The community of Frax Finance, a decentralized finance protocol, has announced the unveiling of FRAX v3, a stablecoin pegged to the US dollar.
The stablecoin uses AMO smart contracts and permissionless, non-custodial sub-protocols to maintain stability.
Official documentation is now live
In a post updated three days ago, Frax Finance released the official documentation for FRAX v3, a stablecoin designed to preserve its value through the use of AMO smart contracts and permissionless, non-custodial subprotocols.
Of these sub-protocols, Fraxlend, a decentralized credit market, and Fraxswap, an automated market maker with distinctive features, act as internal stability mechanisms, while the external sub-protocol, Curve, improves the stability of the currency by pegging it to the US dollar.
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To ensure the stability of the FRAX stablecoin, the documentation emphasizes that the peg to the USD will be activated once it reaches a collateral ratio of 100%. This pairing mechanism will rely on a combination of Chainlink oracles and a reference rate approved by the governance structure, affirming FRAX’s commitment to keeping its value in line with the US dollar.
A dizzying dip
Despite news of many new stablecoins entering the market in recent months, including PayPal USD, the stablecoin market has witnessed a 35% decline over the past year and a half.
This is partly attributed to the fact that cryptocurrencies have been on the wrong side of US regulatory efforts thus far.
Read more: Binance Research reports stablecoins on continued decline in monthly report