Money Claims - MoneyMoves EP #1

This is the first in a multi-part series produced by the Flywheel team that takes a deeper look into the question “What is Money” and how does it function. The insights gained here will provide more context and education around why we think Frax is the best form of crypto money. In this inaugural episode, Producer Sam McCulloch explores the most important attribute of money… its ability to maintain value at par on demand. We take it for granted that every type of money we have is accepted at face value. What would it be like if your cash was worth less than the money in your bank account? It would cause chaos. Understanding the importance of holding the peg is vital to the workings of Frax and its role in crypto. A Stablecoins is only as good as its redemption ability in the most volatile of markets. It doesn’t matter how well you held the peg previously, such was the fate of UST, which stayed relatively close to the peg for many months, only to completely fall apart and destruct within a few hours. While UST was considered as “money,” a proper analysis would have shed serious concerns about its claims to value. Its redemption ability for $1 was fully reliant on the price of LUNA maintaining. When LUNA sold off, it created a negative reflexive loop where UST was able to be redeemed for less and less, which only led to it being sold off even faster. In the end the UST/LUNA blow up should have been expected, its money claims were not guaranteed and there was no group providing a “put” to halt downside price declines. The US dollar on the other hand has the entire US government and country supporting its backing. Every dollar has the full faith and guarantee of the government. If the dollar peg were ever to fail, the government would and has stepped in to prevent serious damage. This gives consumers and investors the confidence to use, transact, and hold billions of US dollars in reserves, bank accounts, and wallets on a daily basis. For FRAX to be successful long term, it must also hold the peg no matter the conditions. If any significant deviation were to occur, people would lose faith in the protocol and dump their holdings to flee for safer assets. Since its launch, the FRAX/USD peg has only tightened. New developments like the Curve AMO make it mathematically impossible for the peg to break. Anyone using FRAX can know with fully transparency where every single FRAX in circulation is being held or deposited. This openness is a core tenet of the protocol. For FRAX to grow long term, the peg must be held at all costs, there is no other option. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit flywheeloutput.com