The FIP-188 proposal to govern Frax Finance, the first fractional-algorithm stablecoin protocol, has reached a quorum sufficient to make a decision – 98% of community members voted to change the FRAX collateral model.
“The time has come for Frax to gradually remove algorithmic support for the protocol. You need to set the Frax Protocol Target Collateral Ratio (CR) to 100%. The increase in CR will be achieved over time due to the growth of the protocol and its revenues. This offer does not include the issuance of additional Frax Share (FXS) tokens to increase CR,” the FIP-188 proposal states.
FRAX’s original algorithmic support model included a “variable collateral ratio” that adjusted based on market demand for the stablecoin. The hybrid model led to the fact that FRAX liquidity became 80% secured by crypto assets and partially stabilized algorithmically, due to the issuance and burning of the FXS control token. Once the offer is implemented, FXS will be discontinued.
Removing algorithmic support for FRAX will allow the Frax Finance protocol to avoid the potential threat of sanctions from regulators and possible lawsuits from members of the community. So, the other day, two investors of the DeFi Stablegains platform accused the project team of price manipulations with the TerraUSD (UST) algorithmic stablecoin, as well as violating securities laws.
Source: Bits
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