Host: Blair Zhu, Mint Ventures
Special Guest: Andy, The Director of Asia at Frax Finance
Contents
Introduction of Andy and Frax
Blair: Hey everyone, welcome back to Web3 Founders Real Talk. We’re here to bring you very captivating conversations with movers and shakers in the Web3 industries. Today we have Andy at our show. He is the director of Asia on Frax Finance. Welcome to the show Andy.
Andy: Thank you, thank you for having me Blair. Happy to be here to speak on behalf of Frax.
Blair: Would you mind telling us a little bit about yourself and your project?
Andy: For sure, so my name is Andy and I currently serve as the director of Asia at Frax Finance. I oversee a lot of things at Frax Finance, anything from managing the community, seeking out business development opportunities at Frax Finance, especially focusing on Asia, going around to different conferences to do panels and get that Frax Finance and stablecoin maximalism narrative out there. So to give a quick introduction to Frax, we basically do stablecoins. We issue innovative and decentralized stablecoins and also build sub-protocols to support them.
Blair: Wow, impressive. I’m pretty sure Frax is one of the leading Defi protocols in the space. Would you mind telling us a little bit about yourself, how did you land in the crypto space?
Andy: For sure, super interesting story actually. I had no crypto or blockchain background when I first started. I remember back in the day, I think in Korea, it was 2017 or 2016 when Ripple was at like $3 or it was at all-time high. My cousin was like, “You know, this is when you need to get in.” So I bought a bunch of Ripple at all-time high and I’m still holding it. From then I actually got an interesting offer from a friend of mine to do part-time translations and communication between the English office and the Korean team. So starting from there, I started to learn about crypto because the founder of Frax also founded a product called IQ Wiki and that’s where I started. IQ Wiki was actually founded before Frax and it was all about learning and education of crypto and blockchain space. So it was very gradual for me to learn and earn as time went on. So that’s how I got into space. And then I stuck with the team for a couple of years because I truly believe that they are the best team in the space, brilliant people who are very patient with who I was before and even now, and always helping me learn and dive into the space and better for sure.
Blair: Wow, interesting. It seems like you experienced the speculations of the crypto space and also the education side of it.
Andy: Definitely.
Comprehensive Product Lines and Their Motivation
Blair: Let’s just jump straight in. As I said, Frax has built a very comprehensive DeFi economy based on stablecoins, including very comprehensive product lines like liquidity systems, lending markets, Frax swap, Fraxlend, and liquid staking like Frax Ether. We would love to know what inspired your team to create such a diverse and extensive set of DeFi protocols in the first place.
Andy: Yeah, that’s a great question. You mentioned a lot of our sub-protocols, we do have a lot of things going on in our ecosystem. You mentioned Frax swap, Fraxlend, our LSD, Frax Ether, there’s also Frax Ferry. So there’s a bunch of things. I think the motivation in terms of building this as of now is that we currently issue three different types of stablecoins as well. So there’s Frax, which is a USD-pegged asset. FPI, which is Frax price index stablecoin. And that’s the first stablecoin pegged to the basket of consumer goods, which is creating its own unit of account separate from any nation-state denominator money. As you mentioned, Frax Ether, which is pegged to Ethereum to used as a replacement for wrapped ETH in smart contracts. So we build sub-protocols around them to actually support our stability mechanism. Frax swap is a native AMM, which is also the first AMM to have a time-weighted average market maker built into it. Fraxlend, which is a permissionless lending market. Frax Ferry is the safest way to transfer and ferry the Frax-based tokens. I guess I’ll dive more into it later, but coming back to your original question, the motivation is that by issuing these three different stablecoins, and the sub-protocols, we believe that in the future there will be three main dominant assets in the next wave that dominates the entire industry. So, I guess I’ll go a little bit into it more now. Going back to our three stablecoins, we think that USD will obviously dominate, which is why we issued Frax, and then some kind of flat coin, such as CPI basket of goods, which is why we issued FPI. And then, big blue chip assets and crypto, such as Bitcoin or Ethereum. That’s why we issued FraxEther. And then around that, obviously, the sub-protocols that we’ve mentioned and talked about support that and support the stability mechanism.
Challenges & Current Focus
Blair: Well, I would say Frax has been expanding into multiple Defi verticals. As you mentioned, there are a lot of products to name. It could bring massive development and maintenance pressures. Have you guys encountered any notable challenges and also what aspects are currently the major focus for your team right now?
Andy: I think on the development side, I don’t want to speak too much for our development core team, but the vibe that I got from working with this team is that they are builders. So I get a lot of questions about, how do you guys deal with bear markets and horrible market situations. And the truth is, for me even, it’s hard to get that entire noise out and to ignore that whole negative narrative, but it’s really motivating to see our core team build around that, and just focus on building great products so that when the next bull market comes, there’s all these amazing products that they’ve launched. And I guess on the outer spectrum of development, I think it’s very safe to say that everyone in DeFi or in general in the crypto space has encountered challenges such as frequent bridge hacks that happened last years, some de-pegs of different stablecoin protocols. And actually through this bridge hack, it was actually a learning point and curve for us and a motivator for developing Frax Ferry, which is actually the safest way to bridge over Frax assets. It does take longer than other bridges, but we value safety of user assets than the timely aspect of things. So we love to learn through mistakes and different parts of hurdles and challenges that other protocols might’ve faced and just in terms of space in general.
Blair: I can tell you guys are extremely bullish on stablecoins, that’s why you guys have developed stablecoin-empowered DeFi infrastructure. And like Frax involved from a single stablecoin, then the LSD, then the Layer2. They’re a very comprehensive ecosystem that you are trying to build, accompanied by continuous expansion and motivation. Managing those transitions requires very insightful strategies. Like you said, in this space in particular. I find it dynamic, fast-paced, Also sometimes bombarded as well. So there are always a lot of distractions happening and you have to be selective about those trends or the product that you would like to build. Can you also shed light on how your team navigated those insights and developments, also innovations, and your ultimate missions and vision as it pushes the boundaries of the industries?
Andy: For sure. I think one notable thing that I can mention here is that our core team is builders, but they also really look and do research around other respectful and notable crypto native projects. We’re on that look for how we can do something better. How can we learn from different projects? So that’s one way I think that FRAX really stays on top. We focus on this positive sum narrative where we learn and we move up together as the entire space rather than seeing other projects as competitors, which is one other respectful thing that I have for the team. But our ultimate vision is to become one of the top DeFi projects and become the leading stablecoin for each dominant asset that I mentioned before, and we think in the next decade, it’s gonna happen. Our main focus, going back to the previous question actually that I forgot to answer is definitely Fraxtal. We want to expand this vision of the dominant asset vision to create a chain where the entire DeFi space can grow. It’s going to be something completely different, something that no one has ever done before. So we’re very excited to launch this product. It’s super interesting because I think it’s coming very soon. The date right now of the recording is very close to the launch date. So we’re pretty excited.
Brief Overview of Fraxtal
Blair: Since you talk about the Fraxtal, that would be our key focus today. I guess there’s considerable excitement surrounding the upcoming launch of Fraxtal. That’s the way you named the Frax chain, and the potential expansion of the FRAX LSD as well. I captured that from your 2024 roadmaps. Can you share more insights into the current stage of this product? You answered my questions partially like what motivated Frax to develop its own layer2 solutions, but not sure if you have any other insights to add on. Can you provide a brief overview, like a sneak peek of its architecture and functionalities? What are we waiting for?
Andy: Sure, I think I can go a bit deeper into this question. As mentioned previously, it brings everything together. It’s one of our end-game visions to have our Fraxtal launch. In terms of the development stage, we’re very close to launch. We’re going to announce it on February 7th, and some snapshots about the Fraxtal points and airdrops are going to be happening on that date as well. To go into a brief overview of the architecture, I guess it’s going to be a general-purpose chain with scaling. So Fraxtal is going to be a general-purpose blockchain, similar to other layer2 solutions like Arbitrum or Polygon. The scope of Fraxtal is likened to established rollup solutions like Arbitrum, Optimism, and zkSync. However, it’s not just an application-specific chain, AKA AppChain. It’s a comprehensive technology stack with a broader ambition than other rollups currently launching AppChains. Another thing that we can highlight is the modified OP stack and super chain compatibility. Sounds very complex, but the initial vision of Fraxtal was a modified OP stack execution environment compatible with super chains, facilitating the deployment and development of decentralized applications. Then the long-term roadmap is to become a base layer ZKL1. So that’s the long-term goal there. And the gas token flexibility, we can talk about that. We plan to use both FraxETH and Frax gas tokens, which means that both of these assets will be unstaked and extra yield will be passed on to SFrax and SFraxETH holders. Split mint, government, and gas can be also, a talking point here. So while FraxETH and Frax will be used as gas tokens on Fraxtal, governance on the other hand will be controlled by veFXS holders. So this separation will be key to long-term growth, we believe, as network profits will flow back to veFXS, while increased network usage would drive more towards FraxETH to be deposited on Fraxtal. One actually really cool thing that we like to highlight is blocked space incentives. So this is a brand new type of incentive structure that will reward users and apps and developers using the network. So the reward is going to be paid out in veFXS. So if you’re a developer who are building amazing apps or products on Fraxtal, and a lot of people use it, you will not only earn the app revenue but also block space incentives, which will increase profitability and alignment of the app for long-term growth with Fraxtal. So I think this is really key here for builders out there who are interested in building in Fraxtal because it not only incentivizes them, but it incentivizes the space in general. And I guess in the future, we plan to launch special FXS gauges. And one super bullish thing I personally have is something called BAMM. I’m not sure if you’ve heard of it, but it stands for Borrowed Automated Market Maker. So I think this is potentially the most innovative DeFi advancement to be released in 2024. So it’s actually coming pretty soon after the Fraxtal launch. So this is a new borrowing facility built on top of lock liquidity pools, which will open new avenues for lending and allow Fraxtal to draw on liquidity to backstop the protocol. So this is going to be super interesting. I guess one alpha that I can drop here is that it’s going to be launched within maybe one or two months of Fraxtal going live. I guess you can say it like one or two months from today.
Initiatives to Engage Developers and Users
Blair: Wow, that sounds very exciting. Looking forward to seeing all those stories coming true. It sounds like it’s going to be a prolific year for FRAX Finance. Well, it’s going to be a fun ride. We will see. I don’t want to be a bummer, but here’s my next question about competitions. As you said, there are a lot of scaling solutions now like ZK, OP, and also other kinds of scaling solutions happening in this space. How has FRAX Finance strategically engaged with its community to drive adoptions? I know you guys have been doing pretty well, but now you have your layer2 solutions. So it sounds like you’re going to have to compete for developers and users. Can you also share some sort of specific initiatives that attract both users and developers to the FRAX ecosystem in the near future?
Andy: For sure. I think the FRAX optics is purely about innovation and building. The way the core team sees it is that we see it in the very long term. Short-term to long-term, you’re ranging from three months to the next decade even. We always like to question ourselves, what will be the next essential unit of account, and stuff like that? What will be the next important stability mechanism in the next decade or two? What might change, what might not? So we look at what’s new and innovative in the space in the lens of a stablecoin maximalist-centric view. So we utilize that. And like I mentioned before, it’s not all about building, but really acknowledging what’s going around in the space. I think that really drives a lot of users for us that we try to reach that innovative narrative when we’re building. So we’re building out things that have never been done before. And we don’t hide that. We like to have that so that other protocols can maybe look at it and learn from it. And that’s what we do as well. We look at innovative protocols and we learn from that. For example, the reason why we’ve been using and why we’ve been so huge on Curve for a very long time is that we believe that Curve stable swap technology is literally the ultimate mint and redeem function. And that’s never been created by crypto. We think that it is the greatest and the most mathematically elegant and mint redeem smart contract that has been designed in crypto. So working with these really crypto native and innovative projects and partnering with them helps us grow as well. And again, it’s about that positive-sum game. So I think that helps us drive adoption in terms of retaining users or bringing more people onto FRAX, but more importantly, building up the entire ecosystem and space in general.
Insights & Lessons
Blair: Yeah, I guess everyone in this industry can tell that spirits you guys holding, and you guys accumulated a lot of users based on this mission, and you guys share the same goal. So that’s why you drive a lot of users to your game and those people remain in your ecosystem. That’s something good to see. Well, your team has been praised for its delivery capabilities and product safety. Since you mentioned there are a lot of risk factors in Defi sectors, but from my observations, you guys doing pretty well. Are there any insights or lessons? I don’t really wanna call out specific protocols here. There are a lot of entrepreneurs that are experiencing some sort of challenges or resistance previously, but are there any insights or lessons that you would like to share with other builders in a Defi space? How can you manage these high-quality delivery capabilities plus product safety in particular?
Andy: Yeah, I think in terms of Frax as a stablecoin, we really focus heavily on the stability mechanism. I think I mentioned that word so many times in this podcast already, but I think that’s one key thing that all stablecoin products usually focus on. So having that stability mechanism and having different protocols to accommodate that is something that we’ve learned and developed throughout the years that we’ve experienced the space. I think one super cool thing that we have something going on is really about that positive-sum game. As I mentioned before, we don’t see other projects as competitors, but we really like studying them and seeing what they do and seeing different new startups grow or existing projects do innovative things. That’s where we take insight and learn from it. I hope that other products are learning from Frax as well and what we do, but we’re constantly building and constantly innovating and learning. In terms of stability mechanism, for example, you can see that we used to be fractionally algorithmic, but learning from different projects and etc, and what’s been going on, we decided to retire that and go into fully 100% CR. Stuff like that, I think, is what really keeps us in the space and helps us develop that safety aspect of what Frax does best.
Blair: So it sounds to me like your secret recipe would be keeping yourself up to date because you guys are doing a lot of competitor analysis. This is not gonna be direct competitors, but you guys are doing such a comprehensive analysis based on the trends, products, and other innovations. You guys will be selective and absorb those kinds of things into your products. I think that’s impressive because, as we said, entrepreneurs need to be selective and strategic when they make decisions.
Andy: Yeah, I think our team has our ideas and plans and what’s going down the line, but it never hurts to look around and do research and learn from others. I think it’s just about helping each other out as well. That’s important in this space.
More to Expect in 2024
Blair: Yeah, agree. Especially the whole industry is still very nascent to me. Now with all those Bitcoin ETFs, we’re driving a lot more adoptions, but now there is no distinction between your job and my job. It’s more like a widespread community that we’re trying to build together. That’s something I’m siding with you as well. Other than that, are there any other product features to expect in 2024? Are there any other things that you would like to call out today?
Andy: I think the main focus in 2024 would be Fraxtal. We’re not just going to launch Fraxtal on February 7th and then call it a day. We’re going to constantly upgrade it and constantly work on making Fraxtal something that’s like the next level. Along with that, I think there have been talks in the community, you can check, I think, about how FPIS, which is the governance token of FPI and FXS, there’s going to be a merge. So I think there’s going to be a snapshot proposal about and discussions around. So that’s pretty interesting that might be coming pretty soon. And then, like I mentioned before, BAMM is super cool. I think that’s going to be a game-changer for sure. As I mentioned, from continuation and development in Fraxtal, Fraxtal ETH v2 is also coming, which is going to be completely permissionless. So again, there are so many things going on, but I can say that the main focus would be Fraxtal, I think in 2024.
Blair: How can you guys manage such a workload? It sounds like you’re going to have a 100 or 200 people team to me, like you’re having so many verticals to cover.
Andy: It’s super interesting that you mentioned that. Our core team is, I think, as of now under 10 people. A very few geniuses just working around the clock to ship these amazing products out, which is again, another reason why I respect them so much. I think that keeping the team lean also helps to keep that same vision and focus without diluting the vision or creating extra noise that can be a disturbance. I think that’s something that works well in the Frax team as well.
Make FXS the Top Five
Blair: Wow, that’s really impressive. You guys must be really focused and super outcome-oriented. Well, I guess your CEO mentioned that you guys want to make FXS to become one of the top five cryptocurrency projects. I would say this is a very ambitious goal, given that there are also a lot of other players competing with you guys. Can you just share the origin of the aspirations and are there any solid plans and strategies that Frax Finance has in place to achieve this goal? It sounds like you guys definitely have something in place already before calling that out in particular. So we’d love to know if there’s anything that you would love to share about this ambitious goal.
Andy: I think Sam is obviously super ambitious, but that also comes with confidence in what he has built and what the Frax team has built around that. I also believe that FXS is going to be one of the top tokens in the whole industry. I think that’s a kind of aspiration there. It’s not just us saying that it’s going to be the top five, but we’re working towards that because we have history and we’ve done a lot of impressive things, and we’ve hit a lot of milestones that we can confidently lay out there. In terms of the plans and the strategies for this, I think Fraxtal is going to be one of the driving factors of this. We always have this saying that all roads lead to Frax, right? So everything is going to go back to the governance token which is FXS, and that’s why we think it’s going to be big in terms of Fraxtal and all the protocol revenues after we hit 100% CR is going to go back to FXS. So I think that’s going to be the core asset, growing exponentially with all these new innovative products coming out for Frax and the Frax ecosystem.
Insights on Stablecoin and Defi Summer
Blair: Wow, that sounds very solid driving force to me. We are definitely looking forward to seeing that day come and maybe we’re going to have another conversation. Looking ahead, what are your thoughts on the core driving factors for a decentralized stablecoin overall? That would be my last question to ask because it sounds like you guys are super bullish on stablecoins, and also nowadays, especially in this market cycle, we’re seeing a lot of emerging new trends going viral, like meme coins and Depin. There is always something new in this space. But currently, what do you think about decentralized stablecoin demands and also the Defi in the next cycle potentially? How do you see these factors shaping the industries in the future? Some people are saying that DeFi is probably not gonna driving us to another DeFi summer that we used to see. What do you think of those speculations?
Andy: I mean, I think everyone’s entitled to their opinion. I personally think there’s going to be another DeFi summer for sure. Just like how we had an LSD summer this year. I think DeFi is definitely here to stay and along with that stablecoins as well. I know that it’s been a pretty rough rollercoaster journey in terms of stablecoins this year and the past year, but we now kind of have proven that stablecoins are here to stay. The reason why we think this is that we believe in this idea of stablecoin maximalism. And it’s actually the belief that most crypto protocols converge to become a stablecoin in the long term or become of central importance to their existence. So everything slowly will converge to some kind of stablecoin given sufficient time and sufficient size. We think that almost every DeFi primitive converges on becoming a stablecoin-like and every stablecoin at scale converges on the same structure. I think we’ve seen this movement with a lot of projects launching their own stablecoin. Whether it’s Web2 or Web3, we’ve seen a lot of big names and a lot of different products coming with their own stablecoin with their different stablecoin instability mechanism, which is interesting to see and which always goes back to us learning and seeing, what are they doing here? What’s cool there and what’s not? what are some takeaways from this? So I think with this idea of stablecoin maximalism, we think that it’s only going to continuously grow the space and it’s not gonna go away. I think there’s definitely going to be a DeFi, if not, a stablecoin summer. So that’s my personal opinion and I truly believe that.
Blair: Hopefully we’ll get to see that. I would say stablecoin is the core use case for the whole Web3 industry. As you said, there are a lot of other key players jumping in this space, validating your theory, validating your verticals. So definitely, we will see. Thank you so much for all those insights. Thank you for letting us pick your brain before the Fraxtal launch and good luck with everything. It’s gonna be a fun ride. We will see. Thank you so much, Andy.
Andy: No, thank you for having me. I’m super honored to be here on behalf of Frax and to talk to you guys about what I can tell about Frax. Super happy to be here. Thank you.
