How does Frax Share work?

Frax Share is a decentralized finance (DeFi) project that uses blockchain technology to create a stablecoin with a fractional reserve system.

The project is built on the Ethereum blockchain and uses a combination of algorithmic money supply and algorithmic price stabilization to create a stablecoin that is backed by collateral. The Frax Share protocol works by allowing users to deposit collateral into the system, which is then used to back the Frax token. This collateral can be in the form of other cryptocurrencies, such as ETH or DAI, or it can be in the form of traditional assets such as gold or fiat currencies.

The protocol then uses an algorithm to adjust the money supply and price of the Frax token based on the amount of collateral deposited into the system. This ensures that there is always enough collateral backing each Frax token, thus providing stability for its value. In addition to providing stability for its value, Frax Share also allows users to earn rewards for providing liquidity to the platform.

By depositing their collateral into the system, users are able to earn rewards in the form of newly minted FRAX tokens. These rewards are distributed proportionally based on how much liquidity each user has provided. This incentivizes users to provide more liquidity and helps ensure that there is always enough liquidity in the system for users who want to buy or sell FRAX tokens.