Introducing $FLAT, LatteSwap’s very own LP-backed stablecoin!

Dear Baristas,

We hope you are as excited as we are for the upcoming launch of LatteSwap’s very own stablecoin, $FLAT! In this article, we’d like to take the opportunity to officially introduce you to $FLAT and provide all the necessary information you need in order to participate.

Introduction to $FLAT ☕️

$FLAT is an over-collateralized, crypto-asset-backed stablecoin, meaning every $FLAT in circulation is always backed by assets greater than its value. The arrival of $FLAT will let our Baristas take their capital efficiency to the next level by putting up their LP tokens as collateral to borrow $FLAT while still earning farming rewards from their LP positions!

$FLAT is a fork of $MIM by Abracadabra with multiple improvements. Two of the major improvements we’ve made are:

1. Addition of the Close Factor:

To help limit the negative impact of liquidation on our position holders, we’ve added Close Factor to our smart contracts. The Close Factor limits the maximum % of the outstanding debt that can be liquidated in a single transaction.

Without the Close Factor, the entire position could be liquidated, forcing the position owner to take a bad price on the entire collateral even though only a small portion could’ve been enough to bring the position back to above the liquidation threshold.

With this parameter, $FLAT position owners can rest assured that in an unfortunate event of liquidation, only a portion of their collateral will be liquidated.

2. Addition of the Minimum Debt Balance parameter:

To minimize the risk of a bad debt, we’ve added a Minimum Debt Balance — the minimum amount of $FLAT that can be borrowed for a single position.

This parameter ensures the position size is large enough for a liquidator to still be adequately incentivized to liquidate it, net of gas cost. (liquidation bounty is a percentage of the outstanding debt value)

For more details on $FLAT, please visit our Docs here.

Launch Plan 🕐

$FLAT will be launched on 23 Dec 2021. The launch will happen in the following sequence:

1. Borrow $FLAT by putting up stablecoin LP tokens as collateral

Users can put up stablecoin LP tokens as collateral to mint $FLAT. At launch, we will only allow stablecoin LP tokens as collateral to limit the risks. In addition to the LatteSwap’s USDT-BUSD, we will also accept PancakeSwap’s LP tokens as collateral in order to attract more users and increase the adoption of $FLAT.

To limit the risks, we implement Max Debt for each collateral pool. Therefore, at launch, there can only be a maximum of 6 Mn $FLAT in circulation.

For more details on the pool specific parameters, please visit our Docs here.

2. $LATTE rewards for $FLAT-BUSD LP

We’ll allocate 1,500 alloc points (~ $91K USD/ week in rewards!) to the $FLAT-BUSD pool. Baristas will be able to use $FLAT to provide liquidity in the $FLAT-BUSD pool and enjoy $LATTE incentive rewards! In the future, as there is more adoption of $FLAT, the team will look to create more earning opportunities for $FLAT holders.

Once we have determined that all the related modules are running smoothly, we will expand the $FLAT ecosystem by:

3. Expand the list of eligible LP pools

This will help grow $FLAT’s circulating supply as well as attract more users to the LatteSwap platform. Below is a planned list of the collateral pools we will add:

Note: the launch of these collateral pools will happen over time and the list is subject to change.

4. Increase the max $FLAT limit

We will start increasing the debt limit of each collateral pools, allowing for more $FLAT to enter into circulation if there is demand.

5. Integrate OG NFT with $FLAT to develop additional utility for OG NFTs

OG NFT holders are our most loyal community members. As such, we will incorporate the use of OG NFT in $FLAT by increasing the Max LTV for each collateral pool for users who have OG NFT staked at LatteSwap. The specific increase in the Max LTV for each pool is to be determined based on the team’s discretion in regards to potential risks to the overall $FLAT ecosystem and will be announced in the future.

How you can participate🤔

We’ve laid out a high level guide in simple steps below:

How to open a position and borrow $FLAT:

Step 1: Users deposit LP tokens as collateral on LatteSwap

• Users can deposit their PancakeSwap or LatteSwap LP tokens as collateral
• See the list of eligible Collateral Pools here.

Step 2: Users specify the amount of $FLAT they would like to borrow

• The amount of $FLAT a user can borrow will depend on the value of their collateralized asset and the Collateral Pool Max LTV

Step 3: Users receive $FLAT tokens in the user’s wallet based on the specified amount

• Users can use $FLAT to provide liquidity or swap into BUSD through the $FLAT-BUSD pool, which will be set up during Phase 1 of launch

Step 4: Users harvest rewards from their collateralized LP tokens

• LatteSwap stakes the collateralized LP tokens on behalf of the users, allowing them to enjoy rewards in $CAKE or $LATTE depending on the LP tokens they deposited
• Users can harvest the earned rewards at anytime to repay a portion of the loan, lever up their LP position, or just simply cash out.

How to close a $FLAT position:

Step 1: Repay the outstanding debt in your $FLAT position

• The outstanding debt is the amount of $FLAT you minted plus the accrued interest

Step 2: Withdraw your collateral

• Once you repay the debt, you will be able to withdraw the full amount of your collateral

For a more detailed step-by-step guide, please visit our Docs here.

Key Parameters for $FLAT

Below are the key parameters for $FLAT.

1. Borrowing interest: 2.5% APR — 2.5% APR of borrowing interest is charged on the outstanding $FLAT loan and accrues as position debt. 50% of the borrowing interest generated will be used for buyback & burn of $LATTE while the remaining 50% will go towards the Development Fund.
2. Collateral Farming Fees: 7% — 7% of the farming rewards earned from the staked LP tokens to mint $FLAT will be collected. 4% out of the 7% will will be used for Buyback & Burn . The remaining 3% will go to the Development Fund.
3. Max Loan-to-Value (LTV): Varies — Maximum amount of $FLAT that can be minted based on the value of the collateralized LP tokens.
4. Liquidation Penalty: 5% — 5% of the liquidated debt value will be charged as the Liquidation Penalty. 4% out of the 5% will go to our Buyback & Burn program while the remaining 1% will go to the liquidator.
5. Minimum Debt Balance: $500 — This is the minimum debt balance when opening a $FLAT position.
6. Close Factor: 50% — This determines the maximum percentage of the outstanding debt value that can be liquidated in a transaction.

Please note that all of these parameters are subject to change. For more details on the key parameters, please visit our Docs here.

Security 🔐

LatteSwap takes the security of our users’ funds as the highest priority. We have a very strict security process before releasing any features, including an internal intensive code review as well as working closely with leading audit firms to identify and address potential vulnerabilities. As such, we’ve worked with three audit firms to make sure $FLAT is as safe as possible for our users. You can find the audit reports from each auditor through the links below:

1. SOOHO Audit Report
2. BlockSec Audit Report
3. CertiK Audit Report (in progress)

We hope you are as excited as us for the upcoming launch of $FLAT and that $FLAT will provide a significant uplift to our Baristas’ capital efficiency as well as strengthen our deflationary mechanisms for $LATTE.