Author: @thedefiedge, Crypto KOL
Compiled by: Felix, PANews
On December 4, Fluid Protocol, a DeFi protocol under the Instadapp team, released a proposal for a rebranding and growth plan, intending to rename the token INST to FLUID and implement a 100% revenue repurchase plan. Fluid plans to launch a series of upgrades in the next 12 months, including launching DEX on L2, upgrading ETH Lite Vault, adding more asset support, and launching DEX v2. Crypto KOL @thedefiedge published an article to interpret Fluid Protocol, the following are the details.
Project name: Fluid
Token: FLUID (formerly INST)
Market cap: $362.4 million
TVL: $3.47 billion
Number of holders: 5,823
Track: DeFi - Lending + Dex
The project has no venture capital, no marketing hype, no points or gamification, just pure product dominance.
Fluid is the most innovative DeFi protocol this year. Instadapp has just completed a rebranding to Fluid, and this article is a brief report on the protocol.
Imagine a platform where your lending not only costs you money but also makes you money. That’s the unique aspect of Fluid. Fluid (formerly Instadapp) has been building since 2018 and is no stranger to DeFi innovation.
During the DeFi summer, Fluid managed over $15 billion in TVL, solidifying its position as a key infrastructure player and one of the earliest middleware solutions in DeFi.
Middleware can be seen as a bridge. It connects users to different DeFi protocols like Aave, Compound, and Maker, making it easier to access their services from one platform.
Users can manage everything, including lending and earning yield, without needing to access each protocol separately. All of this is accomplished through Instadapp.
Today, Instadapp is being rebranded as Fluid, an ecosystem that combines money markets and DEX, making liquidity and debt more efficient. It is at the core of a suite of four products, including:
Instadapp Pro: Advanced tools for DeFi power users.
Instadapp Lite: A simplified, user-friendly DeFi gateway.
Avocado Wallet: Next-generation smart wallet enabling seamless cross-chain interaction.
Fluid Protocol: Combining money markets and DEX for unprecedented liquidity efficiency.
Fluid aims to make DeFi easier and more efficient by introducing features like smart collateral and smart debt, which can help users earn more money and do more with their assets.
Game-changing innovation
Smart collateral: Most lending protocols allow users to deposit collateral, while Fluid allows users to deposit currency pairs like ETH <> wstETH, where the collateral can support loans and earn trading fees as liquidity in the DEX.
Smart debt: Debt has always been a cost. Fluid turns debt into an asset. Borrowed funds are used as trading liquidity, earning fees, thus lowering borrowing costs for users. In some cases, high trading volumes may even mean users are actually being rewarded for borrowing.
Let's understand through an example:
In the above example, the borrowing cost decreased to approximately 7.57% (originally 12.44%) due to the transaction APR offsetting around 5%.
This is a practical application of smart debt, where users' borrowing positions can earn trading fees, effectively reducing borrowing APY.
The bigger picture of Fluid
In the next 2-3 years, DeFi lending will grow to over $100 billion in market opportunities. Currently, giants like Aave and Compound dominate, but challengers with new ideas also have room to grow.
Fluid's niche lies in combining lending and DEX liquidity, with liquidity sufficient to challenge Uniswap, aiming for a market size of $10 billion by 2025.
Fluid Dex has become the third largest DEX on Ethereum, with a trading volume of $428 million over 7 days, and a TVL of $1.42 billion within a month of launch.
Top three Ethereum DEXs ranked by trading volume market share:
Uniswap: 66.9%
Curve Finance: 15.0%
Fluid Dex: 4.5%
Fluid's Dex trading volume, Dune
Fluid's DEX allows users to trade more intelligently. With features like smart collateral, LPs can use their liquidity positions as collateral, earning trading fees while reducing risk.
For borrowers, Fluid offers higher efficiency compared to competitors like Aave, Compound, and MakerDAO.
For example, Fluid's wstETH <> ETH token pair has liquidation penalties as low as 0.1%, making it cheaper and safer for users.
Fluid has processed over $1 billion in trading volume and plans to expand into derivatives, real-world assets, interest rate swaps, and foreign exchange markets.
On the Ethereum mainnet, the average yield for USDC is 15%, and for GHO it is 14%. The yield for USDC on Base and Arbitrum is about 18%.
With such yields, it's no surprise that stablecoins are flowing in.
Renaming to FLUID aligns with Instadapp's vision to create a sustainable DeFi ecosystem that brings strong value accumulation for token holders.
The buyback program and enhanced governance are expected to drive speculative demand and organic growth.
Key catalysts
The rebranding of INST to FLUID and the 1:1 token migration (no dilution).
When annual revenue reaches $10 million, initiate a buyback plan, using up to 100% of the revenue.
Lido Protocol's strategic partnership proposal with Fluid.
Aave DAO proposes to acquire 1% of the total supply of INST tokens.
Expansion: Increase support for new markets such as derivatives and real-world assets.
The goal of growth incentives is to reach a market size of $10 billion by 2025.
12% of FLUID allocation is for CEX listings, market making, and financing.
Developing protocol-owned FLUID liquidity on FLUID DEX.
FLUID will launch on ByBit, with more CEXs expected to follow.
Instadapp is operated by a team with over 5 years of experience and is supported by institutions like Naval Ravikant, Balaji Srinivasan, Coinbase Ventures, and Pantera Capital.
Team members include @smykjain, @sowmay_jain, @DeFi_Made_Here.
What makes Fluid different
Committed to security: Instadapp hasn't suffered a hack in the past 6 years and has undergone 6 audits to date.
Revenue sharing opportunity: Fluid combines lending and trading fees, providing users with multiple income sources and driving higher TVL.
As the protocol evolves, future plans include algorithmic buybacks to reward token holders.
Roadmap: Fluid is expanding into derivatives, real-world assets, and foreign exchange markets. Encouraging lending and DEX activity, up to 0.5% of total supply can be used monthly. The new token economics (like revenue sharing) aims to attract more users and create value.
Strategic collaboration:
Lido Alliance has proposed a partnership to promote the adoption of wstETH on Fluid, targeting billions in TVL.
Lido will provide TVL growth incentives, brand support, and drive adoption on L2.
Fluid will share 30% of fees from the Instadapp Lite ETH treasury and 50% from the LRT <> wstETH treasury.
Wintermute has proposed a 1-year loan of 700,000 INST/FLUID with a $10 exercise price repayment option to provide liquidity on major DeFi and CEX platforms.
Aave DAO will use GHO to purchase 'INST tokens worth $4 million (approximately 1% of the total supply of INST with a FDV of about $350 million)'.
Aave DAO will support the GHO pair on Fluid by distributing up to 1/3 of the INST tokens via Merit.
Use cases for the FLUID token
The FLUID token is not only used for governance but also plays a core role in the protocol's growth and value accumulation:
Revenue sharing: Up to 100% of protocol revenue will be used for buybacks to support token value.
Governance: Token holders can influence key decisions such as fee structures, fund usage, and future upgrades.
Liquidity rewards: FLUID will incentivize stablecoin lending, DEX activity, and the protocol's own liquidity for token holders.
There have not been many exciting changes in DeFi over the past few years. Most protocols have only made slight improvements, with nothing truly groundbreaking.
Fluid is the first protocol to genuinely challenge Uniswap, becoming the third largest DEX on Ethereum in just one month, with a weekly trading volume of $428 million.
This is key. They achieved this with just three pools. Imagine what will happen when they scale.
It's not just ordinary users who have noticed this; DeFi institutions including Lido and Aave are lining up to collaborate with Fluid, and those who understand this space are heavily betting on Fluid. Fluid is not just another DEX or lending protocol. With smart collateral, users' assets won't sit idle and will earn trading fees. With smart debt, users' loans can generate income, thus lowering borrowing costs.
Related reading: TVL monthly growth of up to 3 times, will DeFi new player Fluid disrupt Aave and Uniswap?
