Flamingo Finance DeFi Releases USD Stablecoin: FUSD
Flamingo Family,
The wait is finally over. We’re thrilled to announce the release of Flamingo’s very own USD stablecoin: FUSD.
This is an overview of the FUSD protocol. For a step-by-step guide on how to take out FUSD loans, repay them, and add and remove collateral, head over to the FUSD User Guide on Flamingo Learn.
FUSD is a decentralized, over-collateralized USD stablecoin developed by Flamingo on the Neo N3 blockchain.
A stablecoin is a digital asset built on the blockchain that is designed to maintain a price peg at a designated price, most often $1.00.
Collateralization is the use of a valuable asset as collateral to secure a loan.
A collateralized stablecoin is a stablecoin that is entirely or almost entirely backed by collateral held in a reserve.
Because the reserve cryptocurrency may also be prone to high volatility, such stablecoins are overcollateralized — that is, the value of cryptocurrency held in reserves exceeds the value of the stablecoins issued.
If a borrower defaults on a stablecoin loan, the lender may seize and sell the asset to offset their loss. For lenders, the collateralization of assets provides a level of reassurance against default risk.
FUSD
FUSD’s value is collateralized by mainstream Neo N3 assets tradable on Flamingo — FLUND, bNEO, and fWBTC. FUSD can be minted by anyone whose connected wallet holds at least one of these tokens.
You can also trade FUSD just as you would trade any other asset on Flamingo — using Convert or Advanced Trade.
The Vault
To mint FUSD, users must open a Vault. A Vault is associated with a specific collateral asset, such as FLUND. Users can then deposit the collateral asset and mint FUSD as a loan against the collateral. At the time of writing, users can open up to three Vaults — one Vault for each collateral token.
Vault owners can make partial or full repayments of their FUSD loan(s) at any time.
Interest Rates
The FUSD protocol charges interest rates depending on the collateral token:
- bNEO: 4%*
- FLUND: 6%*
- fWBTC: 6%*
* Simple interest (APR): based on the principal amount of a loan only and does not include compounding interest. FUSD interest rates compound on every mint/repay/maintenance operation, so the compounded interest (APY) may be slightly higher.
Loan-to-Value
To ensure the solvency of the protocol (the ability to pay one’s debts), FUSD can be minted at 35% of the value of the collateral asset. For example, someone who deposits $1,000 of fWBTC can mint a maximum of 350 FUSD ($350 USD). This ratio ($350 / $1,000 = 35%) is called the Loan-to-Value.
Vault owners can withdraw collateral at any time, as long as it does not make the Loan-to-Value less than 35%. In order to withdraw all collateral, users must repay all outstanding FUSD he or she was loaned.
If the Loan-to-Value of a Vault becomes greater than 40% due to market movements, the Vault becomes eligible for margin maintenance. In other words, anyone can maintain a margin on any Vault by transferring FUSD if the Loan-to-Value of that vault becomes greater than 40%. For example if Jack opens a Vault, Jill can maintain Jack’s margin if Jack’s Vault goes above 40% Loan-to-Value.
Up to 50% of outstanding FUSD on loan of a Vault can be repaid by a maintainer. In our above example, if we have 350 FUSD backed by $1,000 fWBTC and the fWBTC drops by half, we now have 350 FUSD backed by $500 fWBTC, making a Loan-to-Value of 70%. A maintainer can send 175 FUSD to receive $175 of fWBTC and a 5% bonus, or a total of $183.75 of fWBTC for their efforts.
Margin maintenance on Vaults incur an 8% penalty. That is, 92% of the FUSD sent by the maintainer will be burned and deducted from the Vault balance, as if it were a simple repayment. The remaining 8% will be kept by the platform. In the previous example, 161 of the 175 FUSD sent by the maintainer will be deducted from the Vault’s outstanding balance and 14 will be kept by the FUSD platform.
Vault owners can always keep track of a Vault’s Loan-to-Value percentage on the platform. We will also configure a discord bot on the Flamingo discord to help vault owners follow along there.
Disclaimer: The discord bot is just an informational source and can, at any given time, be offline or not be able, for some reason, to warn you. It can also provide wrong information. It is always your responsibility to check on your loans.
Want to learn more?
Chek out the User Guides here: https://flamingo-1.gitbook.io/user-guide/v/master/user-guides/fusd-loans
Or view the video tutorial for Flamingo Lend:
Flamingo Finance is an easy-to-use DeFi platform built on Neo N3. Designed with Smart Functions for everyone, from beginners to advanced cryptocurrency users. https://flamingo.finance/
To stay in touch with us and keep up to date on all things Flamingo, please join us on Discord and connect with us on Twitter.
