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The anti-collision algorithm is an important part of the Radio-Frequency Identification (RFID) system. Of the various possible algorithms, the Framed Aloha based (FA) algorithms have been most widely used due to their simplicity and robustness. Previous studies have focused mainly on the tag population estimation, choosing the frame size based on the classical results of Random Access (RA) systems. We show that a new theory is needed for algorithm design for RFID systems, because RFID and RA systems are fundamentally different. The Philips RFID system is studied in this paper. We model the reading process as a Markov Chain and derive the optimal reading strategy by first-passage-time analysis. The optimal frame sizes are derived analytically and numerically.