Part 9 of my deep dive research series will be on $FXS.
Has @fraxfinance created the Holy Trinity of DeFi??
The purpose of this deep dive series is to analyse a number of popular projects and rank them against a set framework. I outline my DYOR framework below.
As I complete each project, I will update and track scores on my google sheet. You can view for free below.
https://docs.google.com/spreadsheets/d/1mPGbrsSEqBCN4lTVIIfdu3UzhZVqGP6LWMXlJrWJ5RE/edit?usp=sharing
Let’s dive in…..
Price = $10.25
Market cap = $755m – Rank 65
All time high = $42.80 (-76%)
All time low= $1.50 (+581%)
Frax Finance is an ecosystem of decentralised finance tools including
Fraxswap
Fraxlend
Stablecoins
ETH Liquid staking
At the core of the ecosystem are 2 decentralised stable coins. The first of their kind to be partially algorithmic, partially collaterised. In between USDC and the failed UST.
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. Here is a great thread by @ThorHartvigsen to get you up to speed with the project.
Revenue
In the lead up to the ETH Shanghai upgrade, the frxETH liquid staking product has seen some fantastic growth. According to token terminal- Last week frxETH hit an ATH in fees & revenue.
Fees- $118k weekly and $16k daily
Revenue- $12k weekly and $1.7k daily
That is only just one of the Frax products. According to Defillama, Frax swap is also hitting some good numbers for fees- $34k over the last 24hrs.
8.5 for Revenue.
Treasury
At launch, 5% of FXS was allocated to the Frax Treasury which is entirely community and team governed. According to Etherscan, the multi-sig wallet currently has over $70m worth of assets. 97% is held in in $FPIS- Frax Price Index share ($68m).
This is a robust treasury for the projects market cap and size. It is very concentrated in FPIS however which is a slight concern from a diversification standpoint.
8.5 for Treasury.
Tokenomics
According to coingecko, these are the current supply stats for $FXS
Circulating supply = 73.8m
Total supply = 99.82m
Market cap = $755m
FDV = $1.02b
Market cap/ FDV = 0.74
There are several tokens in the Ecosystem
$FXS- Governance and utility token
$FRAX- Stablecoin pegged to $1 USD
$FPI- CPI pegged stablecoin
$FPIS- Governance token for FPI
$frxETH- stablecoin loosely pegged to ETH
$sfrxETH- vault for accruing staking yield
However, we will focus this section on $FXS as it is the value accrual and governance token for the entire ecosystem. It is designed to be volatile with the potential of upside utility and downside utility of the system.
FXS supply is initially set to a maximum of 100 million tokens at genesis. However, the design of the protocol is such that FXS would be largely deflationary in supply if FRAX demand grows. Currently, the total supply is 99.82m.
You can also lock up your FXS for veFXS and earn special boosts, special governance rights, and AMO profits. Overall, strong tokenomics with good value accrual, fixed max supply and a buy back/ burn mechanism.
9 for tokenomics.
Locked up funds
At token launch, FXS was distributed as per the following
65% Community (65m FXS)
35% Team and investors (35m FXS)
There is a hard cap of 100m max Frax tokens and the team describe the emissions similar to Bitcoin mining. The FXS supply will halve every 12 months on December 20th each year. As it currently stands, around 74% of tokens are in circulation.
8.5 for Locked up funds.
Use case
What I like about Frax is that they have a very diverse suite of DeFi products. From stablecoins, swaps, lending, and liquid staking, they have it all. Across the whole ecosystem, they have just under $2b of TVL.
Including…
Frax = $1.56b TVL
Fraxlend= $185m TVL
Frax Swap= $75m TVL
Frax ETH= $163m TVL
The biggest gainer recently has been frxETH with the anticipation of the Shanghai upgrade and subsequent unlock of staked ETH. Out of all Liquid staking derivatives, frxETH currently pays the best APR at around 8.17%.
9 for Use case.
Roadmap
The focus of Frax is to provide the best and most innovative stablecoin infrastructure in DeFi. In some recent interviews, @samkazemian has outlined some big plans and ambitions for the project in 2023 and beyond...
Open a Fed Master Account (FMA)- long term goal
Support Shanghai upgrade- frxETH
Developing a Borrow AMM (B-AMM)
Sam is very active and has done some interesting interviews recently. A great summary by @ReveloIntel
8 for Roadmap.
Team & funding
FRAX was founded by Sam Kazemian, Travis Moore, and Jason Huan in 2019. It launched on Ethereum Mainnet in 2020. 12% of the FXS supply was allocated to private investors- all of which has since been unlocked (over the first few years).
Some of the biggest investors in crypto are backers of the project as you can see below.
8.5 for Team & funding.
Summary
TLDR summary for each category’s score out of 10.
8.5 - Revenue – Diverse revenue streams
8.5 - Treasury– $70m mostly in FPIS
9 - Tokenomics –fixed max supply, buy back/ burn mechanism
8.5 - Locked up funds – 74% in circulation, no token unlocks
9 - Use case – DeFi Holy Trinity (Stablecoin, liquidity, lending)
8 - Road map – Plans for multi-trillion $ mcap
8.5 - Team/ funding – Strong team, community & investors
TOTAL- 8.7 weighted avg. score
Overall, I am super impressed with Frax Finance. There are several upcoming narratives and bullish catalysts which the team are extremely well positioned for
Shanghai upgrade- frxETH
Decentralised stablecoins- FRAX
Frax comes in 2nd just behind GMX in my overall rankings. I will be keeping a close eye on this project over the next few months and FXS is already showing some recent strength with the mini bulla.
The purpose of this thread is for education and research, not investment or financial advice. The current macro conditions are still very choppy with the risk of recession in 2023 and a tightening Fed so please be cautious out there frens.
Tagging some accounts to follow for more Frax Alpha
Appendix- useful links
https://etherscan.io/tokenholdings?a=0x9AA7Db8E488eE3ffCC9CdFD4f2EaECC8ABeDCB48