FRAX is a decentralized stablecoin that maintains its peg to the US dollar via a hybrid algorithmic and collateralized model. It was the first stablecoin to use a fractional-algorithmic design.
AGON uses USDC for all collateral and settlement on /markets. We chose it for its full backing and regulatory clarity. FRAX represents a different design philosophy in the stablecoin space.
Understanding FRAX gives you context on the broader DeFi ecosystem from which users bridge funds. While you won't use FRAX directly on AGON, knowing its risk profile compared to USDC or DAI helps you manage your total portfolio. It’s about knowing which assets are built for high-uptime operations versus those designed for capital efficiency experiments.
FRAX operates with two tokens: FRAX (the stablecoin) and FXS (Frax Shares, the governance token). Its stability mechanism depends on a variable Collateral Ratio (CR).
If FRAX demand is high and its price > $1, the protocol can lower the CR, requiring less collateral to mint new FRAX. This makes it more "algorithmic." If FRAX demand is low and its price < $1, the protocol increases the CR, requiring more collateral backing and strengthening the peg. This dynamic system aims for both capital efficiency and stability.
This model is more complex than fully-collateralized stables. Purely algorithmic designs have a history of getting rekt, and FRAX's hybrid approach is an attempt to mitigate that risk while retaining some of the benefits.
usdt · dai · stablecoin · depeg
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