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The Frax Protocol is the first stablecoin system that uses a fractional algorithm. Frax is an open-source, permissionless, and completely on-chain protocol that is presently implemented on Ethereum. The Frax protocol's ultimate goal is to create extremely scalable, decentralised, algorithmic money to substitute fixed-supply digital assets like Bitcoin.
Prior to Frax, stablecoins were classified into three types: fiat collateralized, overcollateralized with cryptocurrency, and algorithmic with no collateral. Frax is the first decentralised stablecoin to define itself as fractional-algorithmic, ushering in the 4th and most distinct category.
The Frax Protocol is a community-driven stablecoin with a distinctive style. More than 60% of the FXS supply is distributed over a number of years to liquidity providers and yield farmers. It's a completely decentralised system with on-chain governance. It is also the first and only stablecoin to use a fractional-algorithmic hybrid architecture when it was launched in November 2020.
The Frax Protocol is the creation of American software developer Sam Kazemian, who initially proposed the concept of a fractional-algorithmic stablecoin in 2019.
Travis Moore and Jason Huan are members of the original Frax engineering team. Sam Kazemian came up with the concept after he observed that stablecoins were expanding quickly, but that none of them combined an algorithmic monetary policy with collateralization. Projects with fully algorithmic monetary policy had failed or been closed down due to a lack of substantial traction. Frax was created to evaluate market confidence in a partially algorithmic, partially collateralized stablecoin.
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