Folks Finance wants to give its users the highest range of choices to optimize their asset management, reducing inefficiencies.
Beginning with the gAlgo3/Algo pools, Folks Finance brings the composability of the Algorand ecosystem to the next level. Algorand users can now provide liquidity in their favourite DEXs and then use it as collateral for borrowing on Folks Finance.
In our view, there is no reason for LP positions to remain unused in providers’ wallets. LP positions are valuable collateral; the ecosystem needs composability strategies that allow the users to have higher flexibility with their yield strategies.
Introducing the LPs as collateral generates additional liquidity and opportunities for the original provider and other market participants. Moreover, the double use of the LPs allows for increasing Algorand’s TVL, which is now one of the core milestones of the ecosystem.
What is an LP Token?
LP token (or Liquidity Provider token) is a unique token received after providing liquidity on a decentralized exchange running on the AMM model (Automated Market Maker). LP tokens are used to track individual contributions to the overall liquidity pool, as the LP tokens held correspond proportionally to the share of liquidity in the whole pool.
gALGO3/ALGO to begin
Listing a new market is a time-consuming task and the first pools launched are gALGO3/ALGO LPs from both Tinyman & Pact. More LPs will be listed on Folks Finance Capital Markets in the following weeks. The pairing allowed for using gALGO3/ALGO LPs as collateral are:
How to use your LPs tokens on Folks Finance:
Open the Folks Finance dApp and deposit the LP token in the dedicated section (Deposit); open the Borrowing section and use your collateral to borrow other assets.
A new type of pool has been designed and developed to support this new Folks Finance market. The new contracts have a cap limit on the borrowable assets. The Folks team has dedicated over a month to investigate potential financial attacks connected to these new markets. The financial report has highlighted that the only way of attack is related to a potential exploit from the AMMs, which would devalue the LP. Vantage Point has audited the report and the smart contract upgrades. No relevant error was found. You can read the complete report here.