Protocol for decentralised finance Holders of Frax’s partially collateralized fractional-algorithmic stablecoin FRAX can now receive yields that are equal to the interest rate on reserve balances (IORB), which is now 5.4%, thanks to the company’s introduction of sFRAX, an ERC4626 staking vault. The initial annual percentage yield (APY) of the product was 10%, but it will gradually converge to the Fed’s IORB rate of 5.4%. According to Dune Analytics, more than 150 users have already put more than $35 million into the vault.
On Thursday, the price of Frax’s governance token FXS rose by 7% to $5.66, but it has since fallen to $5.49, showing a gain of 0.5% over the past 24 hours. The ongoing low-volume range play between market leaders ether and bitcoin is consistent with the steady price movement.
The launch of sFRAX coincides with lending protocol MakerDAO taking advantage of the high level of interest in the United States. Since February 2022, according to Parsec Finance, MakerDAO has invested over $2 billion in short-term bonds using offchain structures. In addition to paying 5% interest on DAI, MakerDAO also buys back its MKR token.
MKR has increased more than 168% so far this year, outpacing both the 62% increase in bitcoin and the 32% increase in FXS. Some members of the crypto community predict that FXS will overtake MKR. According to McKenna, the fictitious founder of Arete Research, FXS is prepared to execute a catch-up move on MKR and rekindle protocol revenue with the 5.25% risk-free rate in response to the spectacular growth of sFRAX.