ELI5: Wing Flash Pools
An introduction to the Wing Flash Pools
Welcome to the Explain Like I’m 5 (ELI5) series of guides. The general idea is to explain things without using jargon. I’ll be providing straightforward guidance to enable you to take your first steps into DeFi, and pretty soon you’ll using Flash Pools on the wing.finance platform.
What Is a Flash Pool?
This is the obvious place to start. What are you getting yourself into, if you enter the world of Flash Pools? In simple terms, Flash Pools allow you to do the following.
- Provide assets (i.e. BTC) into a pool, for other people to borrow. You will receive interest simply for making it available to borrow in the Flash Pool.
- Borrow assets (i.e. ONT) from a pool. You will pay, and also earn, interest whilst ever you have borrowed assets from the Flash Pool.
Where Does the APR Come From?
A good question to ask, whenever you get involved in any DeFi project. On the Wing platform, this is really simple. There are two types of rewards that you generate in the Flash Pool.
- When you supply an asset, you will receive rewards paid out as the same asset as you supply. If you have supplied USDC into the Flash Pool, you will receive USDC as a reward. The USDC you receive is generated from the interest charged to the people who borrow USDC. As such, the APR available is dependent on the ratio of USDC supplied and USDC borrowed.
- When you supply or borrow, you will receive rewards in the form of the WING token. This is a governance token which is currently in the distribution phase. It is rewarded to early users of the platform as an incentive to be an early adopter.
Simple Message
Before I explain the simplest form of supplying and borrowing, there is one clear message. The easiest thing you can do to earn money on the Wing platform is supply assets. For example, you can currently earn ~55% APR just by supplying UST. No fuss. No complexity.
An Example of Supply and Borrow
Why would you choose to supply and how would that work? Let’s look at the following example.
Louise has decided that she wants to hold WBTC for the long term. However, she is worried that she will miss out on many exciting opportunities. As such, she decides to use the Wing Ethereum Flash Pool.
First, she supplies her WBTC into the pool. Simply by supplying the asset, she earns ~2.3% APR in WBTC and ~2.3% APR in WING.
She then decides to use the WBTC as collateral, allowing her to borrow assets from the Flash Pool. She decides to borrow USDT, as she knows of a great opportunity that she otherwise wouldn’t have the liquid cash to take part in.
She borrows USDT from the Flash Pool, paying ~6.5% APR in USDT but earning ~5.5% APR in WING. The resulting interest is as low as ~1% APR.
This is a simple example to show how you can hold an asset such as BTC for the long term, whilst still keeping liquidity in your personal funds to explore other opportunities. At the same time, you achieve a net positive return on your position.
What isn’t covered here is the process of connecting your wallet and the actual use of the Flash Pool. You will find step-by-step guides for that process here.
Summary
This is a simple guide as to why you would use a Flash Pool. Next time, we will consider some more complicated opportunities. Hopefully, you have found this a useful starting point to your Wing DeFi journey.
