New stablecoin project "Frax" attracts attention

A new stablecoin project "Frax" has recently garnered widespread attention in the industry. The project was co-founded by Everipedia co-founder Sam Kazemian and economist Stephen Moore, and was officially announced to enter the market on October 21.

Sam Kazemian is an Iranian-American software engineer who majored in philosophy and neuroscience at the University of California, Los Angeles. He later self-taught programming and crypto knowledge. In 2018, he was involved in the creation of the decentralized online encyclopedia Everipedia.

The Frax project adopts an algorithmic stablecoin model with a fractional reserve system. Unlike traditional stablecoins, Frax is not fully backed by fiat currency on a one-to-one basis, but rather has only a portion of its reserves in US dollars. The project will use algorithms to loan out the reserves and collect interest, ensuring that the value of Frax remains pegged to the US dollar. To mitigate risk, Frax will initially hold nearly 100% of its reserves, gradually decreasing as the network gains traction.

Sam Kazemian stated that Frax's mission is to become the first and largest algorithmic stablecoin. He believes that algorithmic stablecoins may be the only innovation in the cryptocurrency space that can be compared to Bitcoin.

However, some digital currencies under the partial reserve system have not been tested by the market, which has become one of the main criticisms faced by Frax. Some industry insiders are concerned that if the redemption demand is too high, a stablecoin lacking full one-to-one support may collapse.

To address the stability issue, Frax has designed a unique lending mechanism. Sam Kazemian explained that Frax will generate cash flow by charging interest on on-chain lending, which can be used to repurchase FRX tokens when prices drop. This method is similar to how central banks operate by issuing bonds to repurchase fiat currency.

Currently, Frax and its collateral are being tested on a certain public blockchain mainnet and are regularly updated to the code hosting platform. Although there is no specific release schedule, Sam Kazemian stated that Frax is expected to launch a complete product within a year.

As a new project by the co-founder of Everipedia, Frax will benefit from the infrastructure and ecosystem of the former. Sam Kazemian revealed that they plan to allow the use of IQ tokens as collateral to borrow Frax reserves and attempt to integrate Frax into Everipedia. He believes that the Frax project can serve as an entry point for Everipedia into the DeFi space, and the two projects will promote each other's development.