FXS is the native governance token of the Frax Protocol. FXS is used to incentivize and reward users for participating in the governance and management of the protocol. Holders of FXS have the ability to propose and vote on changes to the protocol, such as adjusting the algorithmic mechanism used to stabilize the value of the FRAX stablecoin, adjusting staking rewards, and making changes to the collateral pool.
In addition to governance, FXS is also used as a means of value capture for the protocol. A portion of the FRAX protocol's revenue generated from stability fees is used to buy back and burn FXS tokens, which can help to increase the scarcity and value of the token over time.
What Is the Frax Protocol (FRAX)?
The Frax Protocol is the first fractional-algorithmic stablecoin system. Frax is open-source, permissionless, and entirely on-chain – currently implemented on Ethereum (with possible cross chain implementations in the future). 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.
The Frax Protocol is a community driven and unique design stablecoin. Over 60% of the supply of FXS is issued over a number of years to liquidity providers and yield farmers. It is an entirely decentralized protocol with governance onchain. It is also the first and only stablecoin to incorporate the fractional-algorithmic hybrid design at the time of its launch in November 2020.
One unique aspect of the Frax Protocol is that it allows for the creation of fractional stablecoins, such as fUSDC and fDAI, which are backed by a mix of collateralized and uncollateralized assets. This can help to reduce the risk of instability caused by over-collateralization or under-collateralization.The Frax Protocol aims to provide a stable and decentralized alternative to traditional stablecoins, such as USDT and USDC.