Frakencoin (ZCHF) is a crypto-backed, Swiss Franc-denominated decentralized stablecoin.
The cryptocurrency came into the limelight after Ethereum co-founder Vitalik Buterin swapped approximately $198k worth of USDC for ZCHF.
Table of Contents
What is ZCHF?
ZCHF or Frankencoin is a crypto-backed stablecoin that is pegged to the Swiss Franc (CHF). It is available on the Ethereum mainnet and a few major Layer-2s as an ERC-20 coin.
It is a decentralized stablecoin, unlike its peers, USDC, USDT, XAUt, and EURt.
Further, it relies on an auction-based liquidation mechanism to discover its actual price without relying on blockchain oracles. As a result, it is somewhat protected from external attacks. However, this auction-based liquidation mechanism sometimes delays real price discovery, especially when collateral is highly volatile.
The stablecoin has another governance token associated with it called the Frankencoin Pool Shares (FPS).
Collateralization
Frankencoin is overcollateralized because of the volatility of its collateral. The stalecoin is backed by Bitcoin, Ethereum, and other major cryptocurrencies.
Security
Frankencoin, as a project, has been audited by four Blockchain audit companies, all of whose reports are listed on the official Frankencoin website. These companies are:
- Code4rena
- Decurity
- Coinsecurity
- Blockbite
Legal Aspects
Frankenstein is mostly used within the European Union, and, under Swiss law, the stable point is a crypto token, while, under European Union law, MiCAR, the stable coin, is a crypto asset.
Why did Vitalik buy Frankencoin (ZCHF)?
Though Vitalik has not publicly stated the reason for his purchase of Frankencoin, it can be said that he wants to pivot the Ethereum ecosystem away from centralized stablecoins that cover as much as 95% of the current stablecoin market cap.
He might have chosen Frankencoin because:
- Unlike other stablecoins, Frankencoin is decentralized, meaning it doesn’t have a single point of control.
- Further, the stablecoin is somewhat shielded from attackers because of its novel price discovery mechanism.
How to Get Frankencoin (ZCHF)?
You can easily swap for Frankencoin (ZCHF) at Uniswap, and also on Frankencoin’s official website. Below is a snapshot from Uniswap’s page for Frankencoin.
Frequently Asked Questions
Is ZCHF an algorithmic stablecoin?
No, Frankencoin is not an algorithmic stablecoin; rather, it is a fully collateralized stablecoin.
Is Frankencoin legal in the EU?
Yes, under Swiss law, it is a payment token, and under MiCAR in Europe, it is classified as a crypto token. It is exempt from additional classification under Titles 2, 3, and 4 of MiCAR due to its decentralized nature.
Is Frankencoin safe?
It appears to be safe, with audits done by three different organizations, which can be viewed on the official site.
