Flamingo Finance has announced that liquidity provider tokens can now be used as collateral within the Lend module of Neo’s premier DeFi platform. The Flamingo team unveiled the update during their first Community Lagoon hosted as an X Space event on Aug. 26. The inaugural LP token approved for collateralization is FLP‑FUSD‑bNEO. The Flamingo team stated:

This enhancement allows liquidity providers to unlock the value of their assets added as liquidity without sacrificing their yield-generating positions, creating new opportunities for strategic portfolio management.

By extending collateral support to LP tokens, Flamingo enables liquidity providers to borrow FUSD using assets already deployed in yield-generating positions. The move is aimed at enhancing users’ capital efficiency, offer flexibility for leveraging liquidity in other strategies, such as trading or deploying capital elsewhere, and foster ecosystem synergy by bridging lending, trading, and staking functions.

Benefits for Flamingo users include:

  • Maximized capital efficiency: Borrow FUSD while continuing to earn rewards from liquidity positions.
  • Greater flexibility: Leverage liquidity without unstaking.
  • Ecosystem synergy: Tighter integration across lending, trading, and staking tools.

FUSD and how it works with Flamingo Lend

FUSD is Flamingo’s over‑collateralized stablecoin, initially launched in Jan. 2023. It supports collateral including FLOCKS, bNEO, fWBTC, FLM, fWETH, and GAS. The model mirrors MakerDAO’s DAI, where digital assets back the stablecoin to maintain its peg to US $1. When a user mints FUSD using collateral, there are different interest rates depending on the underlying asset. Interest rates on collateral vary:

  • FLM and FLUND: 1 %
  • bNEO and FLP‑FUSD‑bNEO: 3 %
  • GAS, fWETH, fWBTC: 6 %

To borrow FUSD using LP tokens as collateral, users should:

  • Step 1: Select “Create a New Loan.”
  • Step 2: Choose FUSD as the asset to borrow.
  • Step 3: Pick from available collateral options, now including FLP‑FUSD‑bNEO.

As in traditional finance, borrowers pay an annual fixed interest rate, which they must repay upon reclaiming the collateral.

What to expect next

Flamingo Finance’s addition of LP tokens as collateral in Flamingo Lend is intended to empower liquidity providers to borrow FUSD without sacrificing rewards, reinforcing Flamingo’s commitment to capital efficiency, flexibility, and ecosystem cohesion. This launch complements the broader 2025 roadmap with cross‑chain bridging, governance mechanisms, and automation tools designed to elevate the DeFi experience on Neo N3.

Other items on the roadmap include:

  • Cross‑chain bridge: Launching in late 2025 or early 2026, enabling seamless token swaps across multiple blockchains.
  • Flamingo DAO: A governance platform empowering FLOCKS holders to shape the protocol’s evolution.
  • SmartFLOCKS & Trading Bots: Automated tools for yield optimization and trading strategies.

The full announcement can be found at the link below:
https://medium.com/flamingo-finance/flamingo-finance-announces-lp-tokens-as-collateral-in-flamingo-lend-unlocking-new-defi-a1f7fd30f1e4

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