{"id":555429,"date":"2023-02-23T07:37:38","date_gmt":"2023-02-23T04:37:38","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/frax-finance-to-retire-algorithmic-backing-amid-stablecoin-crackdown\/"},"modified":"2023-02-23T07:37:38","modified_gmt":"2023-02-23T04:37:38","slug":"frax-finance-to-retire-algorithmic-backing-amid-stablecoin-crackdown","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/frax-finance-to-retire-algorithmic-backing-amid-stablecoin-crackdown\/","title":{"rendered":"# Frax Finance to retire algorithmic backing amid stablecoin crackdown"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3225e07b30d\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3225e07b30d\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/frax-finance-to-retire-algorithmic-backing-amid-stablecoin-crackdown\/#%E2%80%9D_Frax_Finance_to_retire_algorithmic_backing_amid_stablecoin_crackdown_%E2%80%9C\" >&#8221; Frax Finance to retire algorithmic backing amid stablecoin crackdown &#8220;<\/a><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_Frax_Finance_to_retire_algorithmic_backing_amid_stablecoin_crackdown_%E2%80%9C\"><\/span>&#8221; Frax Finance to retire algorithmic backing amid stablecoin crackdown &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p><img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjMtMDIvNDEyYWM5ODMtODA5Mi00MDZhLWJhMjAtZTM3MWI3NmFjOWQ2LmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-48054ca8>The community of decentralized finance stablecoin protocol Frax Finance has voted to fully collateralize its native stablecoin Frax (FRAX), marking an end to the algorithmic backing of the protocol.<\/p>\n<p>The<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/gov.frax.finance\/t\/fip-188-increase-cr-to-100\/2147\"> FIP-188<\/a> governance proposal initially posted on Feb. 15 reached a quorum following a 98% vote in favor, according to a<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/snapshot.org\/#\/frax.eth\/proposal\/0x6d43531f54de3d52ad439dcb6c56e3eae1b833fceb4d484dcb3b20be070ca25d\"> snapshot<\/a> on Feb. 23 \u2014 which would change the\u00a0collateralization model of FRAX.<\/p>\n<p>\u201cThe time has come for Frax to gradually remove the algorithmic backing of the protocol,\u201d last week\u2019s proposal read.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">Near unanimous vote to move <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/search?q=%24frax&amp;src=ctag&amp;ref_src=twsrc%5Etfw\">$frax<\/a> to 100% CR over time. <\/p>\n<p>Seems like <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/fraxfinance?ref_src=twsrc%5Etfw\">@fraxfinance<\/a> serious about making it clear it\u2019s a stable worth holding with no incentive and completely backed with exogenous collateral.<\/p>\n<p>Will be interesting to see it scale<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/search?q=%24fxs&amp;src=ctag&amp;ref_src=twsrc%5Etfw\">$fxs<\/a> <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/t.co\/fSQXpmsge3\">https:\/\/t.co\/fSQXpmsge3<\/a><\/p>\n<p>\u2014 0xChaos (@0xCha0s) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/0xCha0s\/status\/1628594752554762241?ref_src=twsrc%5Etfw\">February 23, 2023<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script>It explained that the original protocol included a \u201cvariable collateral ratio\u201d which adjusted based on the market demand of the stablecoin. The market would dictate how much collateral was required for each FRAX to equal one United States dollar.<\/p>\n<p>The hybrid model resulted in the stablecoin being 80% backed by crypto asset collateral and partially stabilized algorithmically. This was achieved by the minting and burning of its governance token, FXS, which has surged 12% over the past 12 hours.<\/p>\n<p>Frax is the industry\u2019s fifth-largest stablecoin with a market capitalization of just over $1 billion.<\/p>\n<p>Following the implementation of the proposal, the protocol will not mint any more FXS to increase the collateral ratio and token supply. <\/p>\n<blockquote><p>\u201cTo be clear, this proposal does not rely on minting any FXS to achieve the 100% CR.\u201d<\/p><\/blockquote>\n<p>It plans to retain protocol revenue to fund the increased collateral ratio, which includes pausing FXS buybacks.<\/p>\n<p><strong><em>Related:<\/em><\/strong><strong><em> <\/em><\/strong><strong><em>SEC enforcement against Kraken opens doors for Lido, Frax and Rocket Pool<\/em><\/strong><\/p>\n<p>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 (ETH) instead. It facilitates the transfer of Ether liquidity within the Frax ecosystem.<\/p>\n<p>DeFiLlama recently reported on the growth of frxETH over the past month.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">FraxETH grew by 46.33% over the past month and now has over 100k ETH tokens locked <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/t.co\/5NxhKnTHUt\">pic.twitter.com\/5NxhKnTHUt<\/a><\/p>\n<p>\u2014 DefiLlama.com (@DefiLlama) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/DefiLlama\/status\/1627800684333604871?ref_src=twsrc%5Etfw\">February 20, 2023<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>The move comes amid what <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ears to be a wider crackdown on stablecoins in the wake of last year\u2019s catastrophic Terra\/Luna collapse.<\/p>\n<p>On Feb. 22, the Canadian Securities Administrators (CSA) published a long list of new requirements for crypto companies and stablecoin issuers wanting to remain legally compliant in the country.<\/p>\n<p>Included on that list were strict rules for stablecoin trading and a prohibition on algorithmic or non-fiat-backed stablecoins. <\/p>\n<p><template data-name=\"subscription_form\" data-type=\"defi_newsletter\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/frax-finance-to-retire-algorithmic-backing-amid-stablecoin-crackdown\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; Frax Finance to retire algorithmic backing amid stablecoin crackdown &#8220; The community of decentralized finance stablecoin protocol Frax Finance has voted to fully collateralize its native stablecoin Frax (FRAX), marking an end to the algorithmic backing of the protocol. The FIP-188 governance proposal initially posted on Feb. 15 reached a quorum following a 98%&#8230;<\/p>\n","protected":false},"author":1,"featured_media":555430,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/s3.cointelegraph.com\/uploads\/2023-02\/412ac983-8092-406a-ba20-e371b76ac9d6.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74894,75493,74355],"class_list":["post-555429","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-blockchain","tag-stablecoin","tag-adoption"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/555429","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=555429"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/555429\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/555430"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=555429"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=555429"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=555429"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}