Archimedes Memo
Published in
3 min readSep 12, 2022


Memo to: The Archimedes Community

From: Publius

Re: What the Frax?


Frax Finance is all over the place these days, having just released a lending service. Frax Finance boasts a market cap of over $1.5Bn and built an innovative ‘hybrid’ stablecoin (Frax) that blends collateral with algorithms. Throughout this frothy Crypto Winter, Frax has maintained a tight peg to the dollar. All looks well in Fraxland, right? Well…

Our research into the Frax protocol left us with a burning question. How the heck does Frax earn money? Why is it so hard to find out? What we’ve found is that Frax doesn’t really have it’s own intrinsic value (it would appear).

So what do we mean by ‘intrinsic value’? At a high level, it can be looked at as a reason to own said asset. USDT moves value from off chain to on chain, DAI allows you to keep exposure to ETH while unlocking the liquidity, and Or sUSD, that gives you access to the Synthetix exchange where you can trade both crypto and real world assets on chiggity chiggity chain! With Frax, the intrinsic value is a question mark currently.

Ok, so some of you are probably screaming at your computers right now because Frax has a great reputation (and who the hell are you guys anyway?). Also, Frax liquidity is sky high.

Are we just jealous trolls? No, we really value transparency! And here’s our beef…why would one mint or buy Frax? So far we can only see one reason, the APY generated from their Curve pools. From our perspective, the only reason to hold Frax is to get APY elsewhere. And their ability to generate APY has more to do with winning the Curve Wars than their business model.

So are we sounding the alarm on Frax? Not yet. It’s possible Frax has grown large enough that it will continue to dominate Curve (and other emission generating platforms) that it will have created sustainable value for Frax. Other reasons to be bullish on Frax (and we actually do hope Frax is successful) is they’ve diversified beyond Curve with their AMO strategy and have created exchange and lending services. Or any other strategies they may be cooking up that we are unaware of!

But we can’t help but keep an eye on Frax’s future and their strategy to secure liquidity. Frax growth is capped by CRV emissions (and the equivalent on other platforms). Since such emissions/inflations are capped, so is Frax’s upside as it is currently. Sooo what happens if the emissions gravy train dries up for some reason? Why else would anyone want to own or mint Frax? We don’t know because it’s so DARNED hard to understand their business model.

If you don’t understand it, don’t invest! That is why we take great care when considering how to build out our own protocol and with whom we partner with. At the end of the day, our goal is to have a sustainable protocol that provides good returns at minimal risk (for DeFi).

While we’re concerned with all the buzz around Frax because of some of their weaknesses (or is it just lack of understanding?), we’re not anywhere close to ready to write them off. It is very very possible we’ve got this wrong. Afterall, those Frax people are undoubtedly smart and thoughtful. They have made some really significant contributions to our happy little DeFi community. Just between us girls, we’re kinda hoping to be proven wrong on this one.

To learn more about Archimedes, you can check out our website here. Since we have not launched yet, we recommend joining our mailing list so you can get the latest and greatest updates!

September 12th, 2022



Archimedes Memo

I write about Defi. I breakdown protocols, cover current events, talk about security, and sometimes wax-poetic.