Frax Finance, a decentralized stablecoin protocol that issues three types of stablecoins pegged to different assets, has announced the launch of its own Ethereum layer 2 solution named Fraxchain. Fraxchain is a custom-built optimistic rollup that aims to provide fast, cheap, and secure transactions for Frax-based tokens and other compatible assets.
It is designed to be fully compatible with Ethereum and leverage its network effects, while also offering scalability and interoperability with other blockchains. The solution will use the Fraxferry protocol to transfer natively issued Frax tokens across multiple chains, such as Binance Smart Chain, Solana, Avalanche, and Polygon.
Fraxchain will also integrate with Fraxswap, the native automated market maker (AMM) of the Frax protocol, and Fraxlend, the permissionless lending market for Frax-based stablecoins.
Fraxchain Will Be a Groundbreaking Upgrade
Frax Finance claims that Fraxchain will be the first layer 2 solution to support algorithmic stablecoins, which are partially backed by collateral and partially governed by an algorithm that adjusts the supply and demand of the stablecoin.
The Protocol issues three types of algorithmic stablecoins: FRAX, which is pegged to the US dollar; FPI, which is pegged to a basket of consumer goods; and frxETH, which is pegged to ETH. The company also has a governance token called FXS, which accrues fees, revenue, and excess collateral value from the protocol.
Frax Finance says that Fraxchain will enable faster and cheaper mints, redemptions, swaps, and loans for its stablecoins, as well as a more efficient rebalancing of collateral and expansion or contraction of stablecoin supply. It also expects that Fraxchain will attract more users and liquidity to its ecosystem, as well as foster innovation and experimentation with new features and products.
Frax Finance plans to launch Fraxchain in Q4 2023, after completing security audits and testing. The protocol says that it will offer incentives for early adopters and liquidity providers on Fraxchain, as well as rewards for FXS stakers who participate in governance. Frax Finance hopes that Fraxchain will become a leading layer 2 solution for stablecoins and DeFi on Ethereum and beyond.
