NEO is one of the popular blockchain networks that has come out of China. It is well-known for its community-driven approach. NEO is an open blockchain that is aimed at a smarter economy.
Are you wondering why I am talking about Neo in the beginning? It’s because Neo has come out with Flamingo Finance, a DeFi protocol. It was launched on September 20, 2020. We will tell you all about Flamingo Finance in this article. Let’s dive straight into it.
What is Flamingo Finance?
Neo blockchain-powered Flamingo is a full-featured DeFi protocol, and it’s also cross-compatible. There are five key components of Flamingo, and these are:
(ii) Swap Exchange
(iii) Flamingo Vault
(iv) Perp Exchange
Flamingo Finance has been incubated by the executive arm of the Neo Foundation, Neo Global Development (NGD). The Neo team believes that Flamingo Finance will accelerate the adoption of DeFi. They say that Flamingo is like a missing piece that is required to increase the DeFi adoption.
Each of these components of Flamingo Finance will play an important role in the growth of DeFi space. It will fulfill the need for a cross-chain asset gateway, an on-chain liquidity provider that is based on an automatic market maker mechanism, and a collateralized stablecoin that is based on an algorithm.
A governance token is also in plans, and it will be known as the FLM NEP-5 governance token. The governance token of Flamingo Finance will be based on Neo. The distribution of the FLM NEP-5 governance tokens will be done through community-based participation.
The Role of Flamingo Finance’s Components
Wrapper is an asset gateway based on multiple blockchain networks and has cross-chain capabilities. It is based on Cosmos-SDK, Ethereum, Ontology Network, and Bitcoin.
There’s one interesting feature of the wrapper – What’s that? It allows users to convert any digital assets into NEP-5 tokens. Do you want to wrap ETH to NEth? Check! How about wrapping ONT to nOnt? Check! How about wrapping NEO to nNeo? Check! This all is possible because of the wrapper component of Flamingo Finance.
Are you wondering – What to do when you want your original tokens back? Well, you can return your wrapped NEP-5 tokens and redeem your tokens. Wrapper was the first component of Flamingo Finance that was made available for public use. It has been available to users since the launch of Flamingo Finance – September 23.
We know that the automatic market maker mechanism is pretty popular among the DeFi protocols. The swap exchange component of Flamingo Finance also leverages the automated market maker mechanism like many other DeFi protocols. Swap exchange will act as an on-chain liquidity pool.
The supported tokens of Swap exchange are the native tokens of Flamingo exchange, known as FLM tokens, along with wrapped assets and other NEP-5 tokens. It is quite similar to Uniswap when it comes to its use of Constant Product Market Maker mode (CPMM). So, what role does CPMM play? Well, it ensures that there is constant liquidity on the platform.
There are two NEP-5 tokens in the Flamingo liquidity process. The process is quite simple – A liquidity provider deposits assets to the liquidity pool, and in return, he will receive an LP token proportionate to the assets deposited by him.
You can view the LP tokens as an assurance that they will have a right to repurchase their assets. Additionally, the liquidity providers also earn passive income from Flamingo Finance through the trading commissions. The trading commission is currently set at 0.3%, and the traders are allowed to swap any pairs.
The Neo team has already announced that the total trading commissions that Flamingo Finance will earn, would be distributed among the liquidity providers.
The perpetual exchange component of Flamingo Finance will play an important role. It is an unlimited liquidity provider that leverages the AMM mechanism. It enables every trader to use the constant product market maker model to trade perpetual contracts.
An interesting thing about it is that the traders can go 10x long or short here. Here, FUSD will be used as a fixed margin by the traders. They will again receive FLM in return. Flamingo oracle will feed the pricing information to the perpetual exchange, and it will launch on November 25.
The Flamingo Vault component of the Flamingo Finance will be a universal asset manager. It has combined two interesting features: Staking/Mining with the issuance of secured stablecoins. The vault enables users to stake wrapped assets. As soon as the users stake their wrapped assets, the Mint Rush process will begin.
So, what is Mint Rush? Let’s take a look. The Neo team has designed Mint Rush with an aim for it to act as an incentive to increase community participation in the Flamingo ecosystem. A total of 50,000,000 FLM tokens have been released under this phase, and users are allowed to stake their cross-chain assets to earn FLM tokens.
The liquidity providers holding whitelisted LP tokens can also mint FUSD tokens, a stablecoin. Every FUSD token is pegged to the US dollar.
DAO will enable FLM holders to vote on various important issues – Swap fees, the distribution mechanism of FLM tokens, list of available assets, acceptable assets to collateralize for receiving stablecoins, among other things.
Neo’s long-term plan is that the entire Flamingo project will go entirely to its community, and DAO is an integral part of this plan. This is planned under the Flamingo Configuration Change Proposal and Flamingo Improvement Proposal. As per the roadmap, the scheduled date for rolling out DAO is December 23, 2020.
How Will Flamingo Finance Work?
Source: Flamingo Finance
There are multiple clusters within the Flamingo DeFi protocol. All these clusters have multiple modules integrated within it for providing a stable and comprehensive DeFi infrastructure to its users. The users can play different roles in the Flamingo Finance ecosystem – Liquidity Providers, stakers, and traders.
NEO 3.0 vs ETH 2.0
There is one interesting competition shaping up in the blockchain world. There have been rounds of discussion about which of the blockchain networks is best. One of the prominent competitions is between Neo blockchain and Ethereum blockchain.
With the launch of both the Neo 3.0 and Eth 2.0 on the horizon, the discussion is taking an intense shape. So, which of these upcoming advanced blockchain networks will have an upper hand over the other? We will find it out here.
Ethereum 2.0 will be a better version of Ethereum 1.0. It will help the Ethereum ecosystem to scale new heights and will consume a lot less energy. Ethereum 2.0 will improve the scalability and security problems of the Ethereum blockchain.
On the other hand, NEO blockchain has a reputation for being comparatively better than Ethereum in terms of scalability. So, would Neo 3.0 help maintain the same edge over Ethereum 2.0? Yes! Neo 3.0 will make Neo blockchain even more scalable. It will also add many new enterprise functionalities that will suit the larger projects. With Neo 3.0, we expect Neo blockchain to become even more user friendly.
Neo has many advantages over Ethereum and Neo 3.0 is well-positioned to keep Neo blockchain ahead in the race.
The Future Ahead
Neo believes that Flamingo will be a stepping stone for Neo’s DeFi ecosystem. It will accelerate its growth and adoption. The Flamingo project is still in infancy now, and many features are still to be rolled out. Its design is still being optimized.
In time, there will be an increase in the number of users in the Flamingo community. Regardless of it still being in an infancy stage, we believe in the potential of DeFi and interesting DeFi projects such as Flamingo Finance.
With an increase in participation from the Flamingo community, the Flamingo ecosystem will develop further. It will be interesting to see how Flamingo Finance will make a name for itself in the world of DeFi in the next few years.