Frax Ether (FRXETH)

Liquid Staking and Yield Earning

Frax Ether is a liquid ETH staking derivative that lets users stake any amount of ETH without running validator nodes themselves. Users send ETH to the Frax ETH Minter and receive frxETH tokens in return. These tokens represent staked ETH and can be converted into sfrxETH, which accrues staking rewards over time. This system simplifies earning staking yield and allows withdrawals at any time and size.

Stablecoin and DeFi Utility

frxETH acts as a stablecoin loosely pegged to ETH and can be used as a gas token on the Fraxtal Layer 2 chain. It can also be used to provide liquidity on decentralized exchanges like Curve and Uniswap, enabling users to earn trading fees and participate in DeFi activities while their ETH remains staked.

Ecosystem Integration

Frax Ether integrates with the broader Frax Finance ecosystem, including lending markets and liquidity systems. The protocol invests idle ETH and earns income from lending activities, enhancing yield opportunities. The dual-token model (frxETH and sfrxETH) allows flexible staking and liquidity options, supporting composability in DeFi.

Summary

• Stake any amount of ETH easily and earn staking rewards via sfrxETH.
• Use frxETH as a stablecoin and for DeFi liquidity provision.
• Participate in Frax Finance’s ecosystem for lending and yield optimization.
• Withdraw ETH anytime without lockup periods.

Advantages

• Frax Ether is a liquid ETH staking derivative that makes staking easier and more profitable by leveraging the Frax Finance ecosystem.
• It offers a simplified, secure, and DeFi-native way to earn interest on ETH.
• The system includes frxETH (a stablecoin loosely pegged to ETH) and sfrxETH (which accrues staking yield), allowing users to earn above-average staking yields (around 3.91% APR compared to Lido’s 3.3%).
• Users can convert frxETH to sfrxETH to earn staking rewards and redeem them later.
• Frax Ether supports liquidity and lending markets within the Frax ecosystem.
• It allows users to keep liquidity while staking, enabling participation in DeFi activities.
• Protocol fees (8%) support the Frax ecosystem and benefit FXS holders and FRAX peg backing.

Disadvantages

• The protocol has centralization risks because the admin can mint unlimited frxETH, set validator addresses, and withdraw funds from the minter contract.
• The multisig control has fewer than 4 signers, increasing centralization risk.
• There is a timelock of at least 48 hours for upgrades, which helps users exit if needed but still poses some risk.
• Frax Ether does not earn staking yield directly on frxETH; only sfrxETH accrues rewards.
• The system is relatively new compared to established liquid staking providers like Lido, which may affect adoption and trust.

Founders of Frax Ether

The founders of Frax Ether are Sam Kazemian, Travis Moore, and Jason Huan. Sam Kazemian is the main founder of Frax Finance, the ecosystem behind Frax Ether. Travis Moore and Jason Huan also played significant roles in the development of Frax Finance and Frax Ether. Additionally, Stephen Moore and Jack Corddry contributed to the strategic and technical growth of Frax Finance and Frax Ether.

Investors in Frax Ether

Frax Ether is backed by several notable investors in the crypto space. Key participants include Coinbase Ventures, Temasek’s Vertex Ventures, and Galaxy Ventures. These investors have supported Frax Finance and its liquid ETH staking derivative, Frax Ether, helping to grow the project within the decentralized finance (DeFi) ecosystem.

Halal Status of Frax Ether

• General Ethereum and Ether (ETH) Context: Most Muslim scholars consider Ethereum and its native token Ether (ETH) halal because Ether functions as a utility token powering the Ethereum network. It is not inherently based on interest (riba) and is used for decentralized applications and smart contracts, which do not involve interest-based transactions.

• Staking and Yield: Earning staking rewards on Ethereum, including through derivatives like Frax Ether, is often compared to earning rental income rather than interest, which many scholars find permissible.

• Frax Ether Specifics: Frax Ether is a liquid ETH staking derivative designed to maximize staking yield within the Frax Finance ecosystem. It involves staking ETH to earn rewards, similar to Ethereum staking, which is generally viewed as halal.

Answer: Yes, Frax Ether is halal because it represents a utility token used for staking on Ethereum, and the staking rewards are akin to rental income rather than interest.