Frax Finance is a multifunctional platform that uses a reservation mechanism combined with a specialized algorithm to maintain a balance between supply and demand in the market. When the price of FRAX rises above USD1, the Frax algorithm will issue new coins and exchange them automatically with USDC to keep the price stable. Conversely, if the FRAX price drops below USD1, the algorithm will use FXS to buy FRAX and restore its value to USD1. The way Frax Finance works relies entirely on automated algorithms with no centralized entity control. The process is governed by community members through a governance mechanism.