Mission: DeFi Ep 68 - Fluidity With Shahmeer
Primer: Get rewarded for transacting cryptocurrencies with Fluidity. Find out how rewards are sustainably generated and the inner workings of the protocol in this episode of Mission: DeFi with host Brad Nickel and Shahmeer, Co-Founder of Fluidity.
Background
Based in Australia
Background in game design
Started designing games at 12 years old. Was successful at it
Got into crypto in 2016
While at university, he approached great programmers in his cohort to start a crypto project
They gave it a shot and Fluidity took off
Fluidity is inspired by how games are developed
Before Fluidity
They were trying to build a student client for Algorand
Wanted to enable teachers to use blockchain in class for attendance and citation for sources
That project failed and he realized the importance and necessity of a CTO
Met a great programmer and invited him to Fluidity
Gamification And Lessons Learned
Game Economics
Game economics is very hard
Have been playing Runescape till today
Runescape has a relatively healthy economy such that Venezuelans were using it as a prospective career
Came across a 200-pages paper on the economy of Runescape:
Different types of gold sinks
How gold enters the economy
Took Runescape 20 years to figure out how to create a sustainable economy
“If a new protocol is launching and they have a token, it's tough to argue that you're able to replicate that same sort of phenomenon as Runescape has.”
- Shahmeer Chaudhry
Studying Gamification And How It Worked
Have created some games with jump scares in them
Inspired by Creepypasta
Made games on popular subjects
Timed the release of his games with what’s popular/urban legends. The right amount of jump scares made his games go viral
Games are designed with rules and principles to make them thrilling enough — an introduction, the plot, and then the climax
Songs follow the same rules as well
“Every experience, no matter if it’s a game, or email, or even like financial can actually replicate some of those ideas.”
- Shahmeer Chaudhry
Fluidity
Why Is It Important?
In the previous cycle, DeFi did not bring in billions of users
Instead, NFTs, games, and other fun stuff brought people into crypto
In Australia, it’s part of their culture to gamble
Wanted to create something interesting for the average person to participate in
People do not want to spend crypto because they want to hold onto it, which stunts the utility of crypto
Wants to incentivize people to spend their crypto by rewarding them with yield
How It Works
Deposited assets (e.g. USDC, USDT) are wrapped up and converted into fluid assets
In the background, the assets are deposited into a money market like Compound or Aave to earn a yield
The prize money comes from the money market yield
Incentivizing Merchants To Adopt Fluid Assets
Most projects do not think about counterparty incentives
20% of the prizes go to the recipients of fluid assets
“So imagine if you're a merchant, and you're getting tens or hundreds of daily inbound transactions. If those are fluid assets, you could be earning 20% of these prizes that are being paid out to you. And you don't have to do anything extra.”
- Shahmeer Chaudhry
Preventing Attacks
Gas fees will cost more than the yield attackers receive
Created an algorithm called the Transfer Reward Function (TRF) that looks at multiple variables (e.g. current gas fees, protocol’s TVL, daily active users of fluid assets, etc.)
Every time a transaction is done using fluid assets, it is compared against a table/output from the TRF
The TRF table can be found in their economics white paper
Payouts
Will have small, frequent payouts
This incentivizes people to participate more
On Ethereum:
The small payouts will be batched every 12 hours and users will be able to claim their prizes on their website
The larger prizes will be airdropped directly to the user’s wallet
On low gas fee chains, the prizes will be airdropped directly to the user’s wallet
How Does The Protocol Earn Revenue?
Thinking of taking a small cut out of the yield that’s earned
Taking a small cut of the Utility Mining tokens
Their algorithm is open source but their implementation is proprietary to prevent bots from attacking them
Utility Mining
How Their Governance System Work
Enabling a new form of PvP governance:
There is a probability for every action you take
You could change how these probabilities behave on different actions that users take
For example, if you traded on SushiSwap instead of Uniswap, your chances of winning the jackpot increases
Order flow is even more valuable than liquidity since it’s the source of revenue
Users will be motivated enough to change their behaviour/DEXes they use. This is how their governance token/system comes into play
Users of an AMM often do not get the rewards. Liquidity mining rewards go towards mercenary capital
Rewarding actual users of a given DEX align interests between them and the project
Calls this system Utility Mining:
Projects can use their system to distribute their tokens
Will get genuine users
DODO Exchange is interested in using their system
Will They Be Taking The Highest Bidder At Some Point?
Uniswap does not want to enable fees because this will increase slippage
DApps have an existential crisis enabling fees because someone will fork their project and lower fees, converging fees back to 0%
If projects integrate Fluidity, the volume of fluid assets trading through them would be higher than them activating their fee switch
For the project, there’s no extra cost for adopting a fluid asset and they still get all the upside
Use Cases
Their project is not limited to just DeFi. It could be applied to NFT marketplaces, games, etc.
In games, any value transfer could be represented in a fluid asset. This bootstraps their NFT marketplaces
Will be creating an API for developers to define what the trigger mechanisms may be in their app
Doing POC with Dopex. In talks with a few aggregators
Goal is for people all around the world to use fluid assets for payment
“Because they're like, hey, wait for a second, I'm paying for this anyways, if I use this on Solana or on Ethereum or whatever, I could potentially win a million dollars, buy a house or all that stuff.”
- Shahmeer Chaudhry
Expansion Plans
Blockchain Expansion Plans
Launching on Ethereum and Solana initially
Looking at Arbitrum
Time Frame For Mainnet Launch
Preliminary plan is sometime next month after the merge
Have built one of the coolest frontends with custom animations for wrapping fluid assets
Token
Token holders decide on protocol parameters
Wants the token to be as decentralized as possible. Their emission schedule follows an inverse parabola — goes up over time, hits a peak, and then starts decaying
When users transact with fluid tokens, they get rewards in:
Base yield
Fluid governance tokens
Tokens from projects they partner with
Incentivizing Adoption At Launch
Will be marketing, educating, and spreading the word
Open to ideas for new use cases
Someone suggested integrating fluid assets into gambling websites — gamblers could end up winning from the transfer of fluid assets
Last Comments
Anything Else He Wants To Add?
Too many stablecoins on the market
Some stablecoins have higher risks but do not provide any extra rewards to incentivize people to pick them
Others inflate their APY temporarily through governance token incentives in yield farming
With Fluidity, people get rewards for using those stablecoins. This increases their utility
How Can People Get Involved?
Join their community
They are open to questions and ideas
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