Frax Ether

Rejected venues wait the longest for re-review; a rejection has to earn another look before the scheduled date.

Frax Ether is Frax Finance’s liquid ETH staking token: holders stake ETH through Frax and the staked version accrues the validator yield. At $70M TVL at the 2026-08-14 survey it sits below our $100M materiality line, so a sleeve-sized client position would be a meaningful share of the token’s liquidity. Rejected on size; size alone decides it, whatever the protocol’s quality. If TVL crosses the line and holds, the file reopens and joins the Ethereum LST comparison, where Lido and Rocket Pool are the selected providers.

Kill criteria: the events that revoke this verdict
• TVL sustained above $100M for 30 days

The research file

Materiality mechanism, applied

The threshold is a capacity constraint, not a quality judgment. A $2 million household with a 5-10% crypto sleeve and a 10-40% venue weight implies roughly $10,000 to $80,000 directed here; across 100 similar clients one practice can point $1 million to $8 million at a single venue on the same research. Below $100 million of protocol TVL, that book becomes the exit crush, and TVL itself is a generous capacity proxy rather than a promise of executable withdrawal: utilization, queues, unbonding, bridge depth and token liquidity can all leave less actually withdrawable than the headline figure implies. Small size does not itself indicate weak governance or team quality; the class rule stops short of that judgment because inadequate capacity for this distribution channel cannot be cured by otherwise-strong controls.

Mechanism

ETH mints frxETH, while depositing frxETH into the ERC-4626 sfrxETH vault receives the validator yield. Frax distributes 90% of staking income to sfrxETH, retains 8% as protocol fee and directs 2% to an insurance fund. V2 also lends ETH to validator pools and can place idle ETH into a Curve AMO.

Control and operating evidence

Frax governance and operators control validator credentials, the Beacon Oracle, protocol fee, retained liquidity and AMO operation. Validator addresses and performance are published, and Frax documents the contracts. The mixed lending and AMO design would need current audit and authority review above the gate.

Exit consequences

Unstaking sfrxETH returns frxETH; direct frxETH redemption produces a transferable queue NFT and waits for Ethereum entry and exit queues plus a governance-set delta. Payment is first-come, first-served and can be partial if ETH is short. Secondary swaps introduce peg and pool-liquidity risk.

Why the class rule decides

DefiLlama recorded about $95.9M, still below the materiality floor despite nearing it. Size therefore decides before comparative LST selection and V2 lender/AMO review. Sustained scale above $100M reopens validator distribution, operator control, insurance, AMO exposure and stressed redemption.

Sources

The claims above trace to these. Where a number could not be independently verified, the thesis says so.

• Frax Docs — frxETH and sfrxETH overview · primary · accessed 2026-08-14
  Supports: frxETH minting, sfrxETH yield, fee split, insurance fund
• Frax Docs — redemption queue · primary · accessed 2026-08-14
  Supports: redemption NFT, entry and exit queue, governance delta, one-to-one exit
• Frax Docs — V2 validator and AMO controls · primary · accessed 2026-08-14
  Supports: Beacon Oracle, validator lending, Curve AMO, ETH shortage priority
• DefiLlama — Frax Ether survey record · secondary · accessed 2026-08-14
  Supports: survey TVL, chain distribution, liquid-staking category

Inherited controls

The verdict above grades the protocol layer. Every position also inherits the asset it holds and the chain it settles on. The least safe layer sets the position’s grade, and the position table names which one that is.