- Frax Finance introduced sFRAX to compete in the yield-yielding stablecoin industry
- Protocol saw a spike in activity, but revenues continued to decline
After venturing into the RWA space, along came Frax Finance’s [FXS] sFRAX could also help the protocol gain a foothold in the yield-bearing stablecoin sector. A recently introduced feature could help sFRAX holders participate in the short end of the U.S. Treasury market, where returns are determined by the interest on reserve balances (IORB).
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Will Frax be able to compete?
Frax Finance also had plans for Frax Bonds (FXBs), which would expand access to the longer end of the yield curve. The interest rates of these bonds would be linked to the interest rates of the underlying bonds with matching maturities. This expansion would enable an on-chain view of the entire yield curve, adding depth to the protocol.
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Competition in the yield-bearing dollar market intensifies with the introduction of sFRAX: pic.twitter.com/KJrMhq54Fq
— parsec (@parsec_finance) October 20, 2023
The introduction of sFRAX and the many incentives for users to hold the stablecoin could give sDAI a run for its money.
However, despite increasing competition in the industry, MakerDAO continued to make new updates to sDAI. Recently, MakerDAO launched e-mode via Spark protocol, allowing sDAI holders to borrow USDC and USDT or explore the leverage of DeFi trading strategies.
USDC and USDT are now live on Spark with e-mode on sDAI
For sDAI users, this means you can borrow USDC and USDT for your leveraged DeFi strategies.
For USDC and USDT users: take advantage of these borrowers’ interest rates.
⚡️ https://t.co/wP36gAlcFB ⚡️ pic.twitter.com/K8Pf7pjXpL
— Vonk (@sparkdotfi) October 20, 2023
As these developments unfolded, the performance of both Frax Finance and MakerDAO improved. In fact, data showed that the number of active users on the Frax Finance platform increased by 209.1% over the past six months. However, this increase in users was accompanied by a 25% drop in platform revenue over the same period.
With an additional set of products and incentives being added to the protocol, it remains to be seen whether Frax Finance will be able to see green in terms of revenue. On the other hand, MakerDAO recorded a remarkable 185% increase in sales over the past six months.
Realistic or not, here is MKR’s market cap in BTC terms
Source: token terminal
As for token prices, FXS, Frax Finance’s native token, recorded a price drop. At the time of writing, the stock was trading at $45.28. Moreover, the rate, which indicates the speed of token movement within the ecosystem, also declined in recent weeks.
On the other hand, MKR, MakerDAO’s native token, saw a rise in price. Moreover, MKR’s velocity also increased during this period.
Source: Santiment
