Emre Yumlu 
Legacy Frax Dollar (FRAX) is a fiat-redeemable, fully collateralized stablecoin issued by the Frax Protocol. Each FRAX is backed 1:1 by approved cash-equivalent reserves, such as tokenized U.S. Treasury funds, held by regulated custodians and managed by Frax Inc under delegation from the Frax DAO. The Frax ecosystem includes FRAX alongside other stablecoins like FPI and frxETH, as well as non-stable tokens. This article delves into what Legacy Frax Dollar is, how it functions, and the opportunities it offers.
What is Legacy Frax Dollar (FRAX)?
Legacy Frax Dollar (FRAX) is the cornerstone stablecoin of the Frax Protocol, pegged 1:1 to the USD and backed by high-quality reserves. Each FRAX token is supported by cash-equivalent reserves like tokenized U.S. Treasury funds (e.g., BUIDL, USTB, JTRSY, WTGXX, AUSD), custodied by regulated entities and overseen by Frax Inc under Frax DAO’s delegation. FRAX integrates with other tokens in the ecosystem, such as FPI (pegged to a consumer goods basket), frxETH (an ETH-pegged liquid staking derivative), and sfrxUSD (a yield-bearing stablecoin). Sub-protocols include Fraxswap (a TWAMM-enabled AMM), BAMM (lending module), Fraxlend (permissionless lending), AMOs (algorithmic market operations), and Fraxtal (an L2 chain using FRAX as gas token).
The Frax ecosystem also features FXB (zero-coupon bonds) and veFRAX (voting and staking token) to ensure stability and yield. FRAX serves as liquidity and collateral in DeFi, with reserve management critical for maintaining its peg.
Purpose of Legacy Frax Dollar (FRAX)
Legacy Frax Dollar aims to empower the Frax Protocol by managing collateral and generating yield as a USD-pegged digital asset. sfrxUSD delivers the highest risk-adjusted yield through strategies like carry-trade, AMOs, and IORB/T-Bill rates. Fraxtal, an Optimism-based Layer-2 chain, uses FRAX as its gas token. Frax Bonds (FXB) stabilize the peg by reducing FRAX supply and locking liquidity. The protocol fosters trust through decentralized governance and transparency, with Frax Inc handling reserve management, KYC/KYB compliance, audits, and fiat redemptions. Governed by the Frax DAO under FIP-432, Frax Inc’s authority can be amended or revoked by the DAO at any time.
How Does Legacy Frax Dollar (FRAX) Work?
FRAX is backed 1:1 by cash-equivalent reserves. Frax Inc manages reserves, coordinates audits, and maintains fiat redemptions. FRAX operates permissionlessly, though reserve tokens may have additional requirements (e.g., whitelists). Users interact with frxUSDCustodian contracts for minting and redemption.
Key Features
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Market Registry: Betting markets are created with details like sports, leagues, team names, bet types (ML, Spread, Total), and game times, stored as a market hash in the Registry.
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Escrow Contract: When a bet is offered and accepted, funds are atomically transferred to the Escrow Contract, held until the game outcome (Outcome1, Outcome2, or Void) is reported. Void bets are refunded at no cost.
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Market Makers: Provide deep liquidity with varied strategies, supporting FRAX’s competitive odds.
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Whale & Syndicate VIP Service: Average bet size (~$345) exceeds traditional platforms, with VIP managers offering exclusive deals.
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Low Latency: Fast order book and reliable data reporting.
Core Components
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sfrxUSD: An ERC4626-like yield vault distributing weekly profits to FRAX stakers. The Benchmark Yield Strategy (BYS) selects the highest yield from carry-trade (Ethena, Superstate), DeFi venues (Aave, Curve Finance, Convex Finance, Euler Finance, Fraxlend, dTrinity lending), or IORB/T-Bill strategies (Blackrock, FinresPBC).
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Frax Bonds (FXB): Zero-coupon bond-like tokens that reduce FRAX supply and stabilize the peg. Sold at a discount via Dutch auctions, they convert 1:1 to Legacy Frax Dollar (FIP-430) at maturity. FXBs are debt tokens, offering no claim to other assets.
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Fraxlend: Permissionless lending market for FRAX and other Frax tokens.
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Fraxswap: TWAMM-enabled AMM for large, long-duration trades.
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BAMM: Oracle-free lending module built on Fraxswap.
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Fraxtal: Optimism-based Layer-2 chain using FRAX as gas token.
FXB Minting & Redemptions
FXBs lock Legacy Frax Dollar for conversion at maturity. They are categorized as Origin (minted on the original chain) or Bridged (transferred via bridge). Redemption occurs on the Origin chain via FXBFactory; bridged FXBs require bridging back for redemption.
Legacy Frax Dollar (FRAX) Use Cases
FRAX serves as a stablecoin in DeFi:
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DeFi Transactions: Payments, lending, and liquidity provision.
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sfrxUSD Staking: Earning yield in the vault.
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Fraxlend: Borrowing and lending.
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Fraxswap: Large trades via TWAMM.
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Fraxtal: Using FRAX as gas token.
Usage Steps:
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Connect a wallet like MetaMask.
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Acquire FRAX (via exchanges or frxUSDCustodian).
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Stake in sfrxUSD vault or use in Fraxlend/Fraxswap.
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Transact on Fraxtal.
Advantages of Legacy Frax Dollar (FRAX)
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Stability: 1:1 USD backing with transparent reserves.
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Yield: sfrxUSD offers top risk-adjusted returns.
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Decentralization: Frax DAO governance and permissionless operations.
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Ecosystem: Integration with Fraxswap, Fraxlend, and Fraxtal.
Legacy Frax Dollar (FRAX) Tokenomics
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FRAX: USD-pegged, collateralized stablecoin.
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FRAX: Fraxtal’s gas token with fixed emission (8% initial inflation, dropping to 3% over 6 years).
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sfrxUSD: Yield vault distributing weekly profits to FRAX stakers.
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FXB: Zero-coupon bonds converting 1:1 to Legacy Frax Dollar at maturity.
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veFRAX: Offers voting rights and farming benefits for locked FRAX.
Legacy Frax Dollar (FRAX) Team
The Legacy Frax Dollar team comprises Frax Protocol members: Sam Kazemian (Founder), Stephen Moore (Co-Founder), Jason Huan (Co-Founder), Travis Moore (Co-Founder & CTO), and James Alston (Board Member & Advisor).
Official Links
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