Please check the most update version here in comments.
Authors
Frax Core Team
Summary
This proposal seeks to implement the upgrading of FXS, the Frax North Star Hardfork, the Tail Emission Plan, and the Flox Capacitor Boost. The proposal includes:
- Renaming of the original FRAX token to Legacy Frax Dollar.
- Renaming of FXS to FRAX: will unify branding efforts and reduce confusion.
- Renaming of veFXS to veFRAX: in line with the other renamings.
- North Star Hardfork: FRAX (prev. FXS) will become the gas token on Fraxtal, replacing frxETH. It will also facilitate setting up ETH2-like validators in a future update later. This will provide even more utility for the FRAX (prev. FXS) token.
- Tail Emission Plan: Introduces * 8% yearly FRAX (prev. FXS) emissions, dropping 1% a year to a floor of 3% in 5 years. These will be directed to FXTL point conversions, community discretionary, DAO discretionary, and team retention.
- Flox Capacitor (floxCAP) Boost: A new boosting system designed so users can boost their FXTL conversion rate by locking FRAX (prev. FXS) into a special FRAX staking contract with a fixed 90 day cooldown for withdrawal. veFRAX balances will also qualify for part of the floxCAP boost.
- FXTL Conversion: Every week, ~2% of a user’s FXTL will be converted to FRAX. Conversion rate depends on the user’s floxCAP. Total sum of all FRAX released for conversions subject to tail emission plan.
Background and Motivation
Frax Finance has consistently been at the forefront of decentralized finance, pioneering innovative solutions for stablecoin issuance, yield mechanisms, and governance. As the ecosystem evolves and expands, it is crucial to adapt and enhance its economic and governance structures to align with long-term growth and decentralization. Many top tier projects are upgrading token structures and utility to better prepare their ecosystem and community for success such as Sonic (prev. FTM), Fluid (prev. Instadapp), and more.
Proposal Details
1. Renaming of tokens & multi-chain strategy:
While we realize these rebrandings might initially cause minor confusion, in the interest of branding and frxUSD expansion efforts, we propose that:
- “Legacy” FRAX (the original stablecoin) will be renamed to Legacy Frax Dollar
- The current FRAX logo will replace the FXS logo:
(the FXS logo will not be used anywhere going forward) - FXS will be renamed to FRAX. FRAX will continue to govern emissions, revenue-sharing, gauge emissions, and protocol incentives, reinforcing Frax’s decentralized economic model.
- veFXS will be renamed to veFRAX
- Full Usability of Legacy Tokens: The FXS token (now renamed to FRAX) will remain fully usable across the Frax ecosystem and supported protocols and chains, ensuring continuity for all existing integrations and holders. FXS can upgrade 1 to 1 to FRAX on Fraxtal chain at any time.
- Multi-Chain Strategy Based on OFT Standard: FRAX will continue its multi-chain expansion and will be aligned with the LayerZero OFT standard. This currently includes Arbitrum, Avalanche, Base, Blast, BSC, Fraxtal, Ink, Metis, Mode, Optimism, Polygon, Polygon-zkEVM, Sei, Sonic, and X-Layer. Future chains include Move, Solana, and TON.
2. North Star Hardfork
-
FRAX (prev. FXS) will become the gas token for Fraxtal, replacing frxETH.
-
The current FRAX (prev. FXS) contract will change to a WETH-like gas wrapper contract called wFRAX.
-
Any holders of FXS ERC20s will receive 1:1 wFRAX ERC20 tokens. They can choose to unwrap it for FRAX gas or keep it as an ERC20. Thus, users who hold FXS on Fraxtal will not need to do any action to upgrade their token, the token upgrade will be done for them in the North Star Hardfork.
-
wfrxETH will become frxETH and will be changed to a normal ERC20. wfrxETH holders will receive 1:1 of frxETH ERC20 tokens.
-
Because of gas handling / payable-ness in smart contracts, EOAs & Safes will be treated differently than LP/DeFi contracts as follows:
- EOAs / Safes: Will receive 1:1 FRAX to frxETH, essentially a free bonus amount of FRAX gas. Because of the high price of frxETH relative to FXS, the total bonus amount airdropped will be negligible. They will also receive 1:1 frxETH ERC20s.
- LP / DeFi / Bridge / Other contracts: The market value of the frxETH gas held will be converted to an equal market value of FRAX (prev. FXS) gas tokens. Note that this is a “forced” exchange of frxETH for FXS. Deployers / managers of these contracts MUST ensure that any oracles or other mechanisms of the contract do not become disrupted as a result of this change. External teams are encouraged to reach out to the Frax team before the hardfork to resolve any potential issues beforehand.
-
Additional misc system contract changes will be made to facilitate an ETH2-like validator system in the future, where instead of ETH, FRAX (prev. FXS) would be staked.
-
An example table of the proposed conversions is provided below:
3. Upgrade of veFXS to veFRAX & Multi-Token Rewards
-
veFXS will be renamed to veFRAX, maintaining the same governance power and functionality based on lock times, including farming boosts. Other than the name, the veFXS contract will not change, nor will any positions be unlocked.
-
Multi-token (additional) rewards will be introduced, with Frax Bonds (FXBs) being the first additional reward token in the system. These will be funded with excess revenue share.
-
Rewards Distribution:
a. veFRAX stakers will receive 4-year dated FXBs (e.g. FXB2029 in 2026, FXB2030 in 2027, etc), with governance-approved additions of other FXB maturities or tokens in the future. Amounts will be dependent on governance votes. Emitting additional tokens in the form of bonds instead of other assets encourages long term participation. The FXBs will come from a small portion of the normal DAO / POL revenue, the exact proportion to be determined by the Revenue Plan. The FXBs distributed this way will be fully collateralized by short-dated tbills of the same maturity purchased via protocol revenue.
b. All rewards will be distributed proportionally based on the lock time and amount of FRAX staked, preserving the current incentive structure.
-
Airdrops & Ecosystem Rewards: veFRAX stakers, via via 4-year FXBs, will be eligible for airdrops and additional incentives from Frax Finance’s strategic partners and investing protocols. This includes rewards from Frax-integrated DeFi protocols, Fraxtal-native projects, and external collaborations that align with Frax’s long-term objectives. These rewards will complement the multi-token reward system and further enhance the governance token’s utility. The team will have discretion on the exact ratio between how much each token is distributed to veFRAX stakers or held in Frax’s strategic reserve treasury.
-
Flox Capacitor: A small portion of a user’s Flox Capacitor boost will come from the user’s veFRAX balance.
-
FXS Gauges: FXS gauges will continue on the allocated halvening cycles as before, but a gradual phase-out in favor of the FXTL system is intended.
4. Clarification of protocol revenue destinations
The protocol earns revenue from various sources. The DAO/POL sources include:
I. Yield from direct-held (non-rehypothecated) T-Bills / RWAs inc RWA tokens (BUIDL, SuperState, brokerage-held T-Bills etc)
II. Yield from tokenized stables like Ethena’s sUSDe, Maker/Sky USDS, including farming Curve, etc pairs with them.
III. Fraxlend POL interest income, as well as the overall admin fee
IV. BAMM POL and admin fees
V. Fraxswap POL swap and admin fees
VI. Uniswap V3 POL swap fees
VII. frxETH protocol fee
VIII. POL sfrxETH
IX. Misc airdrops and grants
X. Misc sales of volatile tokens
We propose to delineate which income streams go where, as follows.
- sfrxUSD: Initially, mainly income from TradFi tokenized assets such as BUIDL and USTB. Later, as more people migrate to frxUSD from Legacy FRAX, the POL income streams described above will be incorporated.
- FXBs for veFRAX rewards: A minority portion of the POL income streams described above.
- Sustainability: By using FXBs, the fee switch ensures that revenue sharing is long-term and aligned with Frax’s financial stability.
5. Establishment of the Tail Emission Plan & Tokenomics
-
8% annual FRAX (prev. FXS) emissions. These will drop 1% a year over 5 years to a final floor rate of 3%.
-
[Year 1] token amount are proposed as follows:
- 32.5% (2.6M): Frax DAO Includes grants, marketing, partnerships, audits, TWAMM treasury reserves / rainy day, treasury POL, sponsorships, bug bounties.
- 10-15.6% (800K - 1.25M): Team incentives+expansion. Base 10%, extra 5.6% if frxUSD TVL is ≥ $800M for at least one continuous 30 day period within the next 12 months.
- 23.1%-17.5% (1.85M-1.4M): Community: partnerships, liquidity incentives, BD, gauges, boosts for internal Frax projects. Requires community voting. Base 17.5%, minus 5.6% to team if they meet milestones.
- 34.4% (2.75M): FXTL conversions: FXTL enshrined as new gauge-like system with allocation methods TBD. Holders can redeem FXTL points for veFRAX 2M-4Y lock. Longer locks = better conversion rate. Conversion formula TBD. Likely not linear, in order to favor longer locking.
-
Details & Comparison:
Timeline % New New Emissions Total Supply 2024 - 2025 0 0 100,000,000 2025 - 2026 8.00% 8,000,000 108,000,000 2026 - 2027 7.00% 7,560,000 115,560,000 2027 - 2028 6.00% 6,933,600 122,493,600 2028 - 2029 5.00% 6,124,680 128,618,280 2029 - 2030 4.00% 5,144,731 133,763,011 2030 - 2031 3.00% 4,012,890 137,775,902 2031+ 3.00% 4,133,277… 141,909,178…
To fairly benchmark Frax’s Tail Emission Plan, we use Total Circulating Supply Inflation as the key comparative metric, as it reflects the actual increase in liquid supply and provides a standardized way to assess inflation impact across protocols. Given that Frax is in its fourth year, we compare it to other projects at the same stage.
| Token | Annual Token Unlocking | Annual Token Emission | Annual Token Circulating Supply Inflation | Note |
|---|---|---|---|---|
| CRV | 9.24% | 7.54% | 16.78% | CRV inflation at 4th year (2023 -2024) |
| ETH | - | 6.04% | 6.04% | Ethereum inflation at 4th year (2018 - 2019) |
| NEAR | 14.97% | 5.0% | 19.97% | Near inflation at 4th year (2023 - 2024) |
| SOL | - | 4.91% | 4.91% | Solana’s annual inflation rate at 4th year |
| ENA | 15.2% | - | 15.2% | ENA inflation rate at 4th year (2027 - 2028) |
| S | 2.2% | 7.5% | 9.7% | S inflation rate at first year (2025 - 2026) |
| ARB | 15.7% | Up to 2% | 15.7% ~ 17.7% | ARB inflation rate at 4th year (2026-2027) |
| OP | 44% | ~ 2% | 44% ~ 46% | OP inflation rate at 4th year (2025-2026) |
| FRAX (FXS) | - | 8% | 8% | FRAX inflation rate at First Year (2025 - 2026) which is 4th year of Frax Finance. |
Disclaimer: The data presented in this table is based on the best available research and industry sources. However, due to changes in tokenomics, governance decisions, and market conditions, some figures may be subject to revision and should not be considered definitive.
-
FXTL points conversion:
- Every week, there will be (1 / 52.1429 = ~1.918%) * (2.75M FRAX allocated for FXTL conversion from tail emission plan) = 52739.7 FRAX available for conversion.
- Every week, 1 / 52.1429 = ~1.918% of a user’s FXTL point balance will be deducted / burned and automatically converted to claimable FRAX.
- The conversion rate depends on each user, depending on their floxCAP balance. If other users also have a high floxCAP balance, they will all have lesser conversion rates due to competition (e.g. normalization). This is similar to how the current gauge farms work. Specific formula TBD.
- The total sum of FRAX converted per week will not exceed 52739.7 tokens. That is why the rates need to be normalized in iii.
- For tax / other purposes, users can claim the actual FRAX when they choose. It will not be automatically airdropped into their addresses.
-
FXTL Points as Primary Incentives on Fraxtal: FXTL points will continue to serve as the main incentive mechanism for expanding the Fraxtal ecosystem, ensuring robust growth and alignment with protocol objectives. Because points are allocated in different amounts for different activities and will be expanded over time to include a growing ecosystem of projects and builders on the Fraxtal chain.
-
Flox Capacitor (floxCAP) Boost Mechanism:
- Lock FRAX (prev.FXS) into a FRAX staking contract to multiply the amount of weekly tokens up for conversion that you would normally be entitled to without the boost. You can withdraw your FRAX from this contract any time based on a fixed cooldown period of 90 days.
- In order to receive the boost, you will have to maintain a certain threshold floxCAP balance relative to your entitled FRAX token conversion amount that week, otherwise you will be able to convert your points to the normal baseline amount. If you choose to not stake FRAX for the floxCAP boost, you can still earn tokens at the baseline conversion amount.
- The formula for calculating this threshold ratio will be determined at a later time, but is expected to depend on multiple factors, including the total FXTL emitted for all users for that week, as well as the total amount of floxCAP boost held by other users “Cappers.” A small additive boost will also come from the user’s veFRAX balance.
- Withdrawing your floxCAP back into FRAX (prev. FXS) will be a fixed staking+cooldown system of 90 days.
- floxCAP is non-transferable. floxCap is a balance signifying boosting power of a user’s wallet/address.
- This system will reward long-term oriented users without imposing exceedingly long locking periods. It will also reduce FRAX (prev. FXS) selling from points conversions since getting the best conversion rate requires owning+staking FRAX for at least the next 90 days.
6. Frax Burn Engine (FBE)
The FBE is a system on the Fraxtal blockchain that burns Frax tokens sent to it. Contracts sending Frax to the FBE as a source of FRAX token burns currently are:
More contracts will be added as infrastructure is built in the Frax ecosystem. Projects that wish to contribute to the FBE can send Frax to the FBE. To add your contract to the FBE infrastructure list submit a pull request on Frax’s Fraxtal chain repository. The FBE is the primary burn system of the Frax ecosystem and should outweigh emissions in the future as burn activity ramps up due to growth and emissions continue to decay.
Voting
-
For: Approve the Frax North Star Hardfork, Tail Emission Plan, Flox Capacitor, and FXS Upgrade
-
Against: Do nothing.
References:
- CRV supply. (n.d.). Google Docs.
- CurveFi. (n.d.). Supply & Distribution - Curve resources.
- Ultra Sound money. (n.d.).
- Etherscan.Io. (n.d.). Ether Supply Growth Chart | EtherScan. Ethereum (ETH) Blockchain Explorer.
- Polosukhin, I. (2022, October 10). Introduction to NEAR Protocol’s Economics. NEAR Protocol.
- Team, N. (2024, August 14). NEAR token supply and distribution. NEAR Protocol.
- Solana Tokenomics : Circulating Supply, Inflation Schedule & Token Unlock Dates + Tracker. (n.d.).
- Tokenomics | Ethena. (n.d.).
- S Token | Sonic Documentation | EVM Layer-1 Blockchain. (n.d.).
- Arbitrum Tokenomics and unlock schedule - Tokentrack. (n.d.). TokenTrack.
- The $ARB token: A conceptual overview | Arbitrum DAO - Governance docs. (n.d.).
- [PUBLIC] OP Token unlock (Estimated). (n.d.). Google Docs.
- OP Token Overview | Optimism Docs. (2024, August 14).
