Quorum: 6.60m CVX

Authors

Frax Core Team

Summary

$FRAX: 1 Token, 1 Mission, 1 Vision is a unifying governance proposal that completes Frax’s transition into a single-token, Frax-centric system with clear ownership, disciplined monetary policy, and a growth-first revenue framework.

This proposal consolidates and finalizes several major evolutions already underway across the Frax ecosystem by:

• Clarifying intellectual property ownership between the Frax DAO and Frax Inc. and Frax Core Team,
• Establishing a permanently fixed FRAX supply with explicit, time-bounded budget caps,
• Unifying governance on Fraxtal through veFRAX,
• Re-architecting revenue flows to prioritize frxUSD and Fraxtal expansion while preserving long-term value for FRAX and veFRAX holders.

Together, these changes align the protocol around a single mission: scaling frxUSD as a systemically relevant stablecoin, with FRAX as the scarce governance and ownership asset coordinating that growth.

Background & Motivation

Frax North Star v2.1 (FIP-428) set the long-term direction for the protocol’s tokenomics and governance. Since its approval, key components have been delivered, including the FRAX/FXS rebrand, the North Star hardfork making FRAX the Fraxtal gas token, the launch and growth of frxUSD and sfrxUSD, expanded protocol revenue streams, and FXTL as the primary Fraxtal incentive system. Together, these changes advanced Frax toward a Fraxtal-centric, product-driven ecosystem.

Some elements of v2.1 were intentionally sequenced or left inactive, including FXTL conversion, floxCAP deployment, and the long-tail emission model, which introduced additional complexity as the ecosystem evolved. With frxUSD, Fraxtal, Fraxnet, and protocol revenues now at the center of Frax’s growth, This Proposal consolidates what has been implemented, clarifies IP ownerships in Frax’s world, simplifies the remaining tokenomics, and finalizes a more durable structure by fixing supply, unifying governance on Fraxtal, and aligning protocol revenue with current ecosystem priorities.

For a detailed status update of all North Star v2 components and their mapping to this proposal, see the Appendix: North Star v2 Status Update.

$FRAX: 1 Token, 1 Mission, 1 Vision

One Token. FRAX is permanently supply-capped. It governs emissions, protocol upgrades, revenue allocation, and long-term strategic direction. By unifying governance on Fraxtal and retiring legacy gauge systems, FRAX becomes simpler to understand, harder to dilute, and structurally aligned with protocol growth rather than short-term yield extraction.

One Mission. The mission of the Frax ecosystem is to scale frxUSD into a systemically relevant, capital-efficient stablecoin. Every major design choice in this proposal is optimized to expand frxUSD adoption and durability. FRAX holders benefit not by chasing payouts, but by owning and governing a growing monetary system.

One Vision. Frax is built for longevity. Clear IP ownership, fixed supply economics, unified governance, and growth-first capital deployment position the protocol for institutional integration, regulatory compatibility, and multi-cycle relevance. As frxUSD adoption compounds, FRAX becomes an increasingly scarce claim on an expanding economic network, aligning long-term protocol success with long-term FRAX and veFRAX ownership.

Proposal Details

This proposal introduces updates across four major areas of the Frax IP ownership, Frax tokenomic, governance framework, and revenue distribution.

1. Frax Finance IP Clarification

This proposal formally clarifies Frax’s intellectual property structure to eliminate ambiguity and align legal, operational, and governance realities as the ecosystem scales.

• All Fraxlend, Fraxswap, and Fraxtal protocol IP belongs to the Frax DAO

• All on-chain subprotocols are managed by the Frax Core Team on behalf of the DAO

• UI and application-layer Frax branding IP belongs to the Frax DAO and is licensed to Frax Inc and the core team’s Cayman Entity Corporation. The software, websites, and technology itself without Frax branding are IP of their respective corporations. The team will begin exploring formalized structures to enshrine this in a verified manner in a future governance proposal.

• frxUSD intellectual property and issuance rights are licensed to Frax Inc. on an exclusive, perpetual, and irrevocable basis for the purpose of operating frxUSD as a regulated stablecoin, including under the GENIUS framework and similar regulatory regimes.

• This license is not subject to discretionary revocation by DAO governance.

• Termination may only occur under narrowly defined conditions such as voluntary surrender, permanent regulatory prohibition, or material and uncured legal or fiduciary breach.

This structure preserves DAO sovereignty over the protocol and its economics, while enabling professional execution, regulatory compatibility, and institutional adoption

2. Monetary Policy

2.1. Fixed FRAX Supply Cap (143M)

• The total supply of FRAX is permanently capped at 143M. This is the total supply passed in the North Star Proposal and is not being changed nor proposed to be changed.
• To implement the fixed-supply monetary policy, the DAO will pre-mint 43,000,000 FRAX, representing:

1. 23M FRAX allocated across seven annual budget caps.
2. 10M FRAX required to fully provision FPIS redemptions per FIP-341, in addition to the 6.4M FRAX already held by the Comptroller excluding Community Multisig.
3. 10M FRAX required to settle LFRAX balance sheet, in addition to FRAX that is kept in Community Multisig. The team will use this allocation to keep LFRAX peg stabilized as it deems necessary such as swapping for hard assets like frxUSD to keep LFRAX peg functioning strongly as it slowly winds down over months.

• The perpetual 3% tail emission period planned after year six is eliminated entirely.

2.2. Annual Emission Budgets as Spending Caps

• Yearly allocations (4M → 4M → 4M → 3.5M → 3M → 2.5M → 2M) become maximum allowable annual spending limits.
• The team retains discretion over how yearly emission budgets are allocated across operational needs, incentives, FXTL conversions, and ecosystem growth initiatives.
• Budgets do roll over, and unused amounts can be reassigned, through the governance process.

Emission Year	Period	Annual Cap (FRAX)	Cumulative Total Supply
Year 1	Apr 2025 → Mar 2026	4,000,000	124,000,000
Year 2	Apr 2026 → Mar 2027	4,000,000	128,000,000
Year 3	Apr 2027 → Mar 2028	4,000,000	132,000,000
Year 4	Apr 2028 → Mar 2029	3,500,000	135,500,000
Year 5	Apr 2029 → Mar 2030	3,000,000	138,500,000
Year 6	Apr 2030 → Mar 2031	2,500,000	141,000,000
Year 7	Apr 2031 → Mar 2032	2,000,000	143,000,000

3. Governance & Incentives

3.1. Migration of veFXS → veFRAX (Fraxtal)

• A migration path will be provided for all veFXS positions on Ethereum to move to veFRAX on Fraxtal.
• Locks remain intact, with no unlocking, shortening, or modification.

3.2. Termination of the Legacy FXS Gauge System

• The historical FXS gauge emission system will be sunset in the future in a separate governance vote in 2026.
• Future incentives will rely on FXTL-based mechanisms, FRAX token allotments from the treasury, and veFRAX-aligned systems.

4. Revenue Architecture

Updated Frax’s revenue structure is designed to maximize long-term ownership value rather than short-term payout optics. At the current stage of the ecosystem, the highest-leverage use of protocol cash flow is not aggressive buybacks or high dividend-like distributions, but reinvestment into frxUSD adoption, liquidity depth, and Fraxtal infrastructure. As a result, value accrual to FRAX and veFRAX holders is intentionally driven through governance control, supply discipline, and ownership of an expanding monetary system, rather than through fixed or escalating yield promises.

Recent market evidence supports this approach. Protocols that emphasized buybacks or high revenue sharing have repeatedly shown that these mechanisms are highly sensitive to market timing, liquidity conditions, and revenue cyclicality, producing temporary price support that reverses once programs slow or stop. Public post-mortems and discussions from projects such as Jupiter and Pump.fun further demonstrate that token value ultimately follows product adoption, distribution strength, and ecosystem scale.

4.1. veFRAX Revenue Share (Governance Alignment)

• Up to 10% of eligible net protocol revenue is allocated to veFRAX in WFRAX tokens itself which is how the current mechanics work.
• Rewards are distributed in sfrxUSD or WFRAX, depending on operational requirements.
• The veFRAX revenue share is not fixed permanently and is reviewed by governance on a six-month cadence.
• Any increase above the baseline is milestone-dependent, with reference thresholds including:
  • frxUSD total supply exceeding $500M
  • Fraxtal TVL exceeding $1B

This mechanism is designed to reward long-term governance alignment and ownership participation, not to function as a high-yield dividend or short-term price support tool.

4.2. Growth, Liquidity, and Strategic Reserves

• All remaining protocol revenue is allocated to ecosystem growth, liquidity expansion, and balance-sheet strength, with priority given to:
  • Scaling frxUSD adoption and integrations,
  • Supporting Fraxtal ecosystem development,
  • Strengthening the Crypto Strategic Reserve (CSR).
• This allocation reflects the current growth phase of frxUSD and is intentionally biased toward market expansion and infrastructure build-out, rather than near-term value extraction.
• Governance retains full oversight and transparency over these allocations.

Voting

• For: Approve $FRAX: 1 Token, 1 Mission, 1 Vision.
• Against: Do nothing.