Frax Controls Its Stack

FRAX is a hybrid algorithmic stablecoin whose model is similar to that of UST. However, while UST is now 7.5% backed by exogenous collateral (i.e. BTC), FRAX is 84.5% directly backed by exogenous collateral, making it less reliant on the algorithmic component. This model is in contrast to an overcollateralized stablecoin such as DAI, whose CR ranges from 101-175%. Importantly, FRAX’s collateralization ratio is not static, but rather increases or decreases based on demand for the stablecoin (we dive into these mechanics later on in this post).