Question 1

What happens to FXS when FRAX demand grows?

Accepted Answer

FXS becomes more valuable as FRAX adoption increases. Higher FRAX usage means more fees for veFXS stakers and potential FXS burns (in V1 mechanics), creating scarcity.

Question 2

Can FXS price affect FRAX’s stability?

Accepted Answer

No, FRAX’s peg is maintained by algorithmic controls (AMOs) and collateral, not directly by FXS price. FXS volatility doesn’t impact FRAX’s $1 value.

Question 3

Why lock FXS as veFXS instead of selling?

Accepted Answer

veFXS earns protocol fees, grants governance power, and offers voting weight boosts—rewards selling can’t match. Over 40% of FXS is already locked long-term.

Question 4

How does Frax make FXS deflationary?

Accepted Answer

FXS supply is capped at 100M tokens. While V1 burned FXS to mint FRAX, today’s deflation comes from veFXS locks (tokens removed from circulation for years).

Question 5

What’s the risk of FXS being labeled a security?

Accepted Answer

Regulators may target FXS due to its staking rewards and governance role. This could affect exchanges or tax treatment, but Frax’s decentralized structure helps mitigate risks.

Question 6

Can FXS work without Ethereum?

Accepted Answer

Yes. FXS exists on chains like BSC and Arbitrum, but Ethereum hosts core functions (e.g., veFXS locking). Cross-chain Fraxferry enables transfers.

Question 7

Who owns the most FXS today?

Accepted Answer

Top holders include long-term stakers, Frax’s treasury, and DeFi protocols. The team’s share is transparent on-chain, with no single entity controlling >10%.

Question 8

How do AMOs impact FXS holders?

Accepted Answer

AMOs automate FRAX stability, reducing FXS’s direct role in minting/burning but generating yield that benefits veFXS stakers.

Question 9

Why would traders short FXS?

Accepted Answer

Some may bet against FXS if FRAX loses market share to USDC/Tether, or if governance disputes arise. However, high veFXS lock rates limit sell pressure.

Question 10

Can FXS survive a stablecoin crackdown?

Accepted Answer

Frax’s hybrid model (partly collateralized) may fare better than pure algorithmic stablecoins in regulations. FXS could pivot governance to other products like frxETH if needed.

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