Article reprinted from: Felix
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 excellence.
Fluid is the most innovative DeFi protocol of the year. Instadapp has just completed the rebranding to Fluid, and this article is a brief report on the protocol.
Imagine a platform where your loans not only cost you money but also make you money. This is the uniqueness of Fluid. Fluid (formerly known as 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 being one of the earliest middleware solutions in DeFi.
Middleware can be seen as a bridge. It connects users to various 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 yields, without needing to access each protocol separately. All of this is done 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 the core of a suite of four products, including:
Instadapp Pro: Advanced tools for DeFi advanced users.
Instadapp Lite: A simplified, user-friendly DeFi gateway.
Avocado Wallet: Next-generation smart wallet for seamless cross-chain interactions.
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 that help users earn more money and utilize their assets more effectively.
Game-changing innovations
Smart collateral: Most lending protocols allow users to deposit collateral, while Fluid allows users to deposit pairs like ETH><wstETH, so that their collateral can not only support loans but also 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 and thus reducing users' borrowing costs. In some cases, high trading volumes may even mean that users are actually being rewarded through borrowing.
Let's understand this through an example:
In the example above, due to the trading APR offsetting about 5%, the borrowing cost is reduced to about 7.57% (initially 12.44%).
This is the practical application of smart debt, where users' borrowing positions can earn trading fees, effectively lowering borrowing APY.
The bigger picture of Fluid
In the next 2-3 years, DeFi lending will grow into a market opportunity exceeding $100 billion. Currently, giants like Aave and Compound dominate, but challengers with new ideas also have room for growth.
Fluid's unique aspect lies in combining lending with DEX liquidity, aiming for liquidity sufficient to challenge Uniswap, with a target market size of $10 billion by 2025.
Fluid Dex has become the third-largest DEX on Ethereum, with 7-day trading volume reaching $428 million, and its TVL reached $1.42 billion in the first month after launch.
Top three Ethereum DEXs ranked by trading volume:
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 instance, 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 around 18%.
With such yields, it's no surprise that stablecoins are pouring in.
Renaming to FLUID aligns with Instadapp's vision of creating a sustainable DeFi ecosystem that brings strong value accumulation for token holders.
The buyback program and strengthened governance are expected to drive speculative demand and organic growth.
Key catalysts
Renaming INST to FLUID and conducting a 1:1 token migration (non-dilutive).
When annual revenue reaches $10 million, initiate a buyback program, using up to 100% of revenue.
Lido Protocol's strategic partnership proposal with Fluid.
Aave DAO proposed acquiring 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.
Develop protocols that own FLUID liquidity on FLUID DEX.
FLUID will be listed on ByBit, and more CEXs are expected to follow.
Instadapp is operated by a team with over 5 years of experience and is supported by institutions such as Naval Ravikant, Balaji Srinivasan, Coinbase Ventures, and Pantera Capital.
Team members include @smykjain, @sowmay_jain, @DeFi_Made_Here.
The distinctiveness of Fluid
Committed to security: Instadapp has not been hacked in the past 6 years and has undergone 6 audits to date.
Revenue sharing opportunities: Fluid combines lending and trading fees, providing users with multiple income sources and driving higher TVL.
As the protocol develops, 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 activities, up to 0.5% of total supply can be used monthly. The new token economics (like revenue sharing) aim to attract more users and create value.
Strategic partnerships:
The 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 promote 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 execution price repayment option to provide liquidity on major DeFi and CEX platforms.
Aave DAO will use GHO to purchase ‘$4 million worth of INST tokens (about 1% of the total supply of INST at a $350 million FDV).
Aave DAO will distribute up to 1/3 of INST tokens through Merit to support the GHO pair on Fluid.
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, supporting 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 activities, and protocol-owned liquidity for token holders.
In recent years, there haven't been many exciting changes in DeFi. Most protocols have only made minor improvements, lacking anything truly groundbreaking.
Fluid is the first protocol to genuinely challenge Uniswap, becoming the third-largest DEX on Ethereum within a month, with a weekly trading volume of $428 million.
This is the key. They achieved this with just three pools. Imagine what will happen when they scale up.
Not only ordinary users are noticing this; DeFi institutions like Lido and Aave are lining up to collaborate with Fluid, and those knowledgeable in the field are betting heavily on Fluid. Fluid is not just another DEX or lending protocol. With smart collateral, users' assets will not sit idle and will earn trading fees. With smart debt, users' loans can generate income, thus reducing borrowing costs.
Related reading: TVL monthly increase by up to 3 times, will DeFi newcomer Fluid disrupt Aave and Uniswap?
