Fraxtal DeFi Ecosystem Guide

Fraxtal is an EVM-compatible layer 2 rollup chain launched on February 8th, 2024 by Frax Finance to help reduce congestion on Ethereum. As a roll-up, it groups transactions off-chain, compresses the resulting data, and then posts that compressed data to Ethereum to settle state.

Overview

In a January 2024 interview, Sam Kazemian announced Fraxtal, Frax Finance’s dedicated layer 2 blockchain, with the release planned for the first week of February and day-one support on Etherscan via Fraxscan. The chain executes transactions off-chain and submits compressed data back to Ethereum to increase throughput and lower fees.

Fraxtal uses FRAX as its native gas token and introduces an incentive mechanism named Flox. Flox rewards both users who pay gas and developers of contracts that consume gas: each epoch, gas spenders and contract deployers earn FXTL points which can later be converted into tokens. The design allows users to sometimes receive rewards exceeding their gas outlay, and enables developers to earn rewards beyond the gas their dApps consume.

North Star Hard Fork

The North Star Hard Fork is a major upgrade aimed at changing Frax Finance’s governance and tokenomics to improve decentralization, sustainability, and long-term growth. Initially proposed in late 2023 and iterated after community feedback, the hard fork moves Frax away from a dual-token approach toward a more streamlined structure as part of the 2025 roadmap.

Key objectives include simplifying governance workflows, redesigning tokenomics for protocol durability, and encouraging wider stakeholder participation. The proposal underwent substantial changes between the initial draft (v1.0) and the finalized version (v2.0), adding explicit migration steps, refined incentives, and phased rollout plans.

From a technical perspective, the upgrade implements new governance contracts, a process for consolidating tokens, and improvements across Frax’s architecture, including smart contract and security enhancements. Its deployment follows a three-phase plan—preparation, transition, and stabilization—to ensure a secure and minimally disruptive upgrade. Founder Sam Kazemian noted that the North Star Hard Fork reflects lessons learned and positions Frax for the next decade of DeFi.

FRAX as Gas Token

Fraxtal designates FRAX as the network’s native gas token, letting users pay transaction fees directly with FRAX. FRAX can be moved onto Fraxtal using the protocol’s native Layer 2 bridge by transferring FRAX from the Ethereum mainnet, and when bridging back to Ethereum users receive the ERC-20 version of FRAX on mainnet.

Fraxtal Point System (FXTL)

The Fraxtal Point System uses FXTL as a non-transferable metric to record user activity within the network. Participants earn FXTL points by calling smart contracts, trying new protocols, and holding specified assets; these earnings are tracked to measure engagement.

Point balances and accruals are maintained in the FraxtalPoints contract, which serves as the central ledger for FXTL accounting. The plan is for FXTL to be tokenized within 12 months of Fraxtal’s launch, although the exact outcome—whether a standalone staking token, a conversion to FXS, or a hybrid approach—has not been finalized.

Fraxtal Incentives Delegation

Fraxtal permits delegation of FXTL incentives to addresses that can claim them, addressing cases where certain smart contracts cannot directly receive incentives. This delegation is handled through the DelegationRegistry, where an address can appoint a delegate such as an externally owned account (EOA), a smart account, or a multisig to collect and manage accrued rewards.

Delegation operates non-recursively: incentives flow only to the explicitly assigned delegate and are not forwarded through any further delegation chain. EOAs can register their delegations directly in the DelegationRegistry on both Fraxtal mainnet and testnet.

For smart contracts, delegation can be configured at deployment by invoking specific functions to register the delegate and lock further changes. Contracts able to perform arbitrary calls are advised to adopt additional safeguards to avoid unauthorized updates to delegation settings. These measures are intended to secure incentive allocation without increasing post-deployment contract complexity.

Fraxtal blockspace incentives (Flox)

The Fraxtal Blockspace Incentives program, called Flox, distributes rewards to users and smart contract developers on Fraxtal. Gas spenders and gas-consuming contracts earn FXTL points according to the Flox Algorithm each epoch, with the initial epoch length set at 7 days.

Flox is designed to provide stronger incentives than prior fee-sharing approaches: it compensates both end users and contracts, analyzes transaction traces, and assesses contract importance using multiple criteria.

As an incentive mechanism, Flox uses FXTL to allocate value to participants and developers, aiming to move beyond early transaction fee-sharing models toward a more sustainable revenue-sharing system.

• Example 1: Swapping USDC to FRAX through a Curve pool using 1inch. Incentives are allocated to the 1-inch router contract, the Curve pool contract, the USDC contract, and the FRAX contract.
• Example 2: Borrowing FRAX from a Fraxlend pair against WBTC. Incentives are given to the Fraxlend Pair contract, the WBTC contract, the FRAX contract, and the Chainlink oracle contract.

veFRAX

veFRAX is a non-transferable, time-locked representation of staked FRAX (formerly FXS) used across the Frax ecosystem for governance and protocol utilities. Users may lock FRAX for any period between 1 week and 208 weeks (4 years); the veFRAX balance depends on both the amount locked and the lock duration, with longer locks producing larger balances. For instance, staking 1 FRAX for 4 years yields 4 veFRAX, and that balance decays linearly as the unlock date approaches.

While veFRAX staking was initially confined to Ethereum mainnet, staking is now also available natively on Fraxtal through an updated contract. A combined view of a user’s veFRAX is provided by the veFRAXCounter contract, which aggregates holdings from both Ethereum and Fraxtal; this unified balance is used for governance, Flox incentives, and other protocol functions on Fraxtal.