Yesterday, we held a Spaces with Frax Founder Sam Kazemian on the third anniversary of Frax's launch and the FXS halvening date. DeFi Dave interviewed Sam on the entire suite of Frax products and what to expect for 2024. We've summarized the most important points from that discussion and are very excited to see Frax continue to grow into 2024. Let's dive in.
Sam Kazemian gave us a bunch of new info about the soon-to-be-realeased Fraxchain, which he described as a generalized chain, not an app chain, with a goal to become one of the biggest L2s in the entire crypto space.
One of its most notable features is the introduction of blockspace incentives, a new concept where users and developers earn locked veFXS for building on and utilizing the chain, thereby creating a new market dynamic in block space utilization.
For developers and users, the network will introduce an incentive model where deploying smart contracts and using gas leads to earning locked veFXS tokens and 'fraxtal points'. This model is dynamic, allowing for real-time accumulation of rewards based on transaction types. This would mean that products and protocols that drive usage on Fraxchain will be rewarded with locked veFXS. Sam K said that its possible in this system to potentially earn more rewards than what is being paid for fees, as the locking mechanism would prevent short term sybil attacks.
At the end of the interview Cryptovestor asked Sam whether we might see a lockdrop system similar to what Prisma had implemented, where the users who earn the rewards would be able to choose to receive immediate liquidity by depositing the tokens to Convex or a similar style protocol. Sam K said this was a definite possibility and would be open to speaking with teams about this.
Beyond the locked veFXS tokens, users can expect other types of rewards, which Kazemian hinted at but did not fully disclose. He said there might be a points system, which would allow for a "malleable" incentive approach. Rewards on Fraxchain will be fluid and grow as users engage with the network, adding an element of gamification and ongoing engagement. To support these functionalities, Fraxchain will launch the Fraxscan Explorer, developed in partnership with Etherscan. This tool will offer professional-grade infrastructure and unique features, catering to Ethereum and L2 developers.
The architecture of Fraxchain is based on a modular stack design, and is also exploring the implementation of a sharded chain, comprising multiple 'Fraxtals', which could support Layer 3 or Validium-style systems. This approach allows for the deployment of self-serve app chains, further extending the chain's capabilities. Additionally, Fraxchain will facilitate the native issuance of various Frax assets across different app chains and also allow immediate access to the entire suite of Frax DeFi products like Fraxlend, BAMM, Fraxswap and more.
New Frax LSDs for L1/L2s
One of the more interesting topics that was touched on during the interview was the potential expansion of the frxETH LSD model to other L1s. Frax has seen success with its own LSD model and is looking at how it can use it with other L1s/L2s that integrate with Fraxchain.
Sam K said "There's no reason why that can't also just be applied to other POS chains, especially the POS tokens that run different chains that have some kind of connection to a Fractal chain"
One example Sam gave was frxTIA with Celestia, as the modular DA protocol will be supporting Fraxchain. He also mentioned that Polygon, OP, Arbitrum and other L2s might be good candidates for deploying the frxETH model to. He also mentioned that it could be Polygon as well.
"So right now it's just TIA, it doesn't have to be. It could be POL, Polygon's new token. There could be frxPOL in 2024 as well, depending on if we incorporate their proof aggregation layer. If OP actually does any kind of interesting staking system for the super chain, we're exploring that as well. The Frax vision is essentially to become the largest issue or the MQ issuer or of the most important assets in the 21st century."
The frax vision is essentially to become the largest issue or the MQ issue or of the most important Uh, assets in the 21st century.
Sam K was especially bullish on the upcoming launch of BAMM, saying "everyone will just launch BAMM pairs for their project or for their meme coin or whatever they want to do instead of Uniswap pairs and then trying to build liquidity on centralized exchanges, trying to get a Chainlink oracle, trying to pass Aave or compound governance vote or something to get included in places. They'll just know if we have a huge BAMM pair, like a hundred million dollar liquidity BAMM pair, then we have a hundred million dollar lending facility and swap facility in one."
It's an incredible vision for BAMM in the future. He went on to say...
"BAMM will be kind of the final kind of DeFi mechanism that people can build a stablecoin around like we're trying to do with Frax, but also just use it as a standalone system that's just more profitable more useful than the first generation AMMs."
Sam K teased that FXB's are going to be live any day now, as they have already passed all needed governance votes, completed audits, and have been tested on-chain. One thing he told us is that some of the initial FXB auctions are already on chain and that on-chain sleuths interested in finding the auction transactions would be able to and post the details to Telegram.
There is definitely something brewing between Frax, Paxos, and Paypal with their PYUSD stablecoin. Sam K said that Paypal is one of the largest 28 companies in the world and "once they flip the switch, where payments denominated in dollars are actually PYUSD, moving between account to account, then I think people will wake up and really know that stablecoins have become a household name and household technology right under their noses."
He thinks that FRAX might be the central asset for PYUSD to trade on-chain with and on DeFi, as "it needs to have ubiquitous level liquidity on chain. And to be honest, it doesn't yet, right? But it will when Frax is done with it."
Sam K also talked about the recent Frax DAO vote to partner with Centrifuge to enhance its Real World Asset (RWA) capabilities. This collaboration aims to leverage Centrifuge's experience in managing significant RWA volumes, notably in servicing MakerDAO's DSR yield alongside BlockTower.
One thing that Sam K is excited about for the proposal is the potential for redeeming Centrifuge's RWA fund for FRAX stablecoins, introducing a new mechanism for converting RWAs into stablecoins. Furthermore, the partnership proposes an additional clause in the RWA structure for entities holding T-bills for FRAX DAO, like Centrifuge or BlockTower. This clause would allow entities that pass KYC and regulatory standards to redeem FRAX stablecoins for T-bills at a one-to-one parity, providing multiple redemption points for FRAX stablecoins and enhancing their utility and parity with fiat currencies.
This partnership aims to align FRAX stablecoins with major digital currencies like USDC, PYUSD, and Tether in terms of fiat rail utility, but with a more decentralized approach. Overall, the Frax and Centrifuge partnership marks a significant step in integrating traditional financial assets with decentralized finance.
FPI / FPIS
Sam mentioned that he's been thinking about proposing a merger of FPIS into FXS before the launch of Fraxchain to support the long term growth and health of FPI. While he didn't give any major details, he said that FPI is a major part of Frax's long term growth plans and will be at the forefront of product development going forward.