# \[FIP - 428\] Frax North Star Proposal - V2

**URL:** <https://gov.frax.finance/t/fip-428-frax-north-star-proposal-v2/3652>\
**Category:** Governance Proposals\
**Created:** [March 9, 2025, 7:17am UTC](https://gov.frax.finance/t/fip-428-frax-north-star-proposal-v2/3652 "2025-03-09T07:17:52Z")\
**Posts on this page:** 1\
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**Author:** ![nader.frax](https://yyz1.discourse-cdn.com/flex031/user_avatar/gov.frax.finance/nader.frax/32/1849_2.png) [@nader.frax](https://gov.frax.finance/u/nader.frax)\
**Post date:** [March 9, 2025, 7:17am UTC](https://gov.frax.finance/t/fip-428-frax-north-star-proposal-v2/3652/1 "2025-03-09T07:17:52Z")

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_Please check the most update version [here](https://gov.frax.finance/t/fip-428-frax-north-star-proposal-v2-0/3652/17) 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:

1. **“Legacy” FRAX (the original stablecoin) will be renamed to Legacy Frax Dollar**
2. **The current FRAX logo will replace the FXS logo:**  
 ![](https://canada1.discourse-cdn.com/flex031/uploads/frax1/original/2X/d/d5bcb2d378e92c3277850d70b1b1c11a220bcdb5.png)  
(the FXS logo will not be used anywhere going forward)
3. **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.
4. **veFXS will be renamed to veFRAX**
5. **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.
6. **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

1. FRAX (prev. FXS) will become the **gas token for Fraxtal** , replacing frxETH.

2. The current FRAX (prev. FXS) contract will change to a WETH-like gas wrapper contract called wFRAX.

3. 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.

4. wfrxETH will become frxETH and will be changed to a normal ERC20. wfrxETH holders will receive 1:1 of frxETH ERC20 tokens.

5. Because of gas handling / payable-ness in smart contracts, EOAs & Safes will be treated differently than LP/DeFi contracts as follows:

6. 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.

7. An example table of the proposed conversions is provided below:

 ![](https://canada1.discourse-cdn.com/flex031/uploads/frax1/original/2X/9/90f4f8a4c52f3bccfc06cbb3128c8865dcca055d.png)

### 3. Upgrade of veFXS to veFRAX & Multi-Token Rewards

1. veFXS will be renamed to veFRAX, maintaining the same governance power and [functionality based on lock times](https://docs.frax.finance/fxs-and-vefxs/vefxs), including farming boosts. Other than the name, the veFXS contract will not change, nor will any positions be unlocked.

2. 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.

3. Rewards Distribution:

4. 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.

5. Flox Capacitor: A small portion of a user’s Flox Capacitor boost will come from the user’s veFRAX balance.

6. 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.

1. **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.
2. **FXBs for veFRAX rewards** : A minority portion of the POL income streams described above.
3. **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

1. 8% annual FRAX (prev. FXS) emissions. These will drop 1% a year over 5 years to a final floor rate of 3%.

2. [Year 1] token amount are proposed as follows:

3. Details & Comparison:

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._

1. FXTL points conversion:

2. 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.

3. **Flox Capacitor (floxCAP) Boost Mechanism:**

### 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:

[FNS Registrar](https://fraxscan.com/address/0x88F0d5B0BAB1541Ac9e9dCfBDE9527917901dF67)

[Fraxtal EIP1559 Base Fee](https://fraxscan.com/address/0x4200000000000000000000000000000000000019)

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.](https://docs.google.com/spreadsheets/d/1kFFdaLCX8ISM7yzvfUmuz151QiRzrFfaljCzEiO6sus/edit?gid=0#gid=0)
- [CurveFi. (n.d.). Supply & Distribution - Curve resources.](https://resources.curve.fi/crv-token/supply-distribution/#crv-emissions-for-the-next-10-years)
- [Ultra Sound money. (n.d.).](https://ultrasound.money/)
- [Etherscan.Io. (n.d.). Ether Supply Growth Chart | EtherScan. Ethereum (ETH) Blockchain Explorer.](https://etherscan.io/chart/ethersupplygrowth)
- [Polosukhin, I. (2022, October 10). Introduction to NEAR Protocol’s Economics. NEAR Protocol.](https://near.org/blog/near-protocol-economics)
- [Team, N. (2024, August 14). NEAR token supply and distribution. NEAR Protocol.](https://near.org/blog/near-token-supply-and-distribution)
- [Solana Tokenomics : Circulating Supply, Inflation Schedule & Token Unlock Dates + Tracker. (n.d.).](https://solanacompass.com/tokenomics)
- [Tokenomics | Ethena. (n.d.).](https://docs.ethena.fi/ena/tokenomics)
- [S Token | Sonic Documentation | EVM Layer-1 Blockchain. (n.d.).](https://docs.soniclabs.com/sonic/s-token)
- [Arbitrum Tokenomics and unlock schedule - Tokentrack. (n.d.). TokenTrack.](https://tokentrack.co/tokens/arbitrum)
- [The $ARB token: A conceptual overview | Arbitrum DAO - Governance docs. (n.d.).](https://docs.arbitrum.foundation/concepts/arb-token)
- [[PUBLIC] OP Token unlock (Estimated). (n.d.). Google Docs. ](https://docs.google.com/spreadsheets/d/1qVMhLmmch3s6XSbiBe8hgD4ntMkPIOhc1WrhsYsQc7M/edit?gid=470961921#gid=470961921)
- [OP Token Overview | Optimism Docs. (2024, August 14).](https://community.optimism.io/op-token/op-token-overview)

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_[View the full topic](https://gov.frax.finance/t/fip-428-frax-north-star-proposal-v2/3652)._