Frax Finance Brings Fraxlend, A Borrowing And Lending Marketplace
- Frax Finance announced the debut of Fraxlend, a permissionless market wherein users can borrow and lend any cryptocurrency that is a part of the Chainlink data feed.
- Frax Finance is the leading of algorithmic stablecoin protocols and has over $1.18 billion worth of total value locked (TVL) and is the 13th biggest DeFi protocol as well.
Frax Finance, the first and largest fractional algorithmic stablecoin protocol, has announced the debut of Fraxlend, a permissionless market wherein users can borrow and lend any cryptocurrency that is a part of the Chainlink data feed.
The protocol rose to popularity when it introduced the world to the concept of cryptocurrency being partially backed by collateral and partially stabilized algorithmically and these blockchain-based tokens came to be known as algorithmic stablecoins. Terra stablecoin (UST) now known as Terra Classic (USTC) followed a similar model but failed to implement it in a non-vulnerable way.
According to the ranking presented by DefiLlama, Frax Finance is the leading of algorithmic stablecoin protocols and has over $1.18 billion worth of total value locked (TVL). Moreover, it is the 13th biggest DeFi protocol across the chains and is preceeded by Arrakis Finance, a DeFi yield protocol.
The DeFi protocol uses a two-token model, i.e., it has two tokens like Terra Classic blockchain and these are the FRAX token and the FPI token. The former is pegged in a 1:1 ratio to the US Dollar and is a partically centralized stablecoin. On the other hand, the latter is pegged to the U.S. Consumer Price Index (CPI).
As seen from the data from CoinMarketCap, FRAX is a stable stablecoin, i.e., it has never lost its value to the US Dollar significantly. However, it has seen some minute drops and at the time of writing, the price of 1 FRAX token is $0.9965, almost 0.29% low from its required price of $1.
Frax Finance core developer Drake Evans taked about crucial use cases for Fraxlend while appearing on the Flywheelpod podcast. He confirmed that the DeFi protocol has introduce new uses for its stablecoin and it seems that the supply and burn of the stablecoin will be linked to the borrowing and lending process.
As per Evans, the borrowing and lending process will mint new FRAX stablecoins which will keep the supply and demand in check. It will allow the users of the DeFi protocols to directly lending the stablecoins that they own and earn interest through existing money markets.
“Fraxlend is one of the newest generations of lending protocols that will showcase new innovations in onchain debt origination. Some of these features have never been built before in any kind of lending system so we are extremely excited to finally bring these use cases to DeFi,”
said Frax Finance founder Sam Kazemian.
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
