FRAX is an algorithmic stablecoin that is partially collateralized by USDC at a rate determined by the floating market price of FRAX. When FRAX dips below $1, its USDC collateralization ratio increases until the market returns to parity; when above $1, its USDC collateralization ratio decreases accordingly.
FRAX has held its peg remarkably well over time, even during high volatility periods in the market:
FRAX makes for an interesting addition to our Fuse pool because of a program they refer to as an Algorithmic Market Operation. It would allow FRAX to periodically mint stablecoins into our Fuse pool to satisfy demand.
FRAX could prove to be a powerful partner, especially if our Fuse Pool demand for stablecoins quickly outstrips supply with SY jTokens and SA senior tokens getting added over the coming weeks.