Frax co-founders propose spending $20 million to buyback FXS token

Quick Take

  • The proposal will see the project deploying $20 million from the protocol to buy and burn its own FXS token.
  • The buyback program is to improve the value of the token that has plunged over the last six months.

Sam Kazemian and Travis Moore, co-founders of Frax Finance, have published a new governance proposal Wednesday for a $20 million buyback of the protocol’s Frax Shares (FXS) token.

Frax Finance is a fractional algorithmic stablecoin protocol and its stable currency is called FRAX. The stablecoin maintains its US dollar peg via two mechanisms — partial collateral backing by USDC and an algorithm that trades FRAX and FXS.

The proposal’s authors say the buyback is necessary to reverse the token’s price downtrend. FXS is down more than 85% from its all-time high price of $42.80 reached at the start of the year.

Today’s proposal acknowledged that FXS, like the rest of the crypto market, has lost a lot of its value during the course of the current bear market. Kazemian and Moore, however, countered that Frax’s as a stablecoin project is still in a healthy condition.

As such, FXS at its current price is the most undervalued asset in the project’s treasury. The proposal stated that a buyback of the token is “the best use of capital dollar for dollar spent.”

If passed, the protocol will buy back and burn $20 million worth of FXS. The buyback and burn process will remove those tokens from circulation leading to a decrease in circulating supply.