Her vote was accepted to fully collateralize Frax Finance’s native stablecoin and phase out algorithmic support.
Frax Finance The decentralized financial stablecoin protocol community has voted to fully collateralize the native stablecoin Frax (FRAX), ending algorithmic support for the protocol.
Her FIP 188 governance proposal – which would change FRAX’s collateral model – first announced on Feb. 15 has reached a quorum of 98% yes votes, according to a Feb. 23 snapshot .
“It’s time for Frax to phase out algorithmic support for the protocol,” the proposal reads.
He explained that the original protocol featured a “variable collateral ratio” that was adjusted based on market demand for stablecoins. The amount of security required for each FRAX equivalent to his US$1 is determined by the market.
Hybrid model allows stablecoins to be backed by crypto collateral and partially algorithmically stabilized. This was achieved by issuing and burning the governance token FXS, which rose 12% in the last 12 hours.
Frax is his 5th largest stablecoin in the industry, with a market cap of $1 billion. Strong.
After implementation of the
proposal, the protocol will no longer issue FXS to increase the collateral ratio and token supply.
“To be clear, this proposal does not rely on minting any FXS to achieve the 100% CR.”
It plans to retain protocol revenue to fund the increased collateral ratio, which includes pausing FXS buybacks.
It will also authorize up to $3 million per month in Frax Ether (frxETH) purchases to increase the collateral ratio. frxETH behaves similarly to a stablecoin but is pegged to Ether
instead. It facilitates the transfer of Ether liquidity within the Frax ecosystem.
DeFiLlama recently reported on the growth of frxETH over the past month.
The move comes amid what appears to be a broader crackdown on stablecoins following last year’s devastating Terra/Luna collapse.
On February 22, Canada’s securities regulator released a long list of new requirements for cryptocurrency companies and stablecoin issuers seeking to remain compliant in the country.
The list included strict rules for trading stablecoins and a ban on stablecoins not backed by algorithms or fiat currencies.