What happened

Frax Share (CRYPTO: FSX) is seeing explosive gains in Saturday's trading. The cryptocurrency was up roughly 61.2% over the previous 24-hour period as of 1:20 p.m. ET today.

Terraform Labs founder Do Kwan published messages on Twitter today announcing the launch of 4pool -- an initiative designed to expand the liquidity of stablecoins by consolidating usage through a series of tokens including Frax Finance's FRAX (CRYPTO: FRAX). Meanwhile, Terra's (LUNC 1.13%) Luna token was up roughly 7.2% over the last day of trading.  

A piggybank launching like a rocket.

Image source: Getty Images.

So what

Stablecoins are typically designed to remain as close to $1 U.S. dollar as possible. The 4pool liquidity pool will consist of the TerraUSD, USDC Coin, FRAX, and Tether stablecoins. Check out Kwan's tweet on the 4pool initiative below:

"CVX" in the tweet refers to Convex Finance's (CVX 1.77%) token. The Curve (CRV -0.52%) software operates an automated market for stablecoins, and owning a majority of CVX tokens would allow the holders to determine how Convex distributes the CRV tokens that underpin Curve.

Now what

To put the potential significance of 4pool for the FXS token in perspective, check out this section from Frax Finance's whitepaper outlining the relationship between Frax Shares and FRAX:

FRAX stablecoins can be minted by placing the appropriate amount of its constituent parts into the system. At genesis, FRAX is 100% collateralized, meaning that minting FRAX only requires placing collateral into the minting contract. During the fractional phase, minting FRAX requires placing the appropriate ratio of collateral and burning the ratio of Frax Shares (FXS).

With the FRAX stablecoin seemingly on track to see a significant increase in adoption, that could translate into a significant increase in the number of Frax Shares that are burned. Burning tokens removes them from the outstanding coin count, which in turn often translates into prices increasing. 

Frax Share now has a market capitalization of roughly $575.7 million and ranks as the 132nd-largest cryptocurrency by market capitalization.