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 capitalization: $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 of the year. Instadapp has just completed a rebranding to Fluid, and this article is a brief report on the protocol.
Imagine a platform where your borrowing not only costs you money but also makes you money. That's what makes Fluid unique. Fluid (formerly Instadapp) has been building since 2018 and is no stranger to DeFi innovation.
During the summer of DeFi, 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 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 yields, without having to access each protocol separately. All of this is done through Instadapp.
Today, Instadapp is being reshaped into Fluid, an ecosystem that combines currency markets and DEXs, making liquidity and debt more efficient. It is the core of a suite of four products, including:
Instadapp Pro: Advanced tools for DeFi power users.
Instadapp Lite: A simplified, user-friendly gateway to DeFi.
Avocado Wallet: The next-generation smart wallet that enables seamless cross-chain interactions.
Fluid Protocol: Combines currency markets and DEXs to achieve unprecedented liquidity efficiency.
Fluid aims to make DeFi simpler and more efficient by introducing features like smart collateral and smart debt, which can help users earn more 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, so that their collateral can not only support loans but also earn trading fees as liquidity in DEXs.
Smart debt: Debt has always been a cost. Fluid turns debt into an asset. Borrowed funds are used as trading liquidity to earn fees, thus lowering users' borrowing costs. In some cases, high trading volume may even mean users are actually being rewarded through borrowing.
Let's understand this through an example:
In the example above, the trading APR offset about 5%, reducing the borrowing cost 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 to over $100 billion in market opportunities. Currently, giants like Aave and Compound dominate, but challengers with new ideas also have space to grow.
The use case for Fluid lies in the combination of 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 7-day trading volume of $428 million, reaching $1.42 billion in TVL within a month of launch.
Top three Ethereum DEXs 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 while earning trading fees and 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 forex markets.
On the Ethereum mainnet, the average yield for USDC is 15%, while GHO's average yield is 14%. The yield for USDC on Base and Arbitrum is about 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 delivers strong value accumulation for token holders.
The buyback program and enhanced 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, a buyback program will be initiated, with up to 100% of revenue being used.
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 like derivatives and real-world assets.
Growth incentives aim 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 the FLUID DEX.
FLUID will launch on ByBit, with more CEX listings expected.
Instadapp is operated by a team with over 5 years of experience and 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
Commitment to security: Over the past six years, Instadapp has not faced any hacks and has undergone six audits to date.
Revenue sharing opportunities: Fluid combines lending and trading fees, providing users with multiple income streams 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 forex markets. Encouraging lending and DEX activities, with up to 0.5% of total supply usable each month. New token economics (such as revenue sharing) aim to attract more users and create value.
Strategic partnerships:
Lido Alliance has proposed establishing a partnership to drive 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 vault and 50% from the LRT><wstETH vault.
Wintermute has proposed a 1-year loan of 700,000 INST/FLUID and offers a $10 execution 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 at about $350 million FDV)'.
Aave DAO will support the GHO pair on Fluid by distributing up to 1/3 of INST tokens through Merit.
Use cases for FLUID tokens
FLUID tokens are not only used for governance but also play a core role in the growth and value accumulation of the protocol:
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.
In recent years, there haven't been many exciting changes in DeFi. Most protocols have only made minor improvements, with nothing truly groundbreaking.
Fluid is the first protocol to truly challenge Uniswap; within a month, Fluid became the third-largest DEX on Ethereum, 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.
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 familiar with the space are betting big 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, thereby reducing borrowing costs.
Related reading: TVL monthly growth of up to 300%, will DeFi newcomer Fluid disrupt Aave and Uniswap?
