Frax: Q2 Update

Throughout the first half of 2023, Frax proved its resilience through both peg stability in periods of market turmoil and the bootstrapping of a widely successful liquid staking solution. frxETH continues to offer some of the highest yield opportunities for ETH, and its explosive growth shows no sign of slowing down. FXS saw a surge in price during the first quarter of the year, but has since slowly returned back to Earth as broader market uncertainty reemerged.

In the latter half of 2022, FXS holders voted to utilize $20M of revenue to buyback the FXS token on the premise that the token is fundamentally undervalued when compared to the rest of the crypto market. To date, $6M of the earmarked funds have been used to buyback FXS, and $14M remains. This buyback function has assisted in the creation of a floor value for FXS that has most certainly helped the protocol survive crypto winter.

Frax has several catalysts scheduled for the rest of the year, including a new iteration of frxETH, a rollup, and a new governance module to enhance decentralization.

frxETH

With $435M of ETH staked with Frax, frxETH has seen exponential growth since its mainnet deployment in October 2022. sfrxETH returns have a 30D average of ~5% APY, but in the early days, sfrxETH APY was nearly double digits thanks to its dual token model. The liquid staking solution currently has a 2.4% market share of the total liquid staking sector, where Lido, Coinbase, and Rocket Pool control the lion’s share.

frxETH utilizes a two token model, where frxETH holders can either provide liquidity on Curve for CRV, CVX, and FXS token rewards or stake frxETH for sfrxETH to receive plain ETH staking rewards. This enables the market to determine a competitive staking APY that constantly rebalances as users gravitate toward the best risk-adjusted option. Further, Frax’s war chest of CRV and CVX grants the protocol material influence over emissions, which helps in further enhancing frxETH yield.