Published
1 year ago on
December 19, 2022
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Crypto users who leave their Christmas shopping to the last minute might be interested to know that Fluidity’s spend-to-earn protocol is launching on Ethereum on December 19.
Described as an “avant-garde DeFi yield primitive,” Fluidity reimagines the yield-generation model by rewarding users simply for wrapping stablecoins on the platform and subsequently using the 1:1 assets. As such, users have the prospect of receiving a windfall every time they spend Fluid Asset or conduct trading activities.
To date, Fluidity has been operating on the Solana devnet beta and Ethereum testnets, and 50,000 users have already explored what it has to offer. After the protocol debuts on Ethereum, it is expected to branch out to other chains including Solana, Arbitrum and Polygon.
A Risk-Free Way to Earn
Although alarm bells may ring at the notion that any protocol in the entire crypto landscape is risk-free, Fluidity is quite different from the yield farms that have traditionally made such claims.
The general principle is simple: users in possession of stablecoins exchange them for wrapped counterparts on Fluidity: for example, USDT would be exchanged for fUSDT. Thereafter, holders of wrapped assets earn rewards by using and utilizing them on-chain – through trading, sending, receiving, and swapping.
Yields are paid on a random basis, with Fluidity founder Shahmeer Chaudhry saying 50-70% of all transactions qualify for rewards that are split on an 80:20 basis between senders and receivers. What’s more, such pay-outs can range from mere cents to millions. Consequently, participants in Fluidity’s ecosystem have a major incentive to swap their stablecoins and interact using the wrapped version – which can be converted into the underlying asset at any time.
“Four or five years ago, everybody said DeFi could be the use-case that brings in a billion users to crypto – but it actually turned out to be NFTs and GameFi,” says Chaudhry, whose experience encompasses game design and blockchain acceleration. “At Fluidity, we want to gamify how people think about spending money, and our long-term goal is to re-shape how people approach spending.”
Although a relatively new project, Fluidity has quite a bit of pedigree. Last year, the venture came fifth out of 6,000 participants in Solana’s IGNITE hackathon. In a subsequent funding round it also welcomed capital from a slew of VC heavy hitters, from Multicoin Capital and Solana to Circle and Lemniscap. The protocol’s smart contracts have also been audited by no less than three firms: Bramah Systems, Verilog Solutions and Hashlock.
Challenging the Liquidity Mine Monopoly
The brain trust at Fluidity believes that liquidity mining programs are inherently unsustainable, as rewards revert to mean over time, causing users to vanish in search of better interest rates. Fluidity, on the other hand, rewards users for common endeavors such as paying for goods or services or swapping one crypto-asset for another. The protocol can also be leveraged by arbitrage traders to optimize profits.
Genuine users – those who display certain intended behaviors – not only earn TRF (Transfer Reward Function) rewards but also governance tokens that let them have a say in how the protocol operates. Merchants, meanwhile, can earn a cut of rewards simply by accepting Fluid tokens as a medium of exchange.
The annual commercial blitz that is Christmas will give Fluidity an opportunity to establish itself as a viable rewards system. The big question, of course, is whether the protocol can win the hearts and minds of seasoned liquidity miners who continue to chase high APY on their staked assets.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice
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