Algorithmic stablecoin protocol Frax Finance is considering buying billions of dollars worth of major blockchain-native tokens (e.g. ETH, BTC) as reserve collateral for its stablecoins. This idea has parallels with the Terra blockchain, which recently bought Bitcoin in large quantities as a reserve asset for UST.
But Frax doesn’t just buy bitcoin like Terra does, but intends to buy the native assets of all the blockchains that have issued its stablecoin.
While FRAX’s largest business is on the Ethereum chain, it also supports transactions on 12 other blockchains, including Avalanche, BNB Chain, Fantom, Harmony, Polygon, Solana, Arbitrum.
Also, unlike how Terra handles it, Frax will utilize its Flaxswap platform to execute these large token purchase orders.