FRAX Finance Community Embraces Fully Mortgaged Stable Currency

02/23/2023 01:18 • Digital Disruptors • 133 views

It is reported that the Frax Finance community voted to pass a governance proposal, setting the target mortgage rate (CR) of FRAX stable currency at 100%, and removing the algorithm support of the agreement for stable currency. In the future, FRAX will become a fully mortgaged stable currency. FRAX was originally designed as a partial mortgage and partial algorithmic stable currency, and its mortgage rate was adjusted according to FRAX’s market demand.

The Frax Finance community voted to completely mortgage the FRAX stable currency and remove the algorithm support

Analysis based on this information:

FRAX Finance community recently voted for a governance proposal, according to which the target mortgage rate or CR (Collateralization Ratio) of stable currency FRAX would be set at 100%. This move, essentially, means that FRAX would become a fully mortgaged stable currency, with algorithm support being removed from the agreement. The proposal passed by the community is significant, as it marks the shift from the originally designed arrangement which had partial algorithmic and partial mortgage support.

To understand this development, it is important to grasp the concept of stable currencies. Stable currencies or stablecoins are cryptocurrencies that are designed to minimize price fluctuations, making them more suitable for transactions and investments. Stable currencies peg their value to assets such as fiat currency, commodities, or cryptocurrencies, with the aim of maintaining a steady value against the underlying asset.

FRAX is a stable currency that was launched in 2020, aiming to provide an algorithmic and mortgage-supported crypto option. Under the original design, FRAX was partially supported by collateral in the form of US dollars and partially backed by an algorithm that adjusted the number of FRAX tokens in circulation to maintain the stablecoin’s value at a dollar range. With the new proposal passing, FRAX would have 100% collateralization, meaning each FRAX token would be backed by US Dollars at an equivalent value.

The FRAX Finance community’s decision to adopt a fully-mortgaged system is aimed at improving FRAX’s stability and protecting its value in the long run. A 100% CR mortgage rate would make the FRAX currency more attractive to investors and traders seeking stability and security, without the risks that come with traditional cryptocurrency investing.

Therefore, the recent governance proposal by FRAX Finance is a significant step toward creating a more robust and reliable stable currency, targeting long-term financial stability for its users. The move sets FRAX apart from other stablecoins, and with its unique approach, the currency could potentially serve as a model that other stablecoins can emulate.

In conclusion, FRAX’s move towards a fully-mortgaged system marks a significant shift in the stable coin market, with other stablecoins already adopting similar measures. The shift toward mortgaged stable currencies is expected to provide better financial security for investors and traders alike.

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