KoinlyticsFrax split the traditional LST into two tokens. frxETH is 1:1 with ETH but earns NO staking yield. sfrxETH earns all staking yield but locks liquidity. The trick: you can convert between them freely inside Frax's system.
Why split
Traditional LST (stETH): every holder earns yield. But every LP position or DeFi collateral is also "earning yield" in a way that competes for the underlying pool's incentives. Frax's split cleanly separates the two.
- frxETH holders: no yield, but frxETH is deeply liquid (Curve frxETH/ETH pool) and used in LP + collateral positions.
- sfrxETH holders: all yield concentrated. Fewer holders, higher per-holder APR (~4-4.5% vs ~3% for stETH).
How the yield concentrates
Total ETH staked earns baseline validator + MEV yield. That yield is distributed only to sfrxETH holders, not frxETH. If half of Frax users hold frxETH (for LP), the other half's sfrxETH earns 2x the base rate.
Where frxETH fits
- LPing frxETH/ETH on Curve while capturing swap fees + CRV emissions.
- Collateral on lending markets (Aave, Fraxlend).
- Anyone who wants ETH exposure with maximum liquidity.
Where sfrxETH fits
- Passive yield-seekers who don't LP.
- Concentrated yield strategies.
- Institutional pool where LP capital comes from elsewhere.
The trade-off
You have to actively pick your role: LPer or holder. Traditional LST users don't. Frax's design assumes users know which side of the market they want to be on. Sophistication requirement.