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Frax USD (FRXUSD) is a pioneering decentralized stablecoin that has evolved from a hybrid algorithmic model to become a fully collateralized, yield-bearing asset within the broader Frax Finance ecosystem.

Key takeaways

• Frax USD (FRXUSD) is a decentralized stablecoin designed to maintain a soft peg to the US dollar.
• It has transitioned from a hybrid algorithmic model to being fully backed by high-quality collateral, primarily USDC.
• FRXUSD holders can earn yield through the Frax Earn program, which allocates collateral to various DeFi strategies.
• The stablecoin operates on the Fraxtal chain, an Ethereum Layer 2 built using the OP Stack and secured by the FRXETH liquid staking token.
• You can trade FRXUSD spot and perpetual contracts on major platforms like BTCC.

What is Frax USD? Key Specifications & Tokenomics

Frax USD (FRXUSD) is a decentralized, yield-bearing stablecoin that aims to combine price stability with capital efficiency.

Who created Frax USD (FRXUSD)?

Frax USD was created by Frax Finance, a decentralized protocol founded by Sam Kazemian and Travis Moore. Kazemian, who has a background in biotechnology and philosophy, conceived the original Frax algorithmic stablecoin design. The project launched in 2020, introducing a novel "fractional-algorithmic" model. Over time, the protocol has been developed and governed by the Frax DAO, a decentralized autonomous organization consisting of FRAX and FXS (Frax Shares) token holders. The team and community have continuously iterated on the design, leading to its current fully collateralized and yield-bearing structure.

How does Frax USD (FRXUSD) work?

FRXUSD operates as a fully collateralized stablecoin. Its mechanism has evolved significantly from its initial design.

• Collateralization: Each FRXUSD in circulation is backed by at least $1 worth of assets held in the Frax Protocol's treasury. The primary collateral is USDC, providing a strong base of liquidity and trust.
• Yield Generation: The protocol does not let collateral sit idle. Through its "Frax Earn" program, the backing assets are deployed into various decentralized finance (DeFi) strategies, such as lending markets and liquidity pools, to generate yield.
• Redemption & Minting: Users can always mint new FRXUSD by depositing $1 worth of acceptable collateral (like USDC) into the protocol. Conversely, they can redeem 1 FRXUSD for $1 worth of the underlying collateral, minus a small fee, ensuring the peg is maintained through arbitrage.
• Fraxtal Integration: As the native stablecoin of the Fraxtal ecosystem, FRXUSD is used for gas fees and is deeply integrated into applications built on this high-speed, low-cost Layer 2.

What makes Frax USD (FRXUSD) unique and valuable?

FRXUSD stands out in the crowded stablecoin landscape due to its innovative evolution and value proposition.

• Evolution to Full Backing: Its transition from an algorithmic model to a fully, transparently collateralized one addresses the concerns associated with purely algorithmic stablecoins, enhancing its stability and trustworthiness.
• Native Yield: Unlike most stablecoins that are inert, FRXUSD is designed to be yield-bearing. The interest generated from its collateral is used to buy back and burn the protocol's governance token, FXS, or can be passed on to holders, creating a unique value accrual mechanism.
• Capital Efficiency: By actively employing its collateral in yield-generating activities, the Frax Protocol creates a more capital-efficient system compared to stablecoins with static reserves.
• Ecosystem Heart: FRXUSD is not just a standalone asset; it's the central medium of exchange and unit of account for the entire Frax ecosystem, including Fraxtal L2, Fraxswap (AMM), and Fraxlend (lending).

What is Frax USD (FRXUSD) used for?

FRXUSD serves multiple critical functions within the DeFi ecosystem.

• Trading Pair and Liquidity: It is a major base trading pair on decentralized exchanges (DEXs), especially within the Frax ecosystem, providing deep liquidity for crypto trading.
• Collateral in Lending: Users can deposit FRXUSD as collateral to borrow other assets on lending platforms like Fraxlend, leveraging their stablecoin holdings.
• Gas Currency on Fraxtal: FRXUSD can be used to pay for transaction fees on the Fraxtal Layer 2 network, promoting its adoption as a native currency.
• Yield Farming and Savings: Holders can stake FRXUSD in the Frax Earn program or other DeFi protocols to earn passive income, using it as a savings vehicle with potential yield.
• Cross-Chain Transfers: As a widely adopted stablecoin, it is used for fast, low-cost value transfer across different blockchain networks via bridges.

How Is the Frax USD (FRXUSD) ecosystem developing?

The FRXUSD ecosystem is rapidly expanding, centered around the Frax Finance protocol's multi-chain vision.

• Fraxtal Layer 2: The development of Fraxtal, an Ethereum L2 using Optimism's OP Stack and secured by frxETH, is a major focus. It aims to become a hub for DeFi applications that natively use FRXUSD.
• Fraxchain Vision: The long-term roadmap points towards "Fraxchain," a potential sovereign blockchain that would further decentralize the ecosystem's infrastructure.
• DeFi Integrations: FRXUSD is continuously being integrated into new DeFi protocols across Ethereum, Arbitrum, Avalanche, and other chains, expanding its utility.
• Monetary Policy Tools: The Frax DAO actively develops and votes on new monetary policy features, such as the AMO (Algorithmic Market Operations Controller), to manage supply and peg stability dynamically.

How to mine Frax USD (FRXUSD)?

FRXUSD is not mined through proof-of-work. It is minted through the Frax Protocol. There are two primary ways to acquire newly minted FRXUSD:

1. Direct Minting: Users can mint FRXUSD by depositing an equivalent value of approved collateral (e.g., USDC) directly into the Frax Finance application. The protocol issues new FRXUSD tokens against this collateral.
2. Liquidity Provision: While not mining in the traditional sense, providing liquidity in pools containing FRXUSD (e.g., on Fraxswap) can earn you liquidity provider (LP) fees and often additional FXS token rewards, which is a form of yield generation.

How to keep your FRXUSD Coin safe?

Securing your FRXUSD involves standard cryptocurrency security best practices.

• Use a Hardware Wallet: For significant holdings, store your FRXUSD in a wallet whose private keys are secured by a hardware device like a Ledger or Trezor. This keeps your keys offline and safe from online threats.
• Secure Software Wallets: For smaller, more active amounts, use reputable non-custodial software wallets (e.g., MetaMask, Rabby). Always safeguard your seed phrase—never share it or store it digitally.
• Verify Contracts: When interacting with the Frax Protocol or any DeFi platform, always verify you are on the correct website and interacting with the official smart contract addresses.
• Beware of Scams: Be cautious of unsolicited offers, fake support channels, and phishing websites pretending to be Frax Finance.

How to buy FRXUSD Coin?

FRXUSD is a popular decentralized stablecoin listed on many exchanges. However, it is recommended to trade on a major platform like BTCC for higher liquidity and better customer support.

1. Register a BTCC Account: Sign up using your email or mobile number and complete the KYC verification to unlock more features and benefits of the platform.
2. Deposit Funds: Deposit fiat currency (via bank transfer, card, or third-party payment) or transfer USDT from an external wallet into your BTCC account. You can follow this guide.
3. Start Trading: Go to the trading page and search for the spot trading pair FRXUSD/USDT or the perpetual contract FRXUSD/USDT.
4. Place an Order: Enter the amount of FRXUSD you wish to purchase and submit the order. For contract trading, you can also choose to go short (sell) and adjust the leverage multiplier according to your strategy and risk tolerance.
5. Confirm Your Purchase: For spot purchases, check your personal account to see if the coins have arrived. For contract trades, check the trading page to see if your order was filled successfully.