Cryptocurrency Q&A
What is FRAX stablecoin backed by?
What is FRAX stablecoin backed by?
BlockchainEmpiress
Fri Jun 21 2024
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6 answers
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Inquiring minds may be wondering, what exactly is FRAX stablecoin backed by? This question arises given the growing popularity and importance of stablecoins in the cryptocurrency landscape. FRAX, as a stablecoin, aims to maintain a stable value, often pegged to a traditional asset such as the US dollar. However, the underlying mechanism and assets that FRAX utilizes to achieve this stability remain somewhat enigmatic. Are FRAX tokens backed by a reserve of fiat currencies? Or perhaps a combination of digital assets and algorithmic mechanisms? Understanding the backing of FRAX stablecoin is crucial for investors and enthusiasts alike, as it provides insights into the coin's credibility and potential for long-term stability.
6 answers
CryptoAlchemyMaster
Sun Jun 23 2024
FRAX, a digital asset, relies primarily on blockchain-based collateral (on-chain) for its backing.
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CryptoWizard
Sun Jun 23 2024
The assets used as collateral for FRAX are diverse and include various cryptocurrencies.
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Tommaso
Sun Jun 23 2024
This collateralization is achieved through the utilization of smart contract protocols, which are self-executing agreements on the blockchain.
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EclipseChaser
Sun Jun 23 2024
These protocols play a crucial role in balancing the amount of FRAX against other assets.
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CryptoQueen
Sun Jun 23 2024
The purpose of this balancing is to maintain FRAX's pegged value of 1 to 1 with another reference asset, usually a stablecoin.
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