Flamingo Finance has launched Neo N3’s first native stablecoin, FUSD, and four new liquidity pools: FLM/FUSD, fWBTC/FUSD, bNEO/FUSD and fUSDT/FUSD. FUSD is an overcollateralised stablecoin backed by FLUND, bNEO or fWBTC that can be minted on the Lend module of the Flamingo DeFi platform.
Stablecoins are designed to maintain a constant price and can allow users to earn income from a digital asset while mitigating the negative effects of market volatility. FUSD is modeled after MakerDAO’s DAI token, which collateralises digital assets to ensure its peg to $1 is maintained.
Along with the launch of the stablecoin and new liquidity pools, Flamingo has also released a step-by-step guide and video overview on how to mint and redeem FUSD, which can be found below:
Coinage of FUSD
To mint FUSD, a user must open a vault using FLUND, bNEO, or fWBTC. Users can mint FUSD up to a loan-to-value of 35% of the value of the collateral tokens (ie an equivalent of $1,000 FLUND can mint up to $350 FUSD). If the market value of the underlying assets increases, the LTV decreases (and vice versa). Vault owners can withdraw all underlying collateral at any time provided the LTV does not exceed 35%. Users wishing to withdraw the initial underlying collateral must repay any outstanding FUSD minted and the interest accrued thereon.
Each “loan” can only be secured by one type of underlying digital asset. If a user wants to mint FUSD with different tokens, a separate loan needs to be created for each asset. This also means that existing loans secured by different underlying assets cannot be merged.
Similar to a loan in traditional finance, once the user has minted FUSD, the user pays a fixed annual interest rate. If the user exits their initial FUSD position, they must redeem the value of the initial mint and pay the additional interest to reclaim ownership of the underlying collateral token. Interest rates on the underlying collateral are 6% for FLUND and fWBTC and 4% when using bNEO.
For example, if a user mints FUSD 100 using FLUND tokens as collateral, after one year the wallet will have to pay back FUSD 100 plus an additional FUSD 6 in interest to access the FLUND initially provided as collateral. If the user does not redeem the credit after one year, interest will accrue at 6% on FUSD 106.
The full announcement can be found at the following link:
https://medium.com/flamingo-finance/flamingo-finance-defi-releases-usd-stablecoin-fusd-49d61657a2c4
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