Algorithmic Stablecoin new project Frax attracts follow

Recently, a new algorithmic stablecoin project called "Frax" has attracted widespread attention in the industry. The project was co-launched by Everipedia co-founder Sam Kazemian and economist Stephen Moore, and it officially announced its market entry on October 21.

The core team of the Frax project is strong. Sam Kazemian, as the CEO and one of the co-founders, is an Iranian-American software engineer who majored in philosophy and neuroscience during college and later self-taught programming and cryptography. Another key figure, Stephen Moore, serves as the Chief Economist, responsible for developing economic models and lending standards. Additionally, the project's General Counsel, Ralph Benko, has served in government positions.

Unlike traditional stablecoins, Frax adopts a partially reserved system with only a small amount of USD reserves supporting it. The project draws on the concept of the Federal Reserve Bank, managing the borrowing and interest collection of reserves through algorithms to ensure that Frax's value remains pegged to the USD at a 1:1 ratio. To reduce risk, Frax will hold nearly 100% of its reserves in the early stages of its launch, gradually decreasing as the network becomes more widespread. All loan transactions will be recorded on the blockchain, without the need for central bank involvement.

Sam Kazemian stated that Frax's mission is to become the first and largest Algorithmic Stablecoin. He believes that Algorithmic Stablecoins may be the only innovation in the cryptocurrency space that can be compared to Bitcoin.

However, the digital currencies under the partial reserve system have not yet been tested by the market, which has become one of the main criticisms faced by Frax. Industry insiders point out that if the redemption demand is too high, stablecoins that lack full one-to-one backing may face the risk of collapse.

In this regard, Sam Kazemian emphasized that Frax's unique lending mechanism will ensure its stability. This mechanism generates cash flow by charging interest on on-chain lending, which can be used to repurchase FRX coins when prices drop. This method is similar to how central banks use bond issuance to repurchase fiat currency. Frax will also leverage the interest earnings from decentralized finance (DeFi) money markets to maintain stability at the algorithmic level.

Currently, Frax and its collateral are being tested on a certain blockchain mainnet, with regular updates to the code repository platform. Although there is no specific timeline for release, Sam Kazemian expects Frax to launch a full product within a year.

As the new project of Everipedia's co-founder, Frax will benefit from the infrastructure and ecosystem of the former. Sam Kazemian stated that Frax will allow the use of IQ tokens as collateral to borrow Frax reserves and plans to integrate Frax into Everipedia. He believes that the Frax project is the gateway for Everipedia into the DeFi space, and the two projects will promote each other's development.