Original author: Frank, Foresight News
Today, Frax Finance announced the launch of the modular L2 blockchain Fraxtal. The testnet and mainnet are open to specific launch partners. Ordinary users will be able to connect to the chain in the next few days and call it "the most important version since the birth of Frax Finance in 2020."
So what kind of chain is Fraxtal, what is unique about it, and what kind of DeFi ambitions does it carry for Frax Finance?
Fraxtal: Modular Rollup based on OP stack
As early as November 2023, Frax founder Sam Kazemian revealed in the official Telegram that Frax Finance plans to launch the Ethereum L2 network Fraxchain, and the test network hopes to be launched in early January 2024 (currently it seems to be postponed to February).
He also specifically emphasized that the L2 chain "is not an application chain", and Frax Finance's liquidity staking product frxETH will be used as a Gas payment token, and FXS is Fraxchain's sequencer staking token used to capture Rollup sequencer revenue.
Then in January of this year, Sam Kazemian revealed that the chain was scheduled to be launched in the first week of February and was officially named “Fraxtal”.
According to the latest official documentation, Fraxtal, as an L2 network, is also a modular Rollup blockchain with a roadmap of “fractal scaling”. Its functions and features include:
EVM equivalence. Fraxtal uses the OP stack as its smart contract platform and execution environment, allowing project owners to deploy applications as quickly, securely, and cheaply as Optimism and Base;
Modular Rollup. Fraxtal will have multiple components and middleware for other chains and networks to use, connect, deploy L3 and build on them. Currently, Fraxtal uses a separate data availability (DA) module developed by the Frax Finance core team;
Block space incentives (called Flox). This feature is used to reward users and developers - any account and smart contract that spends gas and interacts with any smart contract on the network will be rewarded with "Fraxtal Point System" (FXTL) points according to the Flox algorithm, which can later be converted into tokens;
frxETH is used as the Gas payment token;
In addition, according to official disclosures, Fraxtal will be launched together with major Ethereum infrastructure providers, including Etherscan's Fraxscan and various DeFi-related services such as Safe, Chainlink, Axelar Network and LayerZero.
Just after the official announcement today, Frax Finance co-founder Travis Moore said in the official Telegram group that "the mainnet browser will be launched soon."
Fraxtal's unique block incentive mechanism
Among all the features of Fraxtal, the most eye-catching one is Fraxtal’s unique block incentive mechanism, which includes the points system FXTL and the “block space incentive” (Flox) algorithm.
Fraxtal Points System FXTL
What is FXTL?
It is the "Fraxtal Point System" specially launched by Frax Finance for Fraxtal, which is used to reward and incentivize participants in the ecosystem - including creating and interacting with smart contracts, utilizing new protocols deployed to the chain, and holding specific types of assets/tokens.
In other words, any user and developer who spends Gas on Fraxtal to create contracts, interact with contracts, and other operations will have the opportunity to receive corresponding FXTL points rewards, and the accumulation of these points is tracked and managed through the FraxtalPoints master contract:
This contract acts as a ledger for all FXTL-related transactions and balances, and users can access and view accumulated FXLT Points through this contract.
Meanwhile, FXTL Points will be tokenized within 12 months of Fraxtal Chain genesis, but it is not yet clear whether FXTL Points will be tokenized into a separate staking token (FXTL) on the chain or converted into FXS at a specified ratio.
Flox Algorithm
The "Blockspace Incentive" (Flox) algorithm is an automatic algorithm that calculates the specific number of FXTL points that users and smart contracts receive. It can calculate rewards block by block based on the usage of the Fraxtal chain.
The calculation period is each epoch (initially 7 days). All EOA addresses that spend Gas on Fraxtal and smart contracts that use Gas will receive proportional FXTL points rewards based on the Flox algorithm.
More importantly, the Flox algorithm encourages users to interact with widely used contracts, rather than trying to maximize their incentives with lesser used or proprietary contracts.
To achieve this, the Flox algorithm consists of two main innovations:
The transaction trace of Gas used by any smart contract can be tracked;
In any random block of each epoch, a special algorithm can be applied to rank the importance of smart contracts (for example, based on the assets held by users and contracts);
On this basis, smart contract developers can specify a Flox proxy address for each contract at the time of deployment, which is authorized to manage Flox incentives on behalf of the designated contract.
For example, if a user uses 1inch to implement a USDC/FRAX exchange transaction through the Curve pool, then:
At the user reward level, the FXTL points balance will automatically change at the end of each epoch and will be directly added to the FXTL points balance of the corresponding address;
At the smart contract reward level, FXTL incentives will be intelligently distributed to the 1inch router contract, Curve pool contract, USDC contract, and FRAX contract;
In short, by using FXTL as an incentive currency, Flox plans to distribute value to users and developers in a way that goes beyond the network's early transaction fee sharing model, thereby incentivizing DApps to actively deploy on the network out of interest.
FXTL Points Airdrop for veFXS
veFXS is the staking token of FXS. Before the launch of Fraxtal, it can only be staked on the Ethereum mainnet. With the launch of Fraxtal, users will be able to stake veFXS on Fraxtal through an improved staking contract:
A separate veFXSCounter contract is responsible for reading the state of the veFXS contract on Ethereum mainnet and combining it with the user’s veFXS balance on Fraxtal, thereby unifying the user’s veFXS balance between Ethereum mainnet and Fraxtal.
And the combined balance shown in the veFXSCounter contract is used for Fraxtal utilities such as Flox boosts, governance voting, and various new features. In short, veFXS staked on Ethereum mainnet or Fraxtal functions the same.
In addition, on March 7, 2024 at 7:59, Fraxtal will airdrop FXTL points to veFXS stakers based on their veFXS balance for a period of one week. The specific amount and distribution pattern have not been disclosed as of the time of publication (perhaps it will be proportional to the amount and time of stake).
The Flox mechanism will then go live and users who deploy DApps and bring their assets to Fraxtal will start earning FXTL points for every block they use the chain.
summary
Looking back at the development process over the past two years, Frax Finance's product strength is far ahead of other "DeFi veterans":
From the "computing stability giant" that was as famous as Terra in 2022, to the astonishing growth rate of frxETH in 2023, and the latecomers and first-comers of RWA such as sFRAX, to the emergence of Fraxtal, which claims to be the "most important version".
Although the removal of stabilization factors and the launch of fraETH are passive adjustments, Frax Finance has generally made timely changes and has magically coupled the new products with each other, building a self-contained DeFi matrix without missing a single hot narrative.
The latest Fraxtal, to some extent, also carries its ultimate ambition - to build a DeFi universe with L2 chain as the core, to bring together fees and traffic, and to create its own "Fraxtal" era.
Objectively speaking, this may help it become the project that goes the furthest in the DeFi track, but the narrative is sexy and the timing is unpredictable. Whether Frax Finance in 2024 can truly create its own "Fraxtal" era remains to be seen.