networks. While the project states FRAX is not a governance token, governance rights are obtained by locking FRAX to mint veFRAX.

Fraxtal gas and wrapping changes

• FRAX became the native gas on Fraxtal, replacing frxETH. The ERC-20 contract for the pre-fork asset operates as wFRAX, a WETH-like wrapper; FXS ERC-20 holders receive 1:1 wFRAX and can unwrap to native FRAX gas. wfrxETH → frxETH as a standard ERC-20. Handling for EOAs/Safes versus LP/DeFi contracts is specified for the conversion.

Multi-chain and upgrade path

• Legacy tokens remain fully usable; FXS can be upgraded 1:1 to FRAX on Fraxtal. The project aligns FRAX’s cross-chain presence with LayerZero’s OFT standard while maintaining native issuance on Fraxtal. Separately, FIP-419 sets the upgrade path from legacy FRAX/sFRAX to frxUSD/sfrxUSD across supported networks.

Emissions, incentives, and burns (introduced with North Star)

• A tail-emission plan mints FRAX at 8% annually, decreasing 1 percentage point per year to a 3% floor (see schedule). Weekly FXTL conversions occur with a baseline of ~1.918% of a user’s FXTL burnt and converted, boosted by floxCAP (obtained by staking FRAX with a 90-day cooldown) and veFRAX balance. Fraxtal’s Frax Burn Engine (FBE) burns FRAX from sources such as the registrar and EIP-1559 base fee.

Frax (FRAX) is the native asset and base monetary unit of the Fraxtal blockchain. Following the North Star hard fork on 29 April 2025, the former FXS token was upgraded and renamed to FRAX, which now serves as Fraxtal’s gas. FRAX is issued natively on Fraxtal L1; wrapped or bridged versions exist for use on other networks. For ERC-20 compatibility, a WETH-like wrapper, wFRAX, represents the asset in token form and provides a 1:1 upgrade path for legacy FXS holders.

The project specifies that FRAX itself is not a governance token. Governance rights for Frax Finance’s DeFi products are obtained by locking FRAX into contracts such as veFRAX (the successor to veFXS), which sit on top of the FRAX asset. In other words, FRAX is the commodity-like base money used by these contracts, while voting power is conferred by derivative positions created from locked FRAX. In practice, governance participation is contingent on holding FRAX, as veFRAX can only be minted by locking FRAX.

FRAX follows a tail-emission schedule set by governance: annual issuance begins at 8% and decreases by 1 percentage point each year until a 3% floor. In parallel, the Frax Burn Engine on Fraxtal retires FRAX sent to it by designated system components, such as the network’s EIP-1559 base fee and the FNS registrar.

Frax Finance was founded in December 2020 by Sam Kazemian, with Travis Moore and Jason Huan as co-founders. The team launched the original Frax stablecoin system and the wider DeFi stack that later grew to include Fraxlend, Fraxswap, frxETH/sfrxETH, FXBs and the Fraxtal Layer 2 network.

The FRAX asset itself originates from a governance-approved upgrade proposed by the Frax Core Team under FIP-428 (North Star). This upgrade renamed and upgraded the former FXS token to FRAX and made it the native gas and base monetary unit of Fraxtal. The North Star hard fork was executed on 29 April 2025, with the Core Team maintaining implementation while parameters and allocations are governed on-chain by the community through contracts such as veFRAX (obtained by locking FRAX).