The primary goal is to enable users to deposit FRAX stablecoins into a smart contract (following the Standard ERC-4626) and, in return, earn interest, which will be denominated in FRAX stablecoins.
Essentially, sFRAX presents a solution to the challenge of Frax’s near-zero duration yield curve, akin to the Dai Savings Rate (DSR) concept. This approach empowers users to accrue passive FRAX stablecoins while contributing to the expansion of the FRAX supply.
It is essential to note that sFRAX doesn’t guarantee earnings or any redemption rights beyond the deposited and earned stablecoins.
The introduction of sFRAX aims to bridge the yield curve gap of FRAX by offering a low-duration savings option, compliant with the ERC-4626 token standard.
This opens up possibilities for integration into various protocols, bridges, cross-chain applications, and more, allowing users to earn stablecoins passively at the “Frax Staking Rate.”
This innovation enhances the stablecoin ecosystem, promotes liquidity in the protocol, and encourages user participation in earning rewards while stabilizing the supply dynamics.
The sFRAX contract enables users to deposit their FRAX stablecoins, earning APR on their holdings through newly minted stablecoins. Users receive sFRAX tokens reflecting their proportional pool share, facilitating trading and transfers.
Additionally, Frax Protocol ensures consistent weekly deposits of generated yields into the sFRAX Vault, ensuring APR growth over time.
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