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Flower Yield Matching Engine

By bringing together active yield seeking borrowers and passive yield seeking stakers, Flower creates a market which serves both parties.

Flower Yield Matching Engine

Active Yield Seeking Borrowers​

Borrowers can use yield bearing DeFi products and crypto assets as collateral to borrow flUSD, allowing them to amplify their yield or bets on the market.

Passive Yield Seeking Stakers​

By staking their flUSD, they receive sflUSD, a yield-bearing liquid staking token (LST) that represents their share in the staking pool. As interest accrues it is automatically compounded earning them a passive risk diversified yield without any management costs.

How the Engine Works​

Fair pricing of flUSD liquidity​

Through the peg stability mechanisms, flower optimizes the rate to target a 1:1 peg between flUSD and USD. When there's too much supply of flUSD on the market due to overborrowing and understaking, the rate will be adjusted to increase the borrowing cost and incentivize stakers to stake. When there's too much demand for flUSD due to underborrowing and overstaking, the rate will be adjusted to decrease the borrowing cost and incentivizing stakers to unstake.

This free market mechanism should push flUSD borrow rates to converge with (implied) yields available in the wider DeFi ecosystem. The majority of interest paid by borrowers is distributed to stakers, serving as a passive synthetized yield of the wider DeFi ecosystem.

Example Simplified Scenario​

  • The aggregate weighted yield from all collateral assets is 20% APY.
  • Borrowers are willing to pay up to 19% APY to borrow flUSD.
  • The average leverage is 5x. Allowing borrowers to amplify their yield to 20% + (20 - 19) * (5 - 1) = 24% APY.
  • 80% of the total flUSD supply is staked by passive stakers.
  • 80% of interest paid is distributed to stakers and 20% is retained by Flower as a protocol fee.
  • 19% / 80% * 80% = 19% APY is distributed to passive stakers as passive risk diversified yield.