Locking FXS tokens grants users veFXS tokens, preserving their utility and governance rights. Users can stake veFXS tokens on Ethereum or Frax Finance’s layer 2 solution Fraxtal.
By Bhushan Akolkar
Edited by Julia Sakovich
Updated
2 mins read
Frax Finance CEO and founder Sam Kazemian revealed that the team is considering a move akin to Uniswap’s proposal, where a portion of protocol fees would be distributed to stakers of their native token FXS.
Users who lock their FXS tokens receive veFXS tokens, thereby retaining their utility and governance rights. Users can stake these veFXS tokens on both – the Ethereum mainnet and on Frax Finance’s layer 2 solution Fraxtal. Kazemian explained in an interview that the proposal aims to distribute protocol revenue among veFXS stakers. Interestingly, the community had voted to stop revenue sharing back in 2022.
Staking involves the process of locking cryptocurrencies for a predetermined duration to aid in the maintenance of a blockchain network. In exchange, the stakers receive a fixed percentage of rewards, similar to the interest gained from fixed-income securities.
On the other hand, delegation entails transferring voting rights, granted by governance tokens, to recognized entities within decentralized autonomous organizations known as delegates. Frax Finance reached out to its community on the X platform, to test the reactions to the fee-switch proposal. It noted:
“Should veFXS holders vote to distribute Frax Protocol revenue back to veFXS stakers again? Frax Finance makes 8 figures of annual revenue & growing, mostly being conserved in the treasury now. Time to turn it back on?”
During the last weekend, Uniswap’s governance token UNI rallied all the way by 70% in a single day reaching past $12.70.
Following a proposal from the Uniswap Foundation to overhaul the governance structure of the protocol, there’s been a strong surge in user activity.
The proposed upgrade further seeks to incentivize holders of UNI tokens for their long-term commitment by rewarding those who stake and delegate their tokens. Erin Koen, the governance lead at Uniswap Foundation, suggests that implementing this reward system would not only enhance engagement but also contribute to the potential long-term success of the protocol.
“We are going to follow Uniswap’s lead in proposing it. It will be up to the community to pass it,” said Frax Finance’s Kazemian.
The Uniswap (UNI) price rally has triggered a major rally across other DeFi tokens, including the likes of COMP, AAVE, and SUSHI.
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
