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TVL $135MAPY 2.79%low riskUpdated Feb 1, 2025

Aave Ethereum FRAX

Supply FRAX to Aave V3 on Ethereum. FRAX is a fractional-algorithmic stablecoin that has transitioned to a fully collateralized model.

ProtocolAave V3
Networkethereum
SymbolAETHFRAX
CategoryMoney Markets
Underlying Assets
FRAX
Contract Address0xd4e245848d6e1220dbe62e155d89fa327e43cb06

What is Aave Ethereum FRAX?

Aave Ethereum FRAX is a lending market for the FRAX stablecoin on Aave V3. Originally launched as a fractional-algorithmic stablecoin (partially backed by collateral, partially by algorithmic mechanisms), FRAX has evolved to a fully collateralized model following its v3 upgrade. This makes FRAX more comparable to traditional collateral-backed stablecoins while retaining its DeFi-native design.

How This Market Works

FRAX lending on Aave operates like other stablecoin markets:

  1. Deposit FRAX into the Aave V3 lending pool
  2. Receive aETHFRAX tokens representing your deposit
  3. Earn interest from FRAX borrowers
  4. Withdraw FRAX plus yield anytime
Frax Ecosystem: FRAX is part of a larger ecosystem including sFRAX (staked FRAX), FPI (inflation-pegged stablecoin), and frxETH (liquid staking).

What Assets Are Involved

Supply Asset: FRAX (Frax stablecoin) - fully collateralized USD stablecoin Receipt Token: aETHFRAX - Aave deposit token

FRAX borrowing is used for:

  • DeFi strategies within the Frax ecosystem
  • Yield farming with FRAX pairs
  • Diversification from other stablecoins
  • Access to Frax's unique yield products

Frax Ecosystem Evolution

Frax has evolved significantly:

  • v1: Partially algorithmic (required FXS backing)
  • v2: Increased collateralization ratio
  • v3: Fully collateralized by real-world assets
  • Fraxchain: Upcoming L2 for Frax ecosystem

Current collateral includes USDC, US Treasuries via sFRAX, and other approved assets.

Risk Disclosures

Smart Contract Risk: Exposure to Aave V3 and Frax protocol contracts. Collateral Transition Risk: Frax's evolution from algorithmic to fully-backed required significant protocol changes. Historical algorithmic design created trust concerns. FXS Dependency: Frax governance and some mechanisms still depend on FXS token, creating governance risk. RWA Integration: Frax's real-world asset backing through sFRAX introduces traditional finance counterparty risks. Complexity Risk: Frax's multi-product ecosystem is complex, with interdependencies between FRAX, sFRAX, FPI, and frxETH. Utilization Risk: Standard stablecoin utilization dynamics apply. Historical Concerns: The original algorithmic model and UST collapse created lingering concerns about algorithmic stablecoin mechanisms, though Frax has since fully collateralized.

Related Money Markets

Aave Ethereum WETH1.25% APYAave Ethereum USDT2.45% APYAave Ethereum wstETH0.01% APYAave Ethereum USDC3.47% APYAave Ethereum WBTC0.01% APY
Disclaimer: APY and TVL figures are based on on-chain data and may fluctuate. Past performance does not guarantee future results. DeFi investments carry smart contract, market, and liquidity risks. This content is for informational purposes only and does not constitute financial advice. Always conduct your own research before investing.

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