The Edge Podcast - Fraxtal Guide to Frax Finance’s New L2

In this episode of The Edge Podcast which took place on March 6, 2024, DeFi Dad and Nomatic hosted DeFi Dave from Frax Finance to discuss Flywheel DeFi’s role in media and education, challenges and triumphs in funding, the introduction of Fraxtal and the Innovative Flox mechanism, yield redistribution, and more! Read our notes below to learn more.

Background

DeFi Dad (Host) – Host of Edge Podcast

Nomatic (Host) – Co-Host of Edge Podcast

DeFi Dave (Guest) – Co-Founder/Co-Host of Flywheel DeFi and Core Advocate at Frax Finance

Frax Finance – an on-chain protocol that mints and manages the $FRAX stablecoin

Flywheel DeFi: Frax Ecosystem Adoption and Education Amidst Challenges

DeFi Dave describes Flywheel DeFi as the media and education arm of the Frax ecosystem, highlighting its role in driving adoption and education for Frax, especially after the negative impact of the Luna collapse on the stablecoin narrative.
He highlights the grassroots efforts initiated in June 2022 by himself, Sam McCullough, and Kiet to start Flywheel, initially intended to be called Frax Cast, to spotlight developments within Frax and provide educational content.
DeFi Dave explains Flywheel’s evolution into a substantial institution within Frax, mentioning its wide range of activities including podcasts, events, and educational materials to promote the Frax ecosystem and its yields.
DeFiDad asks about the funding for crypto media endeavors like Flywheel, curious about its future and its perceived extension of the Frax core team.
DeFi Dave discusses the gradual increase in grant requests from the Frax community, starting without initial funding to prove their value, and scaling up to significant amounts as their impact and the scope of their work expanded.
He credits PIF Labs for their support since inception. He outlines the strategy of building trust and meeting expectations within the Frax community, including dealing with skepticism from parts of the community like Convex.
DeFi Dave recounts the process and challenges of securing a large grant of $370K for Flywheel, highlighting the tight vote outcome and the eventual support received from the Convex community despite initial reservations.
Nomatic observes that Dave’s victory in a vote felt like a last-second comeback, impressed by the support received.
DeFiDave appreciates the community’s support and highlighting the decentralized nature of Frax where proposals pass based on community, not just the core team’s desires.
Nomatic comments on the intricacies of navigating DAO politics, highlighting the importance of building trust and reputation over time.
DeFiDave explains the balance required between back channeling and public engagement in DAOs, advising on starting with small proposals and scaling up to avoid alienating the community.
DeFiDave introduces Fraxtal as a general-purpose, EVM equivalent L2 built by the Frax team, highlighting its unique incentive mechanism, the Flox mechanism, inspired by Google’s PageRank.
He details the Flox mechanism, explaining it awards Fraxtal points based on smart contract usage and holdings, aiming for a transparent, automated way to distribute incentives at the chain level, contrasting with other arbitrary or politicized incentive models.

Exploring Fraxtal Points: Convertibility, Utility, and Future Prospects in DeFi

Nomatic questions the real value of fraxtal points and their conversion into something of tangible worth, expressing confusion about whether this information is publicly available.
DeFiDave explains, according to Frax.com documentation, that fraxtal points will be convertible into something redeemable and liquid, like a fraxtal token or FXS variants, within 12 months, with the decision likely to be community-voted after extensive discussion.
DeFiDave highlights the significance of fraxtal points for developers in identifying high-value users for targeted airdrops, suggesting that fraxtal points reflect a user’s influence and engagement.
DeFiDad points out the novel opportunity presented by the mechanism of earning points and converting them into tokens, highlighting the early stage of this opportunity.
DeFiDave announces a snapshot on March 6th for veFXS balances, detailing the process for participating in the initial fraxtal point distribution and the ongoing Flox mechanism.
Nomatic seeks clarification on rumors about cvxFXS holders being included in the snapshot if they are staking. DeFiDave confirms the inclusion of staked cvxFXS in the snapshot.
DeFiDad asks about the staking and locking mechanisms for $FXS, inquiring about the minimum and maximum locking periods.
DeFiDave explains the flexible locking times for veFXS, highlighting Convex’s automatic four-year locking and the strategic advantage for cvxFXS holders.
DeFiDad speculates on potential airdrops to participants, suggesting it as a familiar and attractive mechanism drawing attention in the current bull market.
DeFiDave foresees not just airdrops but also the redistribution of smart contract protocol points to users, citing an example of a Frax finance protocol redistributing extra Fraxtal points to its users.
DeFiDad asks about the gas token for Fraxtal, questioning if it will be $FXS, $ETH, or something else.
DeFiDave reveals $ETH as the initial gas token for Fraxtal, speculating on the future use of FRAX tokens as gas and highlighting the strategic alignment with $ETH to boost the yields of sFRAX seed by increasing its monetary premium.

Fraxtal Ecosystem Growth and Staking Insights: 100% Collateral Ratio

Nomatic asks if there are any projects building on Fraxtal and requests any alpha that can be shared.
DeFiDave mentions several projects on Fraxtal, including those focusing on stablecoins, Curve, and Convex infrastructure, Axelar for bridging and interchange messaging, and meme coins like RWA (Real World Abs). He highlights the organic growth and long-term vision understanding by those building on Fraxel.
DeFiDad seeks clarification on the staking mechanics for veFXS or cvxFXS, specifically regarding eligibility for epochs if entering after the snapshot date.
DeFiDave explains that staking can occur after March 6th but will not qualify for the March 13th, 2024 epoch, highlighting the weekly snapshot and rolling epoch system.
DeFiDave highlights the importance of $FXS, mentioning its role in the ecosystem, the redeemable points for liquid assets in the future, and the collateral ratio (CR) nearing 100%. He elaborates on the yield generated by Frax’s on-chain activities and its distribution to veFXS holders once CR reaches 100%.
Nomatic reiterates the significance of the collateral ratio (CR) and the protocol’s journey from a hybrid algo stablecoin to aiming for full collateralization, with the goal of redistributing fee revenues to veFXS holders.
DeFiDave muses on the potential yield for veFXS holders in a 100% CR world, estimating APR based on the boost applied by the holder.
DeFiDad asks about the endgame for Fraxtal. DeFiDave envisions Fraxtal as the issuer of the 21st century’s most important assets and the infrastructure to support them, drawing an analogy to Amazon’s development of AWS.

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Show Information

Medium: YouTube (Video)

Show: The Edge Podcast

Show Title: Fraxtal: A Guide to Frax Finance’s New L2

Show Date: March 6, 2024