Risk Assessments for New Assets
We have performed stringent risk assessments for FRAX and FEI with proposed parameters and risk analysis as below:
FRAX Finance (FRAX)
Frax is the first and only stablecoin with parts of its supply backed by collateral and parts of the supply algorithmic. The stablecoin (FRAX) is named after the “fractional-algorithmic” stability mechanism. The ratio of collateralized and algorithmic depends on the market’s pricing of the FRAX stablecoin. If FRAX is trading at above $1, the protocol decreases the collateral ratio. If FRAX is trading at under $1, the protocol increases the collateral ratio.
- Smart Contract Risk
Frax was deployed on Ethereum in December 2020 and was audited by CertiK. It boasts 217K verifiable transactions on-chain today.
- Financial Risk
Frax has a market capitalization of $1.9 billion with a daily trading volume of 37.2 million. Frax has experienced less volatility than the rest of the algorithmic stablecoins.
- Counterparty Risk
Frax is fully decentralized and can continue to function without the team. Governance decisions are facilitated through Snapshot by FXS holders collectively.
FEI
The Fei protocol is a fully decentralized stablecoin project developed by Fei Labs Inc. It uses a stability mechanism called Protocol Controlled Value (PCV), as well as numerous other mechanisms to keep the Uniswap liquidity pool and FEI, its native stablecoin, close to the exchange rate of the US dollar.
- Smart Contract Risk
Fei was launched in April 2021 with 184K on-chain transactions. It was audited by Open Zeppelin and ConsenSys Diligence.
- Financial Risk
Fei has a market capitalization of $422 million with a daily trading volume of $39 million. However, the price of Fei witnessed some volatility driven by its algorithmic stability mechanism.
- Counterparty Risk
Fei is a decentralized protocol with a strong community of 34K followers on Twitter and 14K members on Discord. Governance votes pertaining to protocol changes are casted through Snapshot by TRIBE holders.