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- 1 Frax’s founder confirms the Fraxtal launch in the first week of February 2023.
- 2 Layer 2 to improve transaction speeds and reduce fees for Frax’s stablecoins.
- 3 Over $1 billion in crypto assets will flow into Fraxtal in the first few months.
Decentralized finance (DeFi) protocol Frax Finance has announced it will unveil its much-anticipated layer 2 blockchain, Fraxtal, in the first week of February.
The layer 2 rollout aims to boost transaction speeds and reduce costs for Frax’s ecosystem of algorithmic stablecoins and lending products.
Frax CEO Sam Kazemian told CoinDesk he expects over $1 billion worth of crypto assets to pour into Fraxtal within months of launch. It could propel Frax into the top five decentralized blockchains.
Addressing Scalability Issues
As one of the largest stablecoin projects in DeFi, Frax has felt the crunch of Ethereum’s congestion and high gas fees firsthand.
The company is turning to layer 2 technology to address these scalability issues hindering growth. Layer 2 is a secondary framework built on a base blockchain layer to handle increased transaction loads.
Numerous Ethereum-based DeFi applications have pursued layer 2 solutions, following the overload problems seen in 2021’s bull market.
Using Rollups
Fraxtal will leverage roll-up technology to reduce congestion on Ethereum. Rollups bundle or “roll up” transactions off-chain to process them in bulk, compressing data before sending it back to Ethereum.
This avoids transacting everything directly on the slower and more expensive mainnet. Frax’s liquid staking token, frxETH, will power Fraxtal layer 2 as its native gas token.
Unique Incentive Model
Beyond rollups, Kazemian states Fraxtal will differentiate itself through an incentives model called Flox.
Flox aims to encourage the usage of Fraxtal’s limited blockspace through yield rewards for activities like providing liquidity, using applications, or developing new products.
The system maps out all available data slots on the chain to track occupancy rates. As more blockspace fills up from user growth, the yields rise dynamically.
Major Industry Interest
Frax is confident significant assets will migrate over from Ethereum to capitalize on Fraxtal’s faster and cheaper transactions.
The decentralized exchange Curve Finance has proposed deploying its stablecoin trading platform onto Fraxtal layer 2. With other significant names expected to follow, Kazemian predicted over $1 billion flowing into Fraxtal in the first quarter.
“We expect at least a 9-figure total value locked in the first month and $1 billion-plus for Q1. That should put us in the top 5 chains soon after that if our innovations are well received,” he said.
Conclusion
As congestion continues plaguing popular blockchains like Ethereum, layer 2 solutions are essential for DeFi to scale up. Frax Finance is pursuing an aggressive layer 2 rollout with Fraxtal to expand its ecosystem of stablecoin products to meet surging industry demand.
With innovations like the Flox incentive program, Frax hopes to attract billions in assets by offering a congestion-free home for DeFi stablecoins and lending markets. If adoption mirrors their ambitious $1 billion first-month projections, Frax could rapidly emerge as a top-five layer 2 blockchain.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
