The swap and margin trading platform for Flare Finance is FlareX, which utilizes automated market makers (AMM) through the power of Flare Network smart contracts to provide liquidity for many different asset pairings. Users can trade between and leverage different assets in a trustless and decentralized manner to cut out the middleman common on centralized exchanges. Users on the Flare Finance ecosystem can become liquidity providers by allowing their assets to be used in different liquidity pools. In return, these users would receive fees and enhanced positions in the FlareFarm product to earn the fair distribution of YieldFin (YFIN). It is important to note that any F-Assets or Spark (FLR) utilized in the liquidity pools will still be able to receive their FLR rewards from the F-Asset reward pools and Flare Time Series Oracle (FTSO) inflation rewards.
All asset trading pairs on FlareX are governed by YFIN and YieldFlare (YFLR) holders, which will cut down on scamming attempts seen on other decentralized exchange (DEX) platforms like Uniswap and PancakeSwap. FlareX will have trading pairs for all F-Assets integrated at launch, FLR, YieldUSD (YUSD), YFLR, and YFIN. After Flare Finance has launched, users of the ecosystem will be able to propose the addition of new asset listings on the platform and any assets approved for the cross-chain bridge, FlareWrap, will automatically be listed as well.
The fee for swapping through FlareX at launch will be 0.30% on each trade performed with 90% of those fees going to the liquidity providers. The fee is adjustable via a governance proposal and delivers the other 10% to the APY Cloud and Flare Finance team and investors. All liquidity pools on FlareX will utilize a 50/50 token split, so in order to provide liquidity to a pool, the user will have to provide equal value of both assets in the pool. Fees are accrued in real time based on the users share of the pool value, which can also be claimed by the user at any time. Liquidity pool (LP) tokens are assigned to the user and represent their value share of the pool. When the user decides to withdraw their funds from the pool, their LP tokens are burned and the system will deliver the original assets plus fees or minus impermanent loss.
FlareFarm is the fair distribution and Launchpad access platform for Flare Finance. Users can participate in yield farming through this platform at the launch of Flare Finance to earn the primary governance token, YFIN. Additionally, yield farming through the FlareFarm product is non-custodial; therefore, users can maintain control over their assets. The FlareFarm platform works in tandem with FlareX, so users will need LP tokens to unlock the value being delivered through FlareFarm from boosted Dual-Token Farming Pools. Users can also opt to utilize Single-Token Farming Pools, which do not require LP tokens as their assets are not used for liquidity.
All F-Assets can be used in the FlareFarm pools along with assets like YFLR, YFIN, and YUSD. Depending on the use of Single or Dual-Token Pools, users can earn the assets being fairly distributed through the FlareFarm product, yield from accrued fees by providing liquidity through FlareX, and the price volatility of assets being used in the pools. Additionally, users will be able to receive their Layer 1 Flare Network rewards from minting F-Assets and delegating their detachable Spark votes to signal providers.
Rewards are accrued on a per-block basis and features a dynamic, annualized percentage yield (APY). The yield rate accrued by a user will be highly dependent on the total value locked (TVL) in a given pool, the user’s value in that pool, and the amount of the asset left to be mined from that pool. The formula for APY in the FlareFarm is depicted below and representative of the assets being distributed through the FlareFarm.
[(Pool Supply * Current Asset USD Price) / USD TVL] * 100%
The FlareFarm Launchpad is governed by Flare Finance users and can only be participated in with YFLR and YFIN as this special pool does not utilize LP tokens. The Launchpad presents holders of Flare Finance governance tokens the opportunity to support composable projects with the broader Flare Finance ecosystem. New projects can submit a project proposal to the Flare Finance community to be voted on for those projects to distribute their dApp token through. By participating in a Launchpad pool, users should expect their assets to be locked up for a variable amount of time around 14 to 31 days, automatic distribution of their share in the token, and accrual of an additional YFIN boosted rewards pool for their participation.
After the conclusion of a Launchpad time period, users can begin trading the token on FlareX and withdrawal their previously locked YFLR and YFIN. Projects launching their token through the FlareFarm Launchpad will have to pay fees in the form of YFLR, YFIN and their token. Launchpad fees will be distributed evenly to the APY Cloud, Flare Finance Foundation, and Flare Finance team and investors. Token fees are distributed evenly to the Launchpad pools for boosted yield, Flare Finance Foundation, and Flare Finance team and investors.
FlareWrap delivers users the ability to bridge assets cross chain in a non-custodial and trustless method. Governance conducted by YFLR and YFIN holders determines which networks and digital assets should be allowed into the Flare Finance ecosystem. At launch, Binance Smart Chain, Ethereum, and Terra will have FlareWrap support with the main tokens and stablecoins from the respective chains. Users will have to place the asset to be wrapped in a smart contract on the native chain, which will in turn signal smart contracts on Flare Network through a bridge relay to mint the wrapped asset. When sending assets back to the native chain, a user will have to simply burn the wrapped asset for their native asset to be released from the smart contract. Fees for FlareWrap are initially set to a variable rate between 0.1% and 0.5% that scales down as the value of the transaction increases.
The infinite mining portfolio management platform on Flare Finance allows ASIC Miners of Bitcoin and Litecoin to earn assets available on Flare Network rather than the proof of work (PoW) blockchain’s native asset. As the miners of Bitcoin and Litecoin are awarded those assets, FlareMine will enable the automated swapping of the mined assets for a host of payout assets including F-Assets minted on the Flare Network. By utilizing FlareMine, these PoW miners could immediately have mined Bitcoin and Litecoin converted to a yield bearing F-Asset earning FLR on a daily basis unleashing more value on the Flare Network. Additionally, participants in FlareMine can opt to keep some of their mined PoW assets on the native chain. Profit distributions on Flare Mine are paid daily to accrue enough rewards to justify the fees for swapping assets on FlareX. All aspects of FlareMine are adjustable per governance on Flare Finance.
The decentralized borrowing and stablecoin creation platform for Flare Finance is called FlareLoans. This protocol takes design inspirations from Liquity Protocol. There are several core components to this platform including collateralized debt positions (CDPs), a stability pool, liquidations console, and staking opportunities with Flare Finance governance tokens like YFIN.
FlareLoans uses collateral denominated in assets like FLR and FXRP to back the creation of its stablecoin termed YUSD. Premium collateral requires a minimum collateral ratio of 110%; however, it is recommended for minimum safety precautions that the collateral ratio exceeds 150%. Users can adjust debt and collateral levels on their CDP position as well. It is important to note that if the total system collateral ratio falls below 150%, then CDPs with a collateral ratio lower than that can be liquidated as a fail safe, recovery mode. Additionally, FlareLoans will facilitate the earning of rewards for WFLR and F-Assets while these assets are used as collateral.
The stability pool is where users can stake YUSD to protect the system from default. YUSD staked in the stability pool is used to pay off bad debt from liquidated CDPs. As loans are liquidated at below 110% collateral ratio, it is expected that stability pool stakers will earn SGB at a 5-10% discount every time some of their YUSD is utilized to pay back bad debt. The stability pool will earn stakers any liquidated collateral over time by using their staked YUSD in this system design.
Liquidations will normally be conducted by bots as individual CDPs fall under 110% collateral ratio. Liquidators are compensated with a premium for the gas fees necessary to liquidate a loan. However, liquidators do not need to have any more capital to liquidate other than that required to pay the gas fee. Redemptions are performed by users when the YUSD price has fallen below its $1.00 peg to USD. In this scenario, YUSD can be swapped for other assets like FLR as if the YUSD value was still at $1.00. After enough redemptions are performed, then the price of YUSD will fall back to equilibrium with its peg as every redemption takes YUSD supply off the market.