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 over-collateralized stablecoin backed by FLUND, bNEO, or fWBTC, and can be minted on the Lend module of the Flamingo DeFi platform.
Stablecoins are designed to maintain a consistent price and can enable users to generate yield on a digital asset while potentially alleviating adverse effects from market volatility. FUSD is modeled after MakerDAO’s DAI token, which collateralizes digital assets to ensure its peg is held to US $1.
Along with the launch of the stablecoin and new liquidity pools, Flamingo has also released a step-by-step guide and video overview for minting and redeeming FUSD, found below:
To mint FUSD, a user must open a Vault with FLUND, bNEO, or fWBTC. Users can mint FUSD up to a loan-to-value of 35% of the collateral tokens’ value (i.e., an equivalent of $1,000 of FLUND can mint up to $350 of FUSD). If the market value of the underlying assets increases, the LTV will decrease (and vice versa). At any point, Vault owners can withdraw any underlying collateral provided the LTV doesn’t exceed 35%. Users who want to withdraw the initial underlying collateral will need to repay all the outstanding minted FUSD and the interest it has accrued.
Each “loan” can only be backed by one type of underlying digital asset. If a user wants to mint FUSD using different tokens, then a separate loan will need to be created for each asset. This also means that existing loans backed by different underlying assets can’t be merged together.
Much like a loan in traditional finance, once the user has minted FUSD, they will pay a fixed annual interest rate. When the user exits their initial FUSD position, they’ll have to redeem the value of the initial mint and pay the additional interest to reclaim ownership of the underlying collateral tokens. Interest rates for the underlying collateral are 6% for FLUND and fWBTC, and 4% when using bNEO.
For example, if a user mints 100 FUSD using FLUND tokens as collateral, after a year, the wallet will have 100 FUSD plus an additional 6 FUSD in interest to pay back in order to access the FLUND initially provided for collateral. If the user doesn’t redeem after a year, they are then incurring interest at 6% on 106 FUSD.
The full announcement can be found at the link below: