Frax Finance ¤
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  • Frax Ecosystem Overview
  • FXS & veFXS
    • Frax Shares (FXS)
    • veFXS
    • Gauges
    • FXS Distribution
    • FXS Smart Contract & Addresses
  • GOVERNANCE
    • Frax Governance Overview
    • How It Works
    • Advanced Concepts
    • Fraxtal Snapshot Voting
  • FRAX V1 - ORIGINAL
    • Original Design
    • Staking Contracts
    • FRAX ABI & Token Addresses
    • Frax V1 Pool ABI & Addresses
    • Core Frax Multisigs
  • FRAX V2 - Algorithmic Market Operations (AMO)
    • AMO Overview
    • AMO Minter
    • Collateral Investor
    • Curve
    • Uniswap v3
    • FRAX Lending
    • Decentralization Ratio (DR)
  • FRAX V3 - 100% CR AND MORE
    • Overview
    • Fraxtal
    • AMOs
    • RWAs
    • sFRAX
    • FXBs
    • sFRAX Token Addresses
    • sFRAX & FXB Multisigs
  • Bridging
    • Fraxferry
    • LayerZero x Stargate
    • Fraxtal Bridge
  • Frax Price Index
    • Overview (CPI Peg & Mechanics)
    • Frax Price Index Share (FPIS)
    • FPIS Distribution
    • CPI Tracker Oracle
    • FPI Controller Pool
    • veFPIS
    • FPIS Conversion / FPIS Locker
    • FPI and FPIS Token Addresses
    • FPI Multisigs
  • Fraxswap
    • Overview
    • Technical Specifications
    • Fraxswap Contract Addresses
  • Fraxlend
    • Fraxlend Overview
    • Key Concepts
    • Lending
    • Borrowing
    • Advanced Concepts
      • Position Health & Liquidations
      • Interest Rates
      • Vault Account
    • ABI & Code
    • Fraxlend Multisigs
  • Frax Ether
    • Overview
    • frxETH and sfrxETH
    • Technical Specifications
    • Redemption
    • frxETH V2
    • frxETH V2 Technical Details
    • frxETH Code & V2 Addresses
    • frxETH and sfrxETH Token Addresses
    • frxETH Multisigs
  • BAMM
    • Overview
  • Frax Oracle
    • Frax Oracle Overview
    • How It Works
    • Advanced Concepts
    • Fraxtal Merkle Proof Oracles
  • Guides & FAQ
    • FAQ
    • Staking
    • Uniswap Migration / Uniswap V3
    • Fraxswap / FPI
  • Miscellany
    • All Contract Addresses
    • Bug Bounty
    • Miscellaneous & Bot Addresses
    • API
  • Other
    • Audits
    • Media Kit / Logos
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  1. FRAX V2 - Algorithmic Market Operations (AMO)

Decentralization Ratio (DR)

Reducing reliance on centralized assets

PreviousFRAX LendingNextOverview

Last updated 9 months ago

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The Frax Decentralization Ratio (DR) is the ratio of decentralized collateral value over the total stablecoin supply backed/redeemable for those assets. Collateral with excessive off-chain risk (i.e. fiatcoins, securities, & custodial assets such as gold/oil etc) are counted as 0% decentralized. The DR goes through underlying constituent pieces of collateral that a protocol has claims on, not just what is inside its system contracts. The DR is a recursive function to find the base value of every asset.

For example, FRAX3CRV LP is 50% FRAX so remove that, as you cannot back yourself with your own coin. The other half is 3CRV which is 33% USDC, 33% USDT, and 33% DAI. DAI itself is about 60% fiatcoins. So each $1 of FRAX3CRV LP only has about $.066 ($1 x 0.5 * 0.33 * 0.4) of value coming from decentralized sources.

In contrast, Ethereum, as well as reward tokens like CVX and CRV, are counted as 100% decentralized. FRAX minted through Lending AMOs also counts as decentralized since borrowers overcollateralize their loan w/ crypto sOHM, RGT, etc. This is the same reason DAI's vaults give it high DR.

The DR is a generalized algorithm that can be used to compute any stablecoin's excessive off-chain risk. Other stablecoins like LUSD are much easier to calculate: their DR is 100%. FEI is around 90% DR.

For a list of assets backing FRAX, see .

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