fDAI is an Ethereum based token that can be minted when users deposit DAI on Flux Finance. Each asset supported by the Flux Finance Protocol is integrated through a fToken contract, which is a representation of balances supplied to the protocol. fTokens, such as fDAI, are a fork of Compound V2's cTokens, with additional functionality to support permissioned assets.
By depositing DAI on Flux Finance, the user's DAI will become available to borrowers, and the user will earn the DAI supply rate. fDAI increases in value relative to the underlying DAI, meaning users can redeem more assets over time as interest is earned. The interest rate earned by lenders fluctuates and depends on the market's utilization (i.e. the percentage of deposited assets that have been borrowed).
By minting fDAI, users earn interest and gain the ability to use fDAI as collateral. fDAI can be transferred to effect change in ownership. Transferring fDAI means transferring your balance of the underlying DAI inside the Flux Finance protocol. Transfers that would result in negative account liquidity for borrowers on Flux Finance will fail.
