Fluidity AMA with CRE8R DAO
Primer: What if you could do something more with your cryptocurrencies besides hodling them in lending pools? Enter Fluidity, a protocol that incentivizes the flow of crypto assets by providing rewards to both senders and recipients of a transaction. Find out how these rewards are generated and more, in their AMA with CRE8R DAO.
Team
Background of the guests
Ivan
From Brazil. Currently living in Australia
Involved in crypto for quite a while
Have a Mechatronics/Computer Science background
Previously involved in Adelaide Blockchain
Worked at Mycelium (now ReputationDAO)
Currently working on Fluidity as Head of Product
Shahmeer
Co-founder of Fluidity
Background in game design
Started making games at 10 years old
Met Ivan a few years ago at one of the Adelaide Blockchain events
The Team
Around 10-12 people
Most of them are starting to go full-time
80% of them are devs. Many of them started programming while they were young
Their team is doxxed
Origins
Why Is The Project Called Fluidity?
Came from the concept that money has no incentive for people to spend it because people prefer holding it
Their name signifies the enabling of money to become a more fluid or liquid form
“We're incentivizing the utility and the velocity of money. So the idea is that a fluid asset is an asset that is more liquid in that sense that it gets spent, or it's always perpetually moving across the economy.”
- Shahmeer Chaudhry
How did they get started?
As part of his degree, Shahmeer had to come up with a startup for one of his classes
Wanted to do something in the blockchain space
Got a grant from Compound
Their project took off
How Is The Project Funded?
Started off at the grassroots level
Got a Compound grant and they started taking off
One year ago, they raised their pre-seed round. Some of their investors include Multicoin Capital, Solana, Circle, DCF God, ZachXBT
In the process of raising another round
Connection To The Solana Ecosystem
Applied for the Solana IGNITION Hackathon
Solana reached out to them because they had an interesting project
Received a grant from Solana
Participated in the next hackathon. Won 5th in the DeFi track
Fluidity
What Is Fluidity In A Nutshell?
Currently, the incentive structure is for people to hold cryptocurrencies
In 2 scenarios, this falls apart:
People living paycheck to paycheck — they can’t get exposure to yield in the way it’s currently designed
Leads to speculation and hoarding. Does not promote the utility of crypto assets
Their project promotes the utility of crypto assets by creating incentives for people to spend them
Users wrap their base assets (e.g. USDC) to create a fluid asset (e.g. fUSDC)
When fluid assets are transacted, senders and recipients receive rewards for using it
Which Blockchains Are They On?
Is a multi-chain project
Will be releasing on Ethereum first, followed by Solana, then other chains
Will Fluidity Push Blockchains To Their Limits?
Does not think that Fluidity will cause congestion from too many transactions
If someone’s purpose is to win money from fluid assets, they are statistically guaranteed to lose money from transaction spamming
Preventing Bots From Spamming The Chain And Gaming The System
Their Transfer Reward Function (TRF) pays out a consistent yield based upon various variables (e.g. gas fee, the velocity of the fluid asset, TVL, annual % of the yield, etc.)
A random number is generated for each on-chain transaction. This is used to determine the rewards
Attackers using spam attacks will pay more in fees than the rewards they receive
In contrast, a genuine user will still pay gas fees, regardless of whether Fluidity exists or not
How Is This Ecosystem Going To Generate Revenue For Fluidity?
Through bribes paid out to Fluidity Governance token holders
Working with protocols to help them distribute tokens in a wider and fairer manner and charging a small fee for doing so
For example, trades made on partner protocols not only entitle users to the Fluidity rewards but to their partner’s native tokens as well
Fluidity Wars and Utility Mining
“So Curve Wars focuses on where liquidity moves around in the DeFi space, whereas Fluidity is about where users move in the space.”
- Ivan Seara Nunes
In Crypto, people are familiar with Curve Wars
Protocols have figured out that they can get liquidity through Curve
Curve is limited in the features it can provide:
Limited to Stablecoins
Does not affect trading volume on other DEXes
Came up with a new token distribution mechanism called Utility Mining
Instead of distributing tokens to LPs, they distribute tokens to the actual users of fluid assets and allow protocols to participate in it
Example:
Assuming we have Uniswap and SushiSwap
Governance decides that every fluid asset trade that goes through SushiSwap has a bonus probability of winning a million dollars
Rational users would choose to trade on SushiSwap rather than on Uniswap
Through governance, protocols can make themselves more competitive to users
Aggregators could re-route their orders to earn rewards as well
“So this is what we call the Fluidity Wars because now there's a war for that user order flow, which is dictated by where the rewards are going when people use their fluid assets.”
- Shahmeer Chaudhry
Fluid Assets
What Are Fluid Assets?
Fluid Assets are wrapped versions of the base tokens (e.g. fUSDC for USDC)
Will be focusing on stablecoins at the start
The base assets are deposited into a yield-generating protocol like Aave, Compound, Solend
The yield is deposited into a reward pool
Whenever an on-chain transaction is made, rewards are obtained from the reward pool
Getting Fluid Assets
To mint a fluid asset, you have to go to their web app and mint it from the base asset
In the future, fluid assets can be found on various DEXes
Rewards
Where Do The Rewards Come From?
Comes from the yield generated from depositing base assets into lending protocols
Other rewards from protocols participating in Fluidity Wars
In the future, users might win their Governance tokens just for transacting on protocols participating in the Fluidity Wars
Ensuring Fairness
There are 2 parts to it:
How are winners picked
How do they ensure transparency
Every time there’s an on-chain transaction, the TRF generates a table of probabilities and its associated payouts
People can refer to their economics white paper on their website
Have implemented several backstop features to prevent fraud and huge payouts in the beginning
Their project has been audited
In the beginning, they will be using the random.org solution for randomness. Currently exploring other decentralized options
How Are The Rewards Claimed?
Will be instantaneous or may take a few minutes
It will be dropped directly into your wallet
Use Cases
Projects That Are On Board
On Solana, they have Orca, Saber, Solend, Raydium, etc.
On Ethereum, they have Compound, Uniswap, SushiSwap, DODO, 1inch, Balancer, and Curve
Integrating Into Different Metaverse Ecosystems
Goal is to turn in-game currencies into fluid assets
People are incentivized to spend in games, leading to an increase in the velocity of their in-game economy
They are reaching out to different Metaverse/gaming projects and have received good feedback
Native Token
Its Release
Looking for product-market fit for their product first
Will consider bootstrapping with a token once their protocol works
Will provide incentives to use Fluidity in the early days — their algorithm accounts for how long you’ve been using fluid assets
Still thinking of a name for the token
Tokenomics
Initially, their token emissions looked similar to a wave function (e.g. Bitcoin)
Remodelling it to be an inverse parabola pattern where early users get more exposure to the token because they take on more risk
Potential Actions That People Could Take To Get The Tokens
Just use fluid assets
Participate in protocols that take part in Fluidity Wars
Security Of The Protocol
The CTO has made multiple checks on the code
Multiple auditors have audited their protocol, on both the Ethereum version and the Solana version
Sherlock, one of their auditors, also offers a bug bounty paid by them and an insurance fund that covers up to $10 million
Have several security protocols in place:
Freeze lock the contract so that users can withdraw their funds
Caps on user and total deposit limits
Roadmap
Plan For The Next 1 Year Ahead
Within the next 6 months: Integrating with more protocols and blockchains
6 months - 1 year:
Running a few Utility Mining programs. One of which is with DODO Exchange
Decentralizing governance
Possible release of their native token
Testnet is live on Solana and Ropsten
Expecting to be on Mainnet by September
Will be releasing a few sneak peeks and blog posts in the coming weeks
Do They Have Concerns About Launching In A Bearish Market?
Not possible to wait forever and market time their launch
The prominent protocols in the space today were launched in the bear market
Launching in bear markets helps you set more realistic expectations of growth and adoption
How Can Listeners Get Involved?
Have documentation for people to read
They host Tiki Talk with partnering protocols where people are welcomed to attend
Have published a few research-based blog posts
Have a 4-part series called Fluidity University where they explore Fluidity and its concepts
Visit their Discord, Telegram, and website
All information presented above is for educational purposes only and should not be taken as investment advice. Summaries are prepared by The Reading Ape. While reasonable efforts are made to provide accurate content, any errors in interpreting and summarizing the source material are ours alone. We disclaim any liability associated with the use of our content.