Decrypting DeFi is Decrypt’s DeFi email newsletter. (Art: Grant Kempster)
If you’ve been at DeFi for a while, you already know about yield farming and the curve wars.
But what about commercial agriculture?
A new project called Fluidity claims to usher in a new era for issuance of crypto coins for various projects. This time it wants to reward active users – not just mercenaries.
Whales used to simply bring their massive holdings into a new protocol, harvest its token launch, withdraw that liquidity, and then dispose of those tokens (aka yield farming).
Fluidity wants to change that model and pay people to actually use a protocol (rather than just farm it). That’s how it works.
Users first deposit a stablecoin (i.e. USDT, USDC, DAI, etc.) into the Fluidity protocol and receive a Fluidity-wrapped token (for the sake of this story, we’ll call this asset an fToken, such as fUSDT or fUSDC). ). The original stablecoin is then deposited into a yield protocol such as Aave or Compound.
The new fToken works like any other stablecoin. You can use it to buy NFTs, make simple transfers, or join liquidity pools. The added bonus that comes with these fTokens – and what makes them so unique – is that the more often you use them, the better your chances of winning a payout.
Remember the funds deposited at Aave and Compound? In this arrangement it becomes a kind of lottery jackpot.
The payout you get will vary “based on the total value locked, daily active users and the gas fee of the particular transaction,” Fluidity co-founder and CEO Shahmeer Chaudhry told Decrypt. “Roughly half of transactions win something, while on average once every three months someone wins a very large payout.”
And rather than a separate protocol, Chaudry said, people should think of Fluidity as a tool for crypto projects to get their native token into the hands of real users. Finally, he explained that “protocols can program behavior to their specific needs, such as B. controlling the trigger for a payout”.
But what about sly daggers trying to increase their odds by swapping fTokens back and forth between their wallets?
Chaudhry explained that the gas fees for performing such spamming would “statistically” exceed the potential payout. “There will be cases where if you win big, you’ll get a lot more than the input cost, but statistically an attacker will go bankrupt,” he said. He and the Fluidity team call this the “optimistic solution.”
This is because “the algorithm also rebalances the yield distribution that takes this into account. So as transactions go up, the probability of payouts goes down like a difficulty function,” meaning these lottery odds go down as usage increases.
Fluidity is of course still in its infancy. But solving this problem is paramount for almost every DeFi project and DAO in the game.
Who would want a mercenary farmer when you could have agrarian revolutionaries?
Decrypting DeFi is our DeFi newsletter, led by this essay. Subscribers to our emails can read the essay before it is published on the website. Subscribe here.
Stay up to date on crypto news and receive daily updates in your inbox.
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.