Next on Flamingo: The Blueprint of DeFi Interoperability

Da Hongfei
6 min readJan 29, 2021

The first major upgrades are set to go live along with FIP#2

Upgrading Flamincome and Flamingo

Flamingo, a NGD (Neo Global Development) incubated, full-stack DeFi protocol, is set to undergo its first major upgrade with newly designed mechanisms for cross-chain interoperability, yield boosting, as well as on-chain derivatives. These new features are set to drive new breakthroughs in the field of DeFi.

Initially designed to reduce opportunity costs for cross-chain users, Flamincome enabled Ethereum users to yield farm via Flamingo while enjoying a return rate equivalent to yearn finance. With this unique “dual mining” model, Flamincome had the chance to experiment on translating cross-chain technology into an asset management product. Moving forward, Flamincome now aims to deliver a higher APY than market benchmarks without compromising users’ cross-chain experience.

To that end, the upgraded version of Flamincome will split yield farming and cross-chain functionalities by introducing two key asset types — yToken, a leveraged yield asset, and xToken, a value pegged cross-chain asset. Miners and cross-chain users will enter through y and x channels respectively; xToken holders enjoy an instant and bi-directional atomic cross-chain solution but is not entitled for yield distribution on Flamincome, and yToken holders are entitled for all yields generated from the strategy pool. Flamincome’s strategy pool will contain all underlying assets of xToken and yToken, making yToken the only cost-free and risk-free leveraged interest-bearing asset within the DeFi space. Moreover, while xToken can be understood as the ETH asset cross-chain channel on Flamingo, it can actually become the standardized ETH asset cross chain channel for any target chain due to its strong value-anchoring nature.

Flamingo is also set to launch Perp, the perpetual contract trading for virtually any asset, as an indispensable module within Flamingo, the full-stack DeFi protocol cluster on Neo. Based on vAMMs (Virtual Automated Market Maker), users can execute transactions without counterparties. Users can also use Perp as an innovative and powerful tool for risk-hedging of virtually any asset.

yToken: leveraged yield asset

By providing yToken holders with the only interest and liquidation-risk-free leverage channel in the DeFi space, the upgraded Flamincome platform can be treated as the leveraged Yearn. Leveraged by the underlying assets of xToken, yToken holders are guaranteed with higher APYs than any other existing Yearn-like protocol.

yToken holders are entitled for all yields generated from the strategy pool

By separating the channel for asset cross-chain, underlying assets for xToken generation will be pooled together with underlying assets of yToken and put into the strategy contract. Under this contract, farming rewards from the strategy contract will only be distributed to yToken holders. This means that every yToken represents (x+y)/y farming productivity, resulting in multiplied mining productivity. For example, if only one user deposits one wETH to generate one ywETH, and 5wETH to generate 5xwETH, the user’s 1ywETH will eventually generate mining income of 6 wETH. As a cross-chain hub, Flamincome will naturally provide users with interest and liquidation-risk-free leverage. The degree of leverage will be determined automatically by the demand of cross-chain users.

xToken: value-pegged cross-chain asset

The upgraded Flamincome will offer users with a real-time atomic asset cross-chain experience by using the xToken as a cross-chain channel the cross-chain contract. Users do not need to interact with the xToken directly as the minting and burning of xToken will be automatically executed by the cross-chain contract. With xToken, cross-chain transactions will be streamlined for an optimized user experience with a low-cost, instant, and atomic manner to maintain a strong price peg between xToken and its underlying assets.

In the initial design of Flamincome, a concept of Collateralized Debt Positions (CDP) based on nToken and pnToken was used for asset cross-chain. While all n-assets are fully backed by corresponding underlying assets, the soft-pegging of CDPs rendered pnToken insensitive to short term market fluctuation. With xToken, the asset cross-chain process will be simplified and the value between xToken and the underlying assets will be tightly pegged. This more reliable asset cross-chain mechanism will also position xToken as the standard ETH asset cross-chain channel for more target blockchains.

xToken works as a strong pegging cross-chain asset and leverage yToken farming APY

More over, xToken is a bilateral-scalable asset protocol. The underlying asset pool behind xToken can potentially provide leverage for more asset management protocols, after securing basic yield leverage for yToken holders on Flamincome.

Perp: vAMM Perpetual Contract for Any Asset

Theoretically, the Perp protocol supports long and short perpetual contracts trades of any asset, as long as it has a commonly accepted price. The vAMM mechanism empowers Perp users to trade an extensive range of assets with no counterpart risks, making it an innovative finance tool for flexible asset risk hedging.

After the successful conclusion of the first Perp Trading Competition, the official launch is just around the corner. The team has done extensive research and testing to optimize price pegging and risk control mechanisms for enhanced system robustness and user experience. With the possibility of accurate price pegging of any asset, we can expect for an exponential increase of asset types tradable in Perp in the near future.

Flamingo + Flamincome = the blueprint of DeFi interoperability

Looking at the larger picture, Neo has already built its DeFi foundations via introducing asset pools, on-chain exchange and on-chain perpetual contracts trading. We look forward to breakthroughs in terms of innovative product mechanisms, enhanced risk control ability, improved module composability, as well as a rich set of risk-hedging tools.

Creating new horizons: DeFi beyond Ethereum

As an outstanding effort to extend the boundaries of the DeFi ecosystem by leveraging cross-chain technology in novel ways to enable interactions between independent blockchain networks. The cross-chain functionality on Flamingo is not only about staking and releasing of assets between blockchains, but more importantly, is about coupling products across various blockchains to optimize capital efficiency as well as user returns. As blockchain adoption advances, cross-chain interoperability and minimized on-chain transaction friction are vital to driving forward the sector’s continued development. By providing highly coupled, ready-to-use standards for cross-chain assets along with the low cost interoperability protocol — Poly Network, Flamingo is set to optimize liquidity within the broader world of DeFi.

In the short term, our top priority is to work with users to ensure a smooth asset migration process. Flamingo upgrade and migration will kick off once FIP#2 is approved by FLM holders. During the migration period, existing pn assets in Flamingo fund pools will be directly exchanged to original assets. After the Flamingo update is completed, original assets can return to fund pools as NEP-5 f-assets via Wrapper. To ensure a smooth migration process, Vault’s FLM mining incentives will be gradually transferred to new liquidity pools. Moving forward, I encourage everyone to follow our updates on Flamingo and join us in constructing the future by voting for FIP#2!