The community behind the decentralized financial stablecoin protocol Frax Finance has agreed to fully guarantee its native stablecoin Frax (FRAX), ending the network’s previous reliance on algorithmic support.

The governance proposal for FIP-188, which was first published on February 15 and would reform the FRAX collateralization model, has now reached a quorum and, according to a snapshot taken on February 23, 98% of voters. They voted in favor of the plan.

As stated in the proposal, “the time has come for Frax to phase out the algorithmic basis of the protocol.”

The first protocol was mentioned as having a “variable collateral ratio” that changed depending on how much demand there was for the stablecoin in the market. The market would determine the amount of collateral that must be posted for one FRAX to be equivalent to one US dollar.

Combining the two models led to the stablecoin being 80 percent backed by crypto asset collateral while also being partially stabilized by algorithms. This was accomplished by minting and burning their governance token, FXS, which has experienced a 12% price increase over the course of the previous twelve hours.

With a market value of just over $1 billion, Frax is the sixth most valuable stablecoin in the business.

As soon as the proposal goes live, the protocol will stop minting new FXS in an effort to reduce the number of available tokens and increase the collateral ratio.

To clarify, the implementation of this proposal does not need to mint any FXS to meet the 100% CR requirement.

It intends to maintain the income generated through the protocol to finance the higher collateral ratio, which will imply suspending the repurchase of FXS.

In addition, it will allow the purchase of up to USD 3 million in Frax Ether (frxETH) each month to increase the collateral ratio. frxETH works in a similar way to a stablecoin, except that it is pegged to Ether (ETH) instead. In the context of the Frax ecosystem, it facilitates the transfer of Ether liquidity.

DeFiLlama recently published a report on the expansion of frxETH over the course of the previous month.

The decision came amid what appears to be a further assault on stablecoins following the disastrous collapse of Terra and Luna that occurred a year ago.

On February 22, Canadian securities administrators published a comprehensive list of additional conditions that cryptocurrency companies and stablecoin issuers must meet if they want to continue to operate legally within Canada’s borders.

Stablecoin trading was subject to a strict set of criteria, and the list in question expressly prohibited non-fiat-backed or algorithmic stablecoins.