FIP #2 Flamingo Asset Flow Redesign

Summary

This FIP proposes a redesigned asset flow for the Flamingo platform, to improve overall usability and asset interoperability.

Motivation

Interoperability is one of the main features of the Flamingo project. To enhance the capital efficiency for Flamincome/Flamingo users, a sophisticated process of asset synthesization was established during the initial launch. While the logic behind this design is solid and all n-assets are fully backed by corresponding original assets, the introduction of non-transferrable Collateralized Debt Positions (CDPs) still creates a barrier for the fluid redemption and arbitration to maintain the value pegging. As a result, price disparities of n-assets on Flamingo Swap have been observed.

The team has earlier deployed measures of mitigation, but to resolve this issue permanently, the team is now taking a more innovative and thorough approach to redesign the asset flow in both Flamincome and Flamingo, to optimize the cross-chain asset flow process while maintaining value pegging to the original asset.

Redesign Goal:

1. Restore the Value pegging between cross-chain assets and their underlying original assets.
2. Improve robustness and future-proof-ness of Flamingo’s asset flow design.
3. To continue to develop Flamincome as the ultimate yield booster on Ethereum.

Proposal

Overview

Below is an illustration of the redesigned cross-chain asset flow between Flamincome and Flamingo.

Advantages

1. As a unified cross-chain asset gateway, the newly introduced NEP-5 f-asset will become a multi-compatible foundation to other changes in the future.
2. Maintaining the value pegging between cross-chain assets and underlying original assets ensures fluid redemption and arbitration of value.
3. Existing n-assets can be migrated in a frictionless way without the need for cross-chain operations.
4. Due to the leverage of x-assets in asset pools, Flamincome will intrinsically deliver a higher yield for y-assets compared with other yield generation protocols, thus realizing asset cross-chain with yield optimization.

Changes in Flamincome (not within the scope of this proposal*)

The redesign of Flamincome includes new x-asset and y-asset types. Users can deposit the original assets to either x-asset or y-asset. x-asset holders can use x-asset for cross-chain functionalities but do not earn interest by holding them. y-asset holders will enjoy the interest generated by the entire original asset pool (staked for both y-asset and x-asset).

During the migration period, current n-asset holders will be able to migrate all their n-assets back to underlying original assets at a 1:1 ratio. The migration will first start with WETH and later with USDT and wBTC.

Updates

• Users intending to use cross-chain assets in Flamingo can perform bi-directional conversions between original ERC-20 assets and f-assets in Flamingo Wrapper. x-assets will be generated as intermediate assets but are not visible to common users.
• Users intending to enjoy yield through yield farming can perform bi-directional conversion between original assets and y-assets on Flamincome.
• Users can perform one-directional n-assets to original assets conversion on Flamincome.
• Both x-assets and y-assets can be withdrawn to the underlying original assets with minimum friction.

*The redesign of the Flamincome project is not within the scope of this proposal, and will be governed by the Flamincome DAO. This proposal only covers changes within the Flamingo project. The explanation of the Flamincome redesign is only for the holistic understanding of the entire asset cross-chain process.

Introduction of f-assets (NEP-5)

With the redesigned Flamincome, the Flamingo platform will need to handle cross-chain assets from both Flamincome versions. (pn-assets and px-assets). In the future, Flamingo may also support more cross-chain assets deriving from the same asset collateral. The complexity of the current cross-chain asset structure may create confusion and inefficiency. It is important to improve the scalability and user experience of the Flamingo project, so that the new design will be future-proof to any further change of the cross-chain asset flow. A NEP-5 based f-asset will be introduced, all pn-assets and px-assets along with other cross-chain assets to be introduced in the future can be exchanged to f-assets at a 1:1 ratio in Wrapper.

Once the redesigned Flamingo platform is launched, relevant changes in Wrapper and Swap will also be made to reflect the implementation of the f-asset.

Changes in Wrapper

Besides current wrapping and unwrapping functions, the asset cross-chain functionalities will be further packaged so that users can directly wrap their original assets from other blockchains to NEP-5 based f-assets. Common users will not need to deal with intermediate assets such as x-assets and px-assets.

The redesigned Wrapper will include the following Wrapping/Unwrapping functions:

1. Original-assets <-> f-assets (original assets will be pooled in Flamincome to boost yield for y-assets)
2. NEO <-> nNEO / ONT <-> pONT
3. Asset migration: pn-assets -> f-assets

Changes in Swap

New trading pairs with f-assets will be set up and users will need to migrate their liquidity from relevant pools. The underlying mechanism of Swap will not be changed.

Changes in Vault

FLM distribution schedule will be gradually adjusted to incentivize users to provide liquidity to f-asset trading pairs in Swap. Entrances to legacy Vault versions (V1, Mint Rush V1, MInt Rush V2) will still be available for users to manage assets.

Changes in Perp

The team will continue to improve and test the protocol before the official launch. f-assets will be used as margins once the redesign is completed.

Changes in overall UI

Optimizations and improvements will be made throughout the user interface.

Migration

Phase 1 — Flamingo redesign launch and WETH asset migration: Tentatively 02/25/2021

Phase 2 — wBTC and USDT asset migration: Tentatively 03/08/2021

During the migration period, current n-asset holders will be able to migrate all their n-assets back to underlying original assets at a 1:1 ratio. The migration will begin with WETH and later with USDT and wBTC. There is no need to migrate nNEO and pONT assets for this redesign.

Asset migration

-Legacy asset holders

1. On Flamincome

• n-assets and unstaked f-assets (ERC-20)* -> 1:1 to original ERC-20 assets

2. On Flamingo:

• pn-assets -> f-assets (NEP-5)* <-> Swap
• f-assets (NEP-5)* <-> ERC-20 original assets

-New users

• ERC-20 original assets <-> f-assets (NEP-5)* <-> Swap

*f-assets (ERC-20) refers to the legacy asset type on Flamincome.
*f-assets (NEP-5) refers to the newly introduced asset type on Flamingo.

Voting

• Vote at: https://flamingo.finance/vote
• Vote starts: UTC 08:00 02/01/2021
• Vote ends: UTC 08:00 02/08/2021
• For more information on voting, please refer to the “Vote for Governance Proposals” section within the Flamingo FAQ.