FXS is the governance and value-accrual token of the Frax protocol and can be used as collateral to mint the protocol's FRAX stablecoin.
FXS is a low-cap asset that represents the protocol's native governance or utility token. FXS is exposed to death spiral risk as its price depends on another asset, thus creating negative feedback loops. This asset is exposed to the underlying risks of Frax, a protocol rated as Moderately Risky. FXS can be used to mint the FRAX stablecoin and the latter can be redeemed for FXS, thus creating negative feedback loops when FRAX holders redeem in mass and sell FXS for other stablecoins. The asset has a fixed supply.
FXS is moderately correlated to the overall market.
The FXS token is used to govern the protocol and give holders the ability to submit proposals and potential changes to the allocation of pool rewards. The amount of voting power a user has is determined by how many FXS tokens are staked and for how long. The longer FXS is staked (max of four years), the more voting rights are granted.
The total supply of FXS was initially hard capped to 100M tokens. The initial supply includes 60M tokens distributed to the community for yield farming programs and DeFi initiatives (maximum one year emission between 18-30M depending on the collateral ratio of FRAX), 5M to a community governed treasury, and 35M to the team and investors (20% team, 3% strategic advisors and early contributors, 12% accredited private investors). The actual supply is intended to be deflationary as long as there is demand for FRAX and while it is minted at higher collateral ratios.
FXS has value accrual mechanisms through its power to promote certain pools across its AMO and locking mechanism to accrue rewards for long-term liquidity providers. Voters determine the different allocations of FXS tokens to each pool, which can boost rewards for liquidity providers. Users are also incentivized to lock their FXS tokens within the protocol in return for veFXS tokens. FXS lockers are entitled to fees generated from minting and redeeming as well as by the protocol's several product lines.