Folks Finance: Algorand Governance With Liquid Staking
This AlgoDaddy article covers Folks Finance, a decentralized finance (DeFi) platform that runs on the Algorand blockchain. Folks Finance lets you be your own Algorand bank.
Moreover, it teaches you how to use its liquid staking feature to participate in the Algorand governance program. See the table of contents below.
TABLE OF CONTENT
• What is Folks Finance?
-Experienced Team
-How Folks Finance Works
-Is Folks Finance Safe?
ARTICLE SUMMARY
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What is Folks Finance?
Folks Finance, which was launched on the Algorand Mainnet in April of 2022, is a modern non-custodial DeFi platform offering a full set of DeFi tools for managing digital assets built on the Algorand blockchain.
Non-custodial implies that you have full control over the funds you use on the platform through having access to the associated private key of your ALGO or tokens.
Before launch, Folks Finance managed to raise a staggering $3 Million USD through seed funding.
Recently they launched V2.0 of their platform, now offering high-efficiency loans, collateral swaps, multi-borrow, and flash loans, amongst other features. Check out the full list of changes here.
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Experienced Team
Folks Finance is the result of extensive research and engineering by the software house Blockchain Italia. Currently, the Folks Finance team consists of over 20 employees and their headquarters are based in the Italian city of Milan.
How Folks Finance Works
In a nutshell, the Folks Finance protocol permits lending and borrowing in Algorand. Users can either deposit liquidity (i.e. ALGO) and instantly start earning continuous interest in return, or they can take loans of digital assets by locking in their funds as collateral.
While the idea on paper is simple – borrowing and lending – it lets users access a whole new world of different opportunities where they can use the Folks Finance protocol to gain leverage, take out shorts, hedge their investments, and much more.
Apart from lending and borrowing, the platform also offers swapping functionality, with the new highly-coveted features for portfolio and asset management coming soon. Users can also access Liquid Governance, the highest yield available for ALGO. More about it further down the article.
Is Folks Finance Safe?
Yes. Folks Finance is safe to use and the company emphasizes its secure transactions. The platform has had several professional companies perform a total of six security audits of their platform.
In addition, they offer up to a $200,000 reward through an Immunefi bug bounty program.
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| Folks, Finance has had 6 security audits |
Algorand Governance Through Liquid Staking
Since the 3rd period of governance, it has been possible for Algorand governors to participate in the program using decentralized finance protocols, including Folks Finance. Such DeFi platforms offer yield on Algorand through a special method, known as liquid staking.
What is Liquid Staking?
Liquid Staking is a form of staking where the staking provider takes the deposited tokens (e.g. ALGO) and in return gives another token back to the depositor, much like a receipt.
The 'receipt' tokens (gALGO in the case of Folks Finance's Algo Liquid Governance) can later be used to redeem the original deposit of ALGO. However, they can also be traded or used as collateral elsewhere, keeping the depositor financially liquid throughout the staking process, hence the terminology.
The gALGO Ecosystem
Folks Finance has made sure to partner up with several other projects and platforms in the Algorand ecosystem in order to allow people to use their gALGO in a diverse variety of ways.
The types of platforms range from popular NFT marketplaces and gaming platforms - such as ALGOxNFT and Zone - to trading and lending protocols like Tinyman.
In total, gALGO can be used on over 20 Algorand platforms, and Folks Finance provides a complete list of gALGO utilities that we can highly recommend to check out.
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Using Folks Finance For Algorand Governance
By offering liquid staking on the Folks Finance platform through 'Algo Liquid Governance', folks users can participate in the Algorand governance program, while still being able to engage in the Algorand ecosystem. This contributes to the better overall health of the blockchain economy.
Additionally, users participating in the Algorand governance program through Folks Finance are entitled to higher rewards, as governors voted in favor of increased allocation for DeFi participation rewards in the 5th and 6th governance voting periods.
The estimated total reward (Base + DeFi rewards) for the G6 period is estimated to be around 3.66% (14.65% APY). Thus, if you committed 10,000 ALGO to liquid governance you can expect 366 ALGO to hit your wallet at the end of the governance period. Not a bad deal, by far.
Leveraged Commit
For those users who are seeking higher potential profits, Folks Finance offers something called ‘Leverage Commit’. As the name suggests, you can commit to the liquid governance program with leverage - borrowing funds from Folks Finance in the process of doing so.
You can use leveraged commit to execute the popular looping strategy. This allows you to earn rewards for up to 4x times your commitment.
The idea of looping your governance stake by borrowing isn’t new, as it’s possible to perform similar ‘looping’ manually on plenty of DeFi platforms. However, Folks Finance has made it a much easier and less time-consuming process, as well as saving you the headache of manually having to calculate all the interest rate variables that would otherwise arise from performing such complex trading methods.
🎓 Leveraged Commit | Folks Academy
— Folks Finance (@FolksFinance) January 11, 2023
📈 Multiply your @Algorand Governance commitment in one click with the newest feature of #FolksV2.
🦾 Increase your voting power and earn higher rewards!
Try here 🔗 https://t.co/DMkqGrpTsp#AlgoFam #Algorand #AlgoLiquidGovernance pic.twitter.com/O7SIelSpII
How Does Leveraged Commit Work?
In practice, the leveraged commit is a genius system that works with the help of flash loans. Flash loans are simply a back-end function that enables users to take a loan and repay it within the same trade execution.
This is how leveraged commit works:
Suppose you’re holding 100 ALGO and you want maximum leverage for governance, i.e. 4x. Within the same transaction, this happens:
1. You take a flash loan of 300 ALGO
2. You commit those 400 ALGO (100+300) to governance and mint 400 gALGO in return
3. Now you borrow 300 ALGO using the gALGO as collateral (1:1)
4. You use those 300 ALGO to repay the flash loan.
This has technical importance, as it provides a secure and easy-to-use system, allowing users to leverage their commitment to Algorand governance.
The accompanying risk of leveraged commit is relatively low. For example, there is no risk of liquidation based on fluctuations in the ALGO-USD price. Instead, the main threat of liquidation arrives from potentially high-interest rates on ALGO. However, the likelihood of this is fairly low (but not non-existent), as interest rates would have to be extremely high for a longer period to really pose a threat of liquidation.
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| Folksy Guys are Folks Finance NFT project |
Folksy Guys NFT Project
Folks Finance has an NFT project known as 'Folksy Guys', which is a group of non-ordinary guys that represent the characteristics of Folks Finance - simple but with unique features.
There are 5000 Folksy Guys minted in total, and by owning one you can benefit from additional rewards from giveaways, raffles, treasure hunts, and more.
Folks Finance on Social Media
You can follow Folks Finance on the different social media platforms presented below.
