An analysis on Butter’s composition

as of April 5, 2022

Table of Contents:

• FRAX Overview
• RAI Overview
• alUSD Overview
• mUSD Overview

FRAX

FRAX is a fractional reserve algorithmic stablecoin that is open-source, permissionless, and entirely on-chain – currently implemented on Ethereum, Polygon, Avalanche, BNB Chain, Fantom, and Harmony. The end goal of the FRAX protocol is to provide a highly scalable, decentralized, algorithmic money in place of fixed-supply digital assets like BTC.

FRAX is one of the only algorithmic stablecoins with parts of its supply backed by collateral. The ratio of collateralized and algorithmic depends on the market’s pricing of the FRAX stablecoin. If FRAX is trading at above $1, the protocol decreases the collateral ratio. If FRAX is trading at under $1, the protocol increases the collateral ratio.

Explanation of Frax Gauges and its Relationship with Curve and Convex - https://rain-attack-d65.notion.site/Opportunities-on-Frax-Analysis-39ccb11712684e54bdf939b172d00885

Opportunities and Risks

• Opportunities on FRAX by FRAX
• Frax Finance Analysis by Albaron Ventures
  • Pegged algorithmic stablecoins that are partially/fully collateralized by their native tokenlike FRAX implies that solvency is a systemic risk

Minting and Redeeming

• Anyone can mint or redeem FRAX at any time
• Supply and demand are balanced by arbitrageurs
• During the fractional-algorithmic phase:
  • FXS (utility and governance) tokens are burned whenever FRAX tokens are minted
  • FXS tokens are minted whenever FRAX tokens are redeemed

Team