The Algorithmic Stablecoin project Frax has attracted follow, and the co-founder claims to challenge Central Bank currency.

Recently, with DeFi and stablecoins becoming the focus of the industry, various stablecoin projects have emerged. Against this backdrop, a new stablecoin project named "Frax" announced its entry into the market on October 21, stating that it aims to challenge Central Bank currencies.

The core team of the Frax project is strong. CEO and co-founder Sam Kazemian is an Iranian-American software engineer who majored in philosophy and neuroscience at the University of California, Los Angeles. During college, he self-taught programming and cryptocurrency knowledge, and co-founded the decentralized online encyclopedia Everipedia in August 2018.

The Frax project has also attracted the participation of some politicians. Among them, a renowned economist serves as the Chief Economic Officer, responsible for developing economic models and lending standards. He has long focused on monetary policy and believes that private competitors challenging the Central Bank's money supply is beneficial. In addition, the project's General Counsel has held important positions in the government.

Unlike traditional stablecoins, Frax adopts a partially collateralized system, with only a small amount of USD reserves backing the currency. The project draws on the concept of the Federal Reserve, using algorithms to lend out reserves and charge interest, ensuring that Frax maintains a 1:1 peg with the USD. To reduce risk, Frax will hold close to 100% of its reserves in the initial launch phase, gradually decreasing as the network becomes more widespread. All loan transactions will be recorded on the blockchain, without the need for Central Bank involvement.

Sam Kazemian stated that Frax's mission is to become the first and largest Algorithmic Stablecoin. He believes that Algorithmic Stablecoins may be the only innovation in the cryptocurrency space that can be compared to Bitcoin.

However, the digital currency under the partial reserve system has not yet been tested by the market, which is one of the main criticisms facing Frax. Some industry insiders are concerned that if the redemption demand is too high, a stablecoin lacking full one-to-one backing could collapse.

To address this challenge, the Frax team emphasizes that its unique lending mechanism will ensure stability. Sam Kazemian explains that Frax utilizes on-chain lending to generate cash flow from interest, and when prices drop, this cash flow can be used to repurchase FRX coins. This approach is similar to how Central Banks repurchase fiat currency through bond issuance.

Currently, Frax and its collateral are being tested on a public blockchain mainnet, and updates are regularly made to the codebase. Although there is no specific timeline for release, Sam Kazemian expects Frax to launch a complete product within a year.

As a new project from the co-founder of Everipedia, Frax will benefit from the former's infrastructure and ecosystem. Sam Kazemian stated that they plan to allow the use of IQ tokens as collateral to lend out Frax reserves and will attempt to integrate Frax into Everipedia. He believes that the Frax project is the gateway for Everipedia into the DeFi space, and the two projects will promote each other's development.