Formation Fi is a new platform that aims to change DeFI portfolio construction and bring a revolutionary approach to yield farming. The start-up revealed a successful strategic sale round in which they received $3.3 million.
A number of DeFi protocols participated in the sale, including key DeFi players such as Bancor, Synthetix, and Polygon, and a number of top-tier investors. Funding will be used for the development of Formation Fi’s risk parity protocol, which “rethinks and restructures how we interact with risks” through the construction of risk adjusted parameters to optimize the return to risk ratio for each unit of risk.
Formation Fi aims to create a founders’ club by attracting support from only the founders of top DeFi companies it wishes to work with long-term. Formation’s Co Founder Kristof Gagacki commented on the developments:
"We are proud to be building on the collective wisdom of some of DeFi's first pioneers. With our founders' club approach, we are focused on coming together to build and amplify this still-experimental ecosystem and evangelize Smart Yield Farming into the world of open finance"
Many projects are looking to take their first steps into building a Defi portfolio, but Formation’s ‘smart yield farming 2.0’ provides the same risk-mitigation strategies which enable hedge funds to dominate the stock market. Rather than only focusing on APY, a risk parity strategy will “invest in different asset classes and use leverage to improve returns while keeping risk under control”.
DeFi has altered the way investments are made, and opened up finance to a wider investment base. Risk management is not employed in the same was as traditional finance however. The way Finance Fi aims to mitigate exposure to risk is as follows.
Users deposit their cryptocurrency of choice, and choose from an index coin such as Alpha, Beta, Gamma, and Parity. Each index coin can then be further deployed for additional yield at the holder’s discretion. Thereafter, the protocol will begin generating yield with users gaining access to the best-performing cross-chain yield strategies according to their individual risk tolerance.
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.