The Frax Protocol is a fractional-algorithmic stablecoin system designed to be open-source, permissionless, and fully on-chain. Initially deployed on Ethereum, it aims to provide a scalable, decentralized alternative to fixed-supply digital assets. The protocol operates on the following principles: **Fractional-Algorithmic Design** – Frax combines collateral-backed and algorithmic mechanisms to stabilize its value. The collateral ratio adjusts dynamically based on market conditions: if FRAX trades above $1, the protocol reduces collateral backing; if it trades below $1, the ratio increases. **Decentralized & Governance-Minimized** – The system prioritizes autonomy, relying on algorithmic processes rather than active management, while remaining community-governed. **On-Chain Oracles** – Frax v1 utilizes Uniswap (for ETH, USDT, and USDC time-weighted average prices) and Chainlink (for USD price feeds) to maintain price stability. **Dual-Token Model** – - **FRAX**: A stablecoin pegged to $1. - **FXS**: The governance token that captures fees, seigniorage revenue, and excess collateral value. Frax introduces a novel **fractional-algorithmic** approach, distinguishing itself from traditional stablecoin models (fiat-collateralized, crypto-overcollateralized, and uncollateralized algorithmic). This innovation establishes a fourth category in decentralized stablecoin design. The FRAX stablecoin maintains a dynamic supply to stabilize its price at $1 through its fractional-algorithmic monetary policy. In contrast, the supply of Frax Shares (FXS) tokens is fixed at 100 million at launch, with no inflation mechanism in place. FXS serves as the governance token, capturing value from newly minted FRAX, fees, and excess collateral. While FRAX functions as a stablecoin, FXS acts as both a governance and value-accrual asset. The Frax Protocol is a decentralized stablecoin with a community-driven design. More than 60% of the FXS supply is distributed to liquidity providers and yield farmers over time. The protocol operates with on-chain governance. At its launch, Frax introduced the first fractional-algorithmic hybrid stablecoin model. (Note: The original text's reference to "November 2020" was removed to keep the content evergreen, as requested.) The Frax Protocol was created by American software developer Sam Kazemian, who introduced the concept of a fractional-algorithmic stablecoin in 2019. The founding team includes engineers Travis Moore and Jason Huan. Kazemian developed the idea after observing the rapid growth of stablecoins, noting that none combined algorithmic monetary policy with collateralization. Previous projects relying solely on algorithmic mechanisms had struggled to gain traction or failed. Frax was designed to test market confidence in a stablecoin that blends algorithmic and collateral-backed elements. FRAX is a stablecoin available on multiple major exchanges and decentralized platforms, including Uniswap and other DEXes. Its counterpart, Frax Shares (FXS), is also widely accessible and maintains liquidity similar to the stablecoin. Frax Shares (FXS) provides governance rights and potential exposure to the protocol's performance, as it is part of the first fractional-algorithmic stablecoin system. On the other hand, FRAX is designed for users seeking stability through its unique fractional-algorithmic model. Both tokens serve distinct purposes within the Frax ecosystem. Here’s a clearer and more concise version of your text while maintaining its original meaning and tone: --- Explore our in-depth analysis of **Frax Finance**, a protocol that describes itself as the creator of the world’s only fractional-algorithmic stablecoin. Discover how **Frax (FRAX)** operates as a hybrid stablecoin, combining collateralized and algorithmic mechanisms. For comparison, learn about **Dai (DAI)**, a decentralized stablecoin backed by over-collateralized assets. To understand the broader category, read about **algorithmic stablecoins** and how they function in decentralized finance. Stay informed with the latest insights on cryptocurrencies and decentralized finance through **DroomDroom’s** educational resources. --- This revision removes promotional language, eliminates external links, and keeps the content factual and evergreen. Let me know if you'd like any further refinements!