- Fraxswap AMM

How Fraxswap works

Fraxswap is a fork of Solidly/Velodrome - the AMM built on Optimism that introduced the solid-style model combining ve-token gauge voting with a protocol fee cut. Unlike Curve's StableSwap invariant (optimized for pegged assets), Fraxswap uses an asymmetric bonding curve with offset virtual balances, making it suitable for both stablecoin pairs (FRAX/USDC) and volatile asset pairs (FXS/ETH). The key architectural difference is that Fraxswap pools can be created permissionlessly (anyone can deploy a new pair) with customizable fee tiers, whereas Curve pools require governance approval.

The fee structure is 80/20: 80% of swap fees go to LPs, 20% go to the Frax Surplus Buffer. This 20% protocol cut is a meaningful revenue stream - at $180M daily volume and 0.05% fee, that's $90k/day or ~$33M/year to the Surplus Buffer, which funds FXS buybacks and burns. The Surplus Buffer is controlled by governance and represents Frax's autonomous yield engine: every trade on Fraxswap contributes to it.

Fraxswap is integrated with veFXS gauge voting - pools are submitted as gauges and compete for FCA (Frax Credit Asset) emissions every two weeks. When a pool receives gauge weight votes, it earns FCA emissions proportional to its weight share. This creates a bootstrap mechanism: new Fraxswap pools can offer high FCA emission APYs to attract initial LP capital, then compete on genuine trading volume as emissions normalize. The bribe marketplace also applies to Fraxswap gauges - protocols can bribe veFXS holders to redirect emissions toward their preferred Fraxswap pool.

Fraxswap V2 introduced dynamic fee pools (market-set fees based on volatility), native LayerZero bridging for cross-chain LP positions, and epoch-based emission adjustments. It is deployed on Ethereum mainnet, Arbitrum, Optimism, Base, Polygon, Avalanche, Gnosis, and Frax's own L2s (Fraxtal and Mode), making it one of the most widely deployed AMMs in DeFi. The multi-chain deployment means LPs can provide cross-chain liquidity and track positions from a single interface.

Key concepts

Asymmetric bonding curve (Solidly-style)

Fraxswap uses a bonding curve derived from Solidly's design - effectively an offset virtual balance model where each pool maintains two virtual reserves in addition to real reserves. The offset allows the AMM to function for both pegged and volatile assets without the extreme slippage of a pure constant-product (xy=k) AMM. The asymmetric design means the fee structure can favor one side of the liquidity provision, which is useful for bootstrapping new pairs where one asset is more abundant than the other.

Fee structure: 80/20 LP/protocol split

Every swap on Fraxswap generates fees split 80% to LPs and 20% to the Frax Surplus Buffer. The 20% protocol cut is one of Frax's core revenue streams - it accumulates in the Surplus Buffer and is used by the AMO controller to buy back and burn FXS. At $180M daily volume and 0.05% fee, that's approximately $33M/year to the Surplus, making Fraxswap a significant contributor to FXS token value accrual.

veFXS gauge integration

Fraxswap pools are registered as gauges in the veFXS voting system. Every two weeks, veFXS holders vote on gauge weights that determine FCA emission distribution. Pools with more votes receive more FCA emissions, boosting LP yields. This creates a flywheel: gauge votes -> FCA emissions -> better yields -> more TVL -> more trading volume -> more fees -> bigger Surplus. The bribe marketplace means protocols can pay to redirect this flow.

Multi-chain deployment

Fraxswap is deployed on 8+ chains: Ethereum mainnet, Arbitrum, Optimism, Base, Polygon, Avalanche, Gnosis, and Frax's own L2s (Fraxtal and Mode). On each chain, the Fraxswap deployment has its own gauge system and competes with local AMMs, but all are governed by the same veFXS voting system (via cross-chain gauges). LayerZero integration allows LPs to track cross-chain positions and deploy capital efficiently.

Fraxswap V2 improvements

V2 (2024) introduced: (1) Dynamic fee pools where pools can adjust fees based on market conditions rather than fixed at creation; (2) Native LayerZero bridging for cross-chain LP tracking; (3) Epoch-based emission adjustments where FCA emission rates are updated per epoch rather than annually; (4) Improved gauge system with lower minimum emission thresholds, allowing smaller pools to receive FCA distributions. These improvements made Fraxswap more competitive with Velodrome V2 and Uniswap V4 hooks.

Fraxswap vs Curve for FRAX pairs

Fraxswap and Curve both serve FRAX/USDC pairs but with different tradeoffs. Curve's StableSwap invariant offers near-zero slippage for very large stablecoin swaps ($10M+) because it's mathematically optimized for pegged assets. Fraxswap's bonding curve has slightly higher slippage for large swaps but offers FCA emission incentives, lower minimum pool sizes, and integration with the full Frax ecosystem. Large institutional LPs often use both: Curve for deep stablecoin LP, Fraxswap for FCA yield stacking.

Why Fraxswap matters

Fraxswap is Frax's answer to the question of infrastructure independence - rather than relying entirely on Curve for FRAX pair liquidity, Frax built its own AMM with full control over gauge systems, fee structures, and emission distribution. This independence is strategic: Curve is a competitor in the stablecoin space, and having Fraxswap means Frax can route its own stablecoin TVL to its own infrastructure while still maintaining Curve positions for cross-protocol liquidity. The 20% protocol fee on Fraxswap also creates a direct, compounding revenue path from trading activity to FXS buybacks - every swap on Fraxswap contributes to the Surplus Buffer.

As of 2026 Fraxswap manages $620M in TVL across 8 chains, handling $180M in daily volume. The combination of FCA emission incentives and fee yield makes it one of the most attractive stablecoin LP venues, particularly for users who want to stack FXS exposure (earning both FCA and fee income). Fraxswap's integration with Fraxtal and Mode means it is the native AMM on Frax's own L2s - a position that Curve and Velodrome cannot easily replicate on those chains. Understanding Fraxswap is essential for understanding how Frax builds infrastructure moats around its stablecoin ecosystem.

Frequently asked questions

How does Fraxswap's bonding curve differ from Curve's StableSwap?

Curve's StableSwap uses the invariant xy + yx = k, which is optimized for near-peg assets with very low slippage near the $1 anchor. Fraxswap is forked from Solidly/Velodrome and uses an asymmetric bonding curve with offset virtual balances - it effectively functions like a Uniswap V2 AMM with a custom fee structure optimized for FRAX pairs. The key difference is that Fraxswap is designed for both stablecoin pairs and volatile asset pairs, with fee structures that can be tuned per-pool, whereas Curve is specialized for pegged asset pairs only.

What is the fee structure on Fraxswap?

Fraxswap pools charge swap fees that are set at pool creation - typically 0.05%-0.30% for stablecoin pairs and 0.30%-1% for volatile pairs. The fees are split: 80% goes to LPs (liquidity providers) and 20% goes to the Frax Surplus Buffer. This 20% protocol cut is one of Frax's revenue streams - it's much smaller than the LP yield but accumulates meaningfully as TVL grows. The fee structure is similar to Velodrome V2, which introduced the "solid" model where protocol fees fund veFXS bribe markets.

How does veFXS integrate with Fraxswap gauge weights?

Fraxswap pools are submitted as gauges to the veFXS voting system. veFXS holders vote biweekly on how to distribute FCA (Frax Credit Asset) emissions across approved gauges - Fraxswap pools compete with bridged Curve pools and Fraxlend markets for these emissions. Pools with more veFXS voting weight receive more FCA emissions, boosting LP yields. This creates a flywheel: more veFXS votes -> more emissions -> better LP yields -> more TVL -> more FRAX utility -> more FXS lockers.

Why does Frax need its own AMM when Curve already exists?

Curve is excellent for pegged asset swaps with near-zero slippage, but Frax wanted an AMM it could fully control - one where the gauge system, fee structure, and emission distribution are all part of Frax's own governance. Fraxswap also allows Frax to deploy new pool types (volatile assets, long-tail ERC-20s) that Curve's StableSwap isn't optimized for. Finally, having Fraxswap means Frax is not dependent on Curve for its core stablecoin pairs - it can use its own infrastructure while still participating in Curve's ecosystem via bridged gauges.

How does Fraxswap compare to Velodrome on Optimism?

Fraxswap is essentially a Frax-branded fork of Velodrome V2 (which itself was a fork of Solidly). The mechanics are the same: veFXS-based gauge voting, asymmetric bonding curves, 80/20 LP/protocol fee split, and solid-style emission models. The main difference is that Fraxswap is Frax's primary AMM, while Velodrome is Optimism's dominant AMM built by the Velodrome team. Frax has deployed Fraxswap across multiple chains (Ethereum mainnet, Arbitrum, Optimism, Base, Fraxtal, Mode), making it a cross-chain AMM infrastructure for the Frax ecosystem.

Can I provide liquidity to Fraxswap pools and earn yield?

Yes - deposit your asset pair (e.g. FRAX/USDC) into any Fraxswap pool to earn: (1) trading fees from swaps (80% of fee revenue); (2) FCA token emissions proportional to the gauge weight your pool receives; (3) any additional bribe incentives posted by protocols seeking to attract liquidity. Yield varies by pool - FRAX/USDC might earn 4-6% APY from fees + emissions, while a new volatile pair might earn 20%+ in the bootstrap period when FCA emissions are high.

What is the Fraxswap V2 update?

Fraxswap V2 (deployed across chains in 2024) introduced several improvements: dynamic fee pools allowing market-set fees rather than fixed at creation; native LayerZero bridging integration for cross-chain LP positions; and a veFXS gauge system with epoch-based emission adjustments. V2 also introduced the 'solid' model where a portion of swap fees fund the Frax AMO's Surplus Buffer, creating a direct revenue path from Fraxswap activity to FXS buybacks.

Related reading

• Frax Finance Overview - the fractional-algorithmic stablecoin that uses Fraxswap as its primary on-chain market.
• veFXS & Gauge Weights - how FCA emissions flow to Fraxswap pools and the bribe marketplace that redirects them.
• Curve StableSwap Invariant - the mathematical invariant Fraxswap competes with and why Curve excels for large stablecoin swaps.
• Fraxtal & Mode - the L2 chains where Fraxswap is the native AMM and FRAX is the gas token.
• Fraxlend - the lending markets that pair with Fraxswap for leveraged strategies and yield optimization.