Frax Ether is the liquid staking arm of the Frax Finance ecosystem, offering two tokens: frxETH (a non-yield bearing ETH derivative used for DeFi liquidity) and sfrxETH (staked frxETH that earns all validator rewards). This dual-token architecture enables Frax to offer the highest ETH staking yield among major protocols by concentrating all rewards into a single token.
Two-Token Model
When users deposit ETH, they receive frxETH 1:1. frxETH does not rebase or appreciate — it stays pegged to 1 ETH. To earn staking yield, users stake frxETH to receive sfrxETH. All validator rewards from the entire Frax Ether pool flow exclusively to sfrxETH holders.
The critical insight: not all frxETH is staked. A portion sits in liquidity pools (particularly the Curve frxETH/ETH pool) to provide liquidity, earning Curve/Convex rewards instead of staking yield. Because LP frxETH earns no staking yield, the full staking yield is concentrated in sfrxETH. This makes sfrxETH's APY consistently 10–20% higher than protocols where every token earns staking yield.
Curve Integration
Frax Ether maintains one of the most liquid frxETH/ETH pools on Curve, subsidized by FXS and CVX emissions. This deep liquidity allows large ETH→frxETH conversions with minimal slippage, while the pool earns separate Curve trading fees. LP providers in the Curve pool earn Curve fees + FXS rewards, while sfrxETH earns the highest staking yield.
Validator Operations
Frax Ether uses a mix of in-house validators and professional operators. The team has emphasized validator client diversity — using a mix of Lighthouse, Teku, and Nimbus clients to reduce correlated failure risk.
Integration with Fraxlend
sfrxETH serves as collateral in Fraxlend (Frax's lending protocol), allowing users to borrow FRAX against their staked ETH without unstaking. The sfrxETH yield partially offsets the Fraxlend borrow rate, making ETH-backed FRAX loans particularly capital efficient.