New stablecoin projects attract industry follow

Recently, a new stablecoin project "Frax" has attracted widespread attention in the cryptocurrency industry. The project is co-created by Sam Kazemian, co-founder of Everipedia, and a renowned economist, aiming to develop an innovative algorithmic stablecoin.

The core team background of the Frax project is quite remarkable. Sam Kazemian is an Iranian-American software engineer who, although majoring in philosophy and neuroscience at university, successfully created the decentralized online encyclopedia Everipedia through self-taught programming and crypto knowledge. Another key member is a senior economist who will serve as the Chief Economic Officer, responsible for developing Frax's economic model and lending standards.

Unlike traditional stablecoins, Frax adopts a partially collateralized model, with only a small amount of dollar reserves backing the currency. The project team stated that they will draw on the concept of the Federal Reserve Bank, using algorithms to lend out reserves and collect interest to ensure that Frax's value remains stable with the dollar. To reduce risk, Frax will initially hold nearly 100% of its reserves, gradually decreasing the reserve ratio as the network gains adoption.

Sam Kazemian emphasized that Frax's uniqueness lies in its lending mechanism, which will be key to ensuring stability. He explained: "Frax utilizes on-chain lending to generate cash flow by charging interest, and once the price drops, this cash flow can be used to repurchase FRX." This mechanism is similar to the way central banks buy back fiat currency by issuing bonds.

Currently, Frax and its collateral are being tested on a public chain mainnet, with regular updates to the code repository. Although there is no specific timeline for release, Kazemian stated that they hope to launch the full product within a year.

As a new project by the co-founder of Everipedia, Frax is expected to benefit from the latter's infrastructure and ecosystem. Kazemian revealed: "We will allow the use of IQ tokens as collateral to borrow from the Frax reserve. We also plan to integrate Frax into Everipedia to increase its value. I see the Frax project as the entry point for Everipedia into the DeFi space, and the two projects will promote each other."

Despite the ambitious nature of the Frax project, some industry insiders have raised concerns. There are opinions that stablecoins lacking full one-to-one backing may face risks of collapse, especially in cases of large-scale redemptions. Additionally, similar fractional reserve token projects have faced failures in the past, which also presents certain challenges for Frax.

With the continuous development of decentralized finance (DeFi) and the stablecoin sector, the future performance of the Frax project is worth following. Whether it can successfully break through the limitations of existing stablecoins and bring new possibilities to the market remains to be seen.