<\/p>\n
Sam Kazemian says Frax protocol\u2019s v3 iteration offers an \u201call-weather\u201d stablecoin that \u201ccompletes the dollar-pegged stablecoin design.\u201d<\/p>\n
The goal is for the stablecoin to behave \u201clike real US dollars in every kind of market condition,\u201d including both high and low rate environments, he explains.\u00a0<\/p>\n
On the 0xResearch podcast (Spotify<\/a>\/Apple<\/a>), Kazemian says the team took what\u2019s already working with Frax \u201cexactly as designed before,\u201d but added \u201ca few new unique innovations\u201d to the protocol\u2019s functionality.<\/p>\n An important enhancement that Kazemian mentions is the incorporation of traditional market dollar yield curve dynamics<\/a>, caused by short-dated Treasurys and the IORB (interest on reserves balances) rate \u2014 often referred to as the Federal Reserve rate.<\/p>\n Read more:<\/strong> Frax v2 enables permissionless DeFi validators<\/a><\/p>\n \u201cWe wanted to design a stablecoin<\/a> that brings all of those things on-chain in as decentralized but proper manner as possible, as well as have all of the innovations that the Frax stablecoin has had in v2.\u201d\u00a0<\/p>\n Frax v3, he says, \u201cneatly places all of those in an elegant way that \u2014 we think \u2014 no one\u2019s done before.\u201d<\/p>\n Safety \u2014 a characteristic that has sometimes appeared to be an afterthought in certain stablecoin solutions of the past<\/a> \u2014 is key to successful long term growth, Kazemian says. \u201cIf you want to create a very large stablecoin,\u201d he says, \u201cyou want to basically become safer as you get bigger.\u201d<\/p>\n \u201cYou don\u2019t want to become riskier as you get bigger,\u201d he adds. \u201cThat\u2019s not a recipe for a good ending.\u201d<\/p>\n If the stablecoin industry is to ever grow into a multi-hundred billion dollar sized market, Kazemian says the technology\u2019s design has to become more reliable. \u201cYou can\u2019t have the same exact structure.\u201d<\/p>\n \u201cYou want it to be safer,\u201d he says. \u201cYou don\u2019t want that to possibly go \u2018poof\u2019 overnight.\u201d<\/p>\n As of now, the Frax stablecoin has a collateralization ratio (CR) of 92%, podcast host Dan Smith observes. Kazemian explains that Frax is \u201cfully transitioning to 100 percent CR of exogenous collateral,\u201d primarily through protocol revenues.\u00a0<\/p>\n \u201cWe have an LSD [liquid staking derivative<\/a>],\u201d he says. \u201cWe like to call it an [ether] ETH<\/a>-pegged stablecoin. We have Fraxchain coming at the end of the year<\/a>.\u201d<\/p>\n Frax earns between $30 to 40 million of annual revenue via their current market offerings, Kazemian says. \u201cHopefully that will be even higher with Fraxchain [layer-2<\/a>] and these kinds of things.\u201d<\/p>\n Because of \u201clocked liquidity\u201d in Frax, a \u201cbank run\u201d is mathematically impossible with the protocol, according to Kazemian, barring smart contract risk \u201cor something really unexpected happening,\u201d he says.<\/p>\n \u201cIf you actually just go on-chain and look at it,\u201d he says, \u201cyou don\u2019t have to trust me.\u201d\u00a0<\/p>\nFully collateralized<\/h2>\n
Locked liquidity<\/h2>\n