Decrypting DeFi is Decrypt’s DeFi e-newsletter. (Art: Grant Kempster)
If you’ve been in the DeFi space for a while, you’re already familiar with yield farming and the Curve Protocol Wars.
But what about commercial agriculture?
A new project called Fluidity aims to usher in a new era of sharing cryptocurrencies across different projects. This time he wants to reward active users, not just mercenary farmers.
Previously, whales would simply deposit their massive stakes into a new protocol, harvest its token release, withdraw that liquidity, and then offload those tokens (aka yield farming).
Fluidity wants to change that model and pay people to actually use a protocol (rather than just cultivate it). Is that how it works?
First, users deposit a stablecoin (i.e. USDT, USDC, DAI, etc.) into the Fluidity protocol and receive a Fluidity-wrapped token (for this story, we’ll call this asset an fToken, like fUSDT or fUSDC). For example). The original stablecoin is then deposited into a profitability protocol such as Aave or Compound.
The new fToken works like any other stablecoin. It can be used to buy NFTs, make simple transfers or join liquidity pools. The added benefit of these fTokens – and what makes them so unique – is that the more you use them, the higher the chances of a payout.
Do you remember the funds deposited at Aave and Compound? In this system, they become a kind of lottery jackpot.
The payout you get will vary “based on the total value locked, daily active users and the gas rate of the particular transaction,” Fluidity co-founder and CEO Shahmeer Chaudhry told Decrypt. “About half of the transactions bring in something, while on average someone gets a very large payout every three months.”
And instead of a separate protocol, Chaudry says, people should look at Fluidity as a tool for cryptocurrency projects to get their native tokens into the hands of real users. He explained that “over time, protocols can program behaviors based on their specific needs, such as controlling the trigger of a payment.”
But what about the wily Degens trying to increase their odds by laundering fTokens back and forth in their wallets?
Chaudhry explained that “statistically” the gas cost of spreading this type of spam would outweigh the potential payout. “There will be cases where you get a lot more than the cost of entry on a lot of wins, but statistically an attacker goes broke,” he said. He and the Fluidity team call this the “optimistic solution.”
This is because “taking this into account, the algorithm also rebalances the distribution of returns so that as transactions increase, the likelihood of payouts decreases as a function of difficulty,” meaning lottery odds decrease as usage increases.
Of course, Fluidity is still in its infancy. However, solving this problem is a priority for almost every DeFi and DAO project in the market.
After all, who wants a mercenary farmer when there could also be revolutionary farmers?
“Decrypting DeFi” is our DeFi newsletter, the headline of which is this essay. Subscribers to our emails can read the essay before it appears on the website.
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Source: decrypt.co
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