We are excited to announce that Frax Finance will be deploying the FRAX stablecoin to Evmos. Once deployed, developers and end-users will be able to leverage FRAX when building and using DeFi protocols on Evmos.
Bringing DeFi Accessibility with Frax
Stablecoins, like FRAX, provide users with greater accessibility to the DeFi ecosystem as stablecoins are pegged to fiat currencies but exist natively as cryptocurrency allowing for easy interaction with decentralized protocols. Following this integration, Evmos DeFi protocols will be able to integrate the FRAX stablecoin, offering users stability, reliability, and liquidity. Users will also be able to send FRAX and FXS, Frax’s value accrual and governance token, throughout the Cosmos ecosystem via IBC. Therefore, users can interact with DeFi protocols on other Cosmos-based chains using FRAX.
Nomad will enable Frax users to send both native FRAX and FXS from Ethereum directly to Evmos. Together with Connext, the modular interoperability stack will enable users to move quickly in and out of canonical FRAX tokens seamlessly. This deep stablecoin liquidity is a precursor to building even more complex cross-chain apps (or xapps) that leverage FRAX’s multichain deployments.
The First Fractional-Algorithmic Stablecoin Protocol
FRAX is the first fractional-algorithmic stablecoin protocol. This means that FRAX is only partially collateralized.
Image retrieved from https://docs.frax.finance/overview
This unique design circumvents the challenges of a fully algorithmic stablecoin which may experience significant volatility and the challenges of a fully collateralized stablecoin such as over-collateralization.
The stablecoin’s collateral ratio is adjusted by the protocol based on the current market price. If FRAX is trading above the target peg, the collateral ratio decreases, and users are incentivized to mint and sell FRAX, increasing the selling pressure to meet the target peg. If FRAX is trading below the target peg, the collateral ratio increases, and users are incentivized to buy and redeem FRAX, increasing the buying pressure to meet the target peg.
As a result, the FRAX stablecoin can consistently maintain its target peg without the need for over-collateralization and minimize volatility during market up and downturns.
Frax is the first fractional-algorithmic stablecoin protocol. Frax is open-source, permissionless, and entirely on-chain — currently implemented on Ethereum and other chains. The end goal of the Frax protocol is to provide a highly scalable, decentralized, algorithmic money in place of fixed-supply digital assets like BTC.
Evmos is an application-agnostic chain that will be interoperable with the Ethereum mainnet, EVM-compatible environments, and other BFT chains via IBC, making it easy for users and developers to interact seamlessly between chains. Evmos aims to be the EVM Hub of Cosmos, making it easy for smart contracts to deploy and communicate within the Cosmos ecosystem.
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