Frax Finance is a stablecoin protocol that operates/issues frxUSD (formerly known as FRAX), a decentralized dollar-pegged stablecoin. frxUSD is backed by both collateral and a series of price stabilizing algorithms. 

Project Function

Frax operates as a “banking algorithm” that adjusts the protocol’s collateral ratio, or the number of stablecoin-denominated deposits needed to back $1 of frxUSD, in order to keep frxUSD’s price in line with its $1 peg. Each dollar of frxUSD is backed by exactly $1 worth of value. However, unlike leading competitors backed by 100% fiat reserves, frxUSD is collateralized via a combination of other stablecoins like USDC and the project’s governance token, FRAX (formerly known as FXS). 

Token Utility 

frxUSD (formerly known as FRAX) was the first fractional-algorithmic stablecoin, combining both crypto-collateral backing and algorithmic supply control to maintain its 1:1 peg to the U.S. dollar.

Staking and Yield Opportunities for frxUSD: frxUSD can be deployed in various ways to earn yield within the Frax ecosystem. One primary avenue is staking frxUSD. Staked frxUSD is an ERC-4626 vault token that represents frxUSD deposits earning a portion of the protocol’s yield.

Governance Rights of FRAX (formerly known as FXS): Governance decisions (such as adjusting collateral pools, fee parameters, or adding new assets) are made by holders of FRAX. Additionally, FRAX holders accrue fees/revenues generated from the Frax ecosystem.

About The Founders

Sam Kazemian: An Iranian-American software programmer and entrepreneur, Sam co-founded Everipedia and later founded Frax Finance in 2019, introducing the first fractional-algorithmic stablecoin protocol.

Travis Moore: An Italian-American computer programmer and entrepreneur, Travis co-founded Everipedia and serves as the Chief Technology Officer at Frax Finance. He graduated from UCLA with degrees in Molecular Biology, Biochemistry, and Neuroscience.

Jason Huan: An American computer scientist and graduate of UCLA, Jason co-founded Frax Finance in 2019.

Risks of fxUSD (formerly known as FRAX)

Like an investment in other crypto assets, there are some general risks to investing in frxUSD. These include:  (i) volatility risk and liquidity risk, (ii) short history risk, (iii) demand risk, (iv) forking risk, (v) code defects, (vi) regulatory risk, (vii) electronic trading risk, and (viii) cyber security risk. For additional information of these and other general risks associated with crypto assets and Uphold’s platform, please refer to the Risks Specific to Holding Digital Assets statement.

In addition to these general risks, an investment in frxUSD is subject to the following specific risks:

frxUSD operates using smart contracts, which have an association with vulnerabilities and security breaches. Despite undergoing successful audits by well-regarded third-party entities, it is essential to acknowledge the existence of inherent risks. 

We emphasize that this Crypto Asset Statement is not an exhaustive description or summary of all risks associated with frxUSD. Investors should conduct their own research and perform their own assessment before trading any crypto asset to determine the appropriate level of risk for their personal circumstances.

The frxUSD community and the Frax Finance founding team are not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of frxUSD have no recourse to the frxUSD community, the Frax Finance founding team, or Uphold if frxUSD declines in value for any reason.

Changes to applicable law may adversely affect the use, transfer, exchange, or value of any of your crypto assets, and such changes may be sudden and without notice.

Uphold’s Evaluation Process

Prior to listing frxUSD on the Uphold Platform, Uphold performed due diligence on frxUSD and determined that frxUSD is unlikely to be a security or derivative under relevant securities legislation. Uphold’s analysis including reviewing publicly available information on the following: 

The creation, governance, usage, and design of frxUSD, including ensuring the source code is open-source, audited and peer reviewed, security, and roadmap for growth in the developer community. 

The supply, demand, maturity, utility, and liquidity of frxUSD.

Any marketing materials put forward by the frxUSD social team including on, Twitter, Medium blog, LinkedIn posts, Discord and Telegram channels.

Material technical risks associated with frxUSD, including any code defects, security breaches and other threats concerning frxUSD and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them.

Legal and regulatory risks associated with frxUSD, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of frxUSD.