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Hello everyone!
As many of you know, I admire @andrecronje and his work a lot.
Now, he and his friends are back, ready to disrupt the ecosystem with @flyingtulip_
I’ll explain everything about it and try to keep it ELI5.
It’ll be a long thread let’s start!
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Before diving deep into the protocol, let's talk about the token launch and raise strategy.
Normally, when protocols launch their tokens, they either go for private/public sale rounds, set an initial price and sell their tokens, or they do something like an LGE.
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Either way, the price risk is taken by the investor.
Protocols also keep a lot of tokens for themselves, to incentivize usage, use them for marketing and try to get the value back in 1-2 years with user acquisition
Generally, token prices go down with these incentives
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FlyingTulip has a completely different approach. There is simply no downward risk.
What you're investing with is your opportunity cost. You can cashback your initial investment at the exact same price you invested.
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Let's say, you invested $10k for 100k FT tokens, and you think protocol is not doing well enough, you can basically give back 100k FT tokens for your initial $10k.
So how does your investment benefit FlyingTulip?
Easy.
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They use that money to be used in low-risk yield strategies like putting your money in @aave.
Buyback FT tokens from market, and distribute them 40/20/20/20 to Foundation/Team/Ecosystem/Incentives.
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To look at every one of them seperately,
Foundation: grows the treasury & protocol
Team: covers operational/living costs
Ecosystem: used for partnerships & integrations
Incentives: rewards and user acquisition
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Essentially, your yield is split 80% for growth, 20% for the team similar to Yearn, which took a 20% performance fee.
So if you invest $10k and the protocol earns 8% annually, you’re effectively contributing $800/year to FlyingTulip:
$640 goes to growth
$160 goes to food
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It's an insanely safe approach, a great innovation in the space, as it keeps the biggest headache from the developer's mind.
The investor's whining.
There is simply no excuse for investor now, as if he/she loses money, it's 100% on his part.
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He could simply give FT back to the protocol and get the initial investment he had.
And it could be only done with huge raise, which is why only the Andre tier developers could pull it off.
And he did.
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So now we understood what's the raise of it, let's dive deeper into the protocol itself.
What does it do?
Basically everything you've used before, but better.
The differences seems minimal, but when everything comes together, it makes everything better.
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I'll go with the same order on the docs. So let's start with ftUSD.
ftUSD is the stablecoin of Flying Tulip.
It's basically a USDC wrapper at heart.
You give 1USDC to the protocol, and it gives you 1ftUSD back. Simple as that but with one difference.
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If you stake ftUSD, you'll get extra yield from basic delta-neutral strategies.
FlyingTulip puts your USDC to work, buyback FT tokens and distribute it to stakers of ftUSD (sftUSD).
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Next one is the Automated Market Maker (AMM).
This is where the big innovations kick in.
Normally AMMs are based on some constant formula, like x*y=k. Or some ampirical autistic formulas like Curve's.
But FT's AMM isn't like that.
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It’s adaptive, it shifts its formula based on volatility, toxicity, and market environment for liquidity.
If volatility is low and markets are calm, trades feel almost like stablecoin swaps.
When volatility spikes, the formula widens its bounds to protect LPs
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In short, FlyingTulip constantly watches volatility and adjusts behavior dynamically.
It’s both an AMM and an order book , if there’s a better price on the order book, the system simply routes the trade there instead.
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It's also the heart of everything else.
The actions on AMM speaks to the interest rates, LTVs of money market, funding and risk cues for Perps, valuations and event checks for Insurance.
Also, revenue generated here goes to buyback FT in a similar fashion explained above
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FT's LEND uses similar approach as its AMM. It constantly eyes on markets.
Instead of relying on hard-coded collateral ratios, it constantly monitors liquidity depth and market volatility of listed tokens.
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If a token is deep and stable, the protocol allows higher borrowing power.
If the token's depth is low, LTV goes lower, as it's harder to sell that token at the event of liquidation.
It’s a living system, not a static spreadsheet.
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Wait, what if my LTV drops and I get nuked?
"Ooooh, LTV went down and I got liquidated, fuck!"
Of course it's not like that.
FT snapshots at the moment you open the position, so your LTV doesn't change with time.
It only affects the future borrowing activity.
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On top of that, there is permissionless pools.
I believe it works similar to Tarot's model.
If there is a BTC/USDC pair on AMM, it also behaves as a lending pool.
To be honest, I'll have to look when the protocol is alive to see how it works, so passing that for now.
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But in short, FT Lend has the biggest innovation by constantly eyeing on the AMM to update LTVs and giving the best price to borrowers.
It will potentially capture router/aggregator volume heavily.
Revenue here again goes to buyback FT and distribute 40/20/20/20.
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FlyingTulip also has Perps, and (surprise, surprise) it’s deeply integrated with both the AMM and Lend.
Instead of relying on external oracles, FT uses:
- AMM data for price and depth
- Lend data for cross-margin and portfolio health
- ftUSD as the settlement layer
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And, as always — revenue from Perps goes to buy back FT, following the 40/20/20/20 model.
Last but not least, FT has Insurance.
It works exactly how you imagine:
- Capital providers act like insurers
- Users pay premiums to open coverage
- If an event happens, insurers pay out
- If not, the providers keep the premiums
(Reached the limit will post the rest blw )
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To summarize, everything on Flying Tulip talks with each other.
If it can do what it promise to do, most probably every router, aggregator will choose Flying Tulip for the best price, or best place to lend/borrow, best place for perps.
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It will open up a new era on DeFi, and probably destroy some protocols in the way.
At worst, as an investor, you can take back your money and say goodbye. At best, it will dominate whole DeFi.
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There are some things I don't understand though, like
"Why does it use AAVE when it can simply use FT Lend for yield strategies?"
or
"What happens if FT Lend is used too much but the AMM is a failure, how will it determine LTVs?".
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I guess time will tell.
Also, don't forget that there are smart contract risks, as the protocol is almost a full innovation, smart contracts can fail and it can be exposed to exploits.
Hope I could clarify some of your questions, or what you're curious about.
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Disclaimer : I will most probably invest in Flying Tulip.
Thank you for bearing with me!
And as always, thanks for your support!
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