Author | Hu Feitong

Invitation
 
FILLiquid is a project that I have always paid attention to, because it appeared in the Filecoin FVM Builder group long before the release of Filecoin FVM, participated in the hackathon and won awards, and then it seemed to develop slowly until the white paper was released in the second half of last year, and then the test network phases 1, 2 and 3 were carried out, and then the code was audited and open sourced. Finally, the main network was officially launched on July 23, 2024.
 
It is true that it takes two years to sharpen a sword. Looking back at the whole process, this is actually the process that an open source project should usually go through. In comparison, some other projects may seem a bit hasty.
 
Yesterday (26th), Filecoin’s official blog (https://filecoin.io/blog/posts/filecoin-news-90/) posted a message congratulating FILLiquid on the launch of its mainnet and retweeted it on Twitter.



Steven004, the author of FIP-0029, congratulated the project on his Twitter (https://x.com/Steven004_Li), saying that he was pleased to see another platform using FIP-0029 come out and that FILLiquid was a potential game changer. He then gave several reasons on Twitter: 1) user-friendly interface; 2) flexibility; 3) no trust required.
 
Why is FILLiquid a potential game changer? This article briefly analyzes it.
 
Conclusion first: a possible development trend
 
As Steven said: “I believe that Filecoin token lenders and SPs that need to borrow will gradually transfer from other platforms to FILLiquid. This requires a process and time period, but due to some unique advantages of FILLiquid, this trend will happen irreversibly.
 
Initially, the development of FILLiquid may go through the following stages:
 
1. The exponential FIG token incentive decay rule will encourage early users to participate, including FIL lenders and SPs that need FIL; the high release of FIG tokens not only increases the income of lenders, but also reduces the borrowing cost of SPs;
 
2. During the early growth period of the FILLiquid fund pool, its lending rates fluctuated greatly, and capable SPs were able to borrow funds at low interest rates, which gradually attracted SPs to join in; maintaining a steady growth in the fund pool and lending volume;
 
3. When the FILLiquid fund pool capacity reaches more than one million FIL, its exchange rate will be relatively stable. However, I estimate that the lending rate of the FILLiquid platform will be lower than the current market rate. This is because the risk cost of the lender is reduced and they are willing to lend funds at a guaranteed low interest rate;
 
4. Due to the advantages of interest rate, security and convenience, FILLiquid's siphon effect will be more obvious, thus ensuring the further growth of the capital pool;
 
5. The ecosystem based on FILLiquid will develop further, including decentralized trading pairs; using flash loans to optimize interest rates; off-chain lending platforms using FILLiquid to improve capital utilization, etc.

Why is immutability of contracts so important?
 
There is actually no need to explain this in detail. Everyone in this industry should know about it. Especially for participants in the Filecoin ecosystem, it may be even more impressive (for various reasons, specific examples will not be listed here).
 
In the Filecoin ecosystem, there are not many projects with completely open source contracts, and there are not many projects that completely give up control of contracts. Among the projects I have seen so far, the ones I have studied are basically very simple local dog projects that are open source and give up control. Because this is very difficult:

1) Open source means that you must have a good design from the beginning, because you cannot change it later, unless you create a new project version 2.0. Note that this is not an upgrade, but a new project.
2) Security assurance must be in place;
3) The project party must dare to give up their interests.
 
In these aspects, the FILLiquid team dares to do so, which must be supported by strength. Judging from the open source and certification currently released by FILLiquid, this has been achieved. From the announcement released by FILLiquid below, all source codes can be viewed directly.



With open source and certification, users can even call contracts directly on the browser Filscan to implement operations, or call contracts directly through programs. This provides professional users with a new and reliable way to operate. The FILLiquid website is just a convenient browsing and operation interface for ordinary users, and it is not the only mode to interact with FILLiquid.
 
I tested the FIT contract and found that it supports calling the owner interface from the browser, and returns:
[owner] method Response
0x0000000000000000000000000000000000000000dEaD
 
Note that this is a dead address. In other words, no one has Owner privileges. Through studying the source code of the contract, it is certain that the contract cannot be upgraded or changed. In other words, once the code is deployed, it is like this. It can only act according to the logic of the code. No one can manipulate it, including the project owner and other authoritative organizations.
 
The FILLiquid contract itself is immutable, and the security level of its contract code logic immutability is guaranteed by the Filecoin chain. All the project can do is to provide services and incentivize community development through the FIG tokens it holds, nothing else.
 
Because the contract itself is open source and has passed the security audit of two auditing agencies. Therefore, for users, you do not need to blindly trust the project party and the development team, you just need to trust the code. This realizes Trustless. For professional users, it is still recommended to read all the contracts, DYOR, build confidence, and then participate.
 
How is this different from traditional lending?
 
We talked about Trustless earlier. For a closed-source project, you have to choose to trust the team and the project owner. For an open-source but upgradeable project, even if it is multi-signature, you have to trust that the signatories will not actively or passively do malicious things. This is the biggest difference.
 
Compared with centralized or semi-centralized lending, in addition to trusting the fund team, the procedures are complicated. Many SPs have gone through this process, not only to hand over the owner, but also to go through countless exchanges, KYC, due diligence, financial audits, computer room reports, and complicated contract terms, which are very confusing. On a completely decentralized platform, such as FILLiquid, these are not necessary, because of decentralization, you control your own funds, lend or mortgage yourself, and you can get it done with just a click of the mouse.
 
On the other hand, if you use centralized or semi-centralized lending, you cannot operate frequently, and each lending period is at least half a year. In FILLiquid, the operation is very flexible: for Lease users, you can deposit FILLiquid at any time, and you can redeem it at any time after one day (the one-day interval is based on security considerations, otherwise it will be attacked by flash loans); SPs can also borrow and repay at any time, and can borrow multiple times with almost no time limit. Compared with traditional lending, such lending flexibility can basically increase the utilization rate of funds by more than 30%, or reduce the lending time by 30%. In this way, even with the same lending rate, the borrowing cost of SPs can be reduced by 30%.

What else is there besides lending?
 
Lending is already very important. For Filecoin, lending is a rigid demand that every SP needs, but it just needs a very convenient platform. FILLiquid's decentralization, code immutability, and user operation flexibility allow any SP to reduce their own costs and increase the certainty of their income through this platform. FILLiquid can become a basic tool for the Filecoin ecosystem.
 
As FILLiquid develops further, we can think about what might happen. I have some simple ideas, and you can provide more ideas in the comments. Maybe we can find good ideas and start new projects, and I can find relevant parties to provide support.
 
FIT and FIL have a fixed price and continue to appreciate. When the liquidity of FIT increases, most FIL Hodlers are more willing to put it into FILLiquid to obtain FIT to obtain passive income without losing liquidity; when more FIL enters FILLiquid, it will reduce the market interest rate (the current high market interest rate is abnormal because the risk cost is too high) to a reasonable level, thereby reducing the cost of SP, which in turn promotes the growth of Filecoin computing power;
 
The liquidity of FIT can be met through other means: 1) centralized exchanges; 2) DEX, so LP income can be obtained by participating in FIT/FIL or FIT/USDT trading pairs;
 
·Lending rate arbitrage platform: FILLiquid's lending rate is determined by the supply and demand relationship and is closely related to FILLiquid's capital utilization rate. You can consider designing a platform to capture FILLiquid's low interest rate for lending, or use the platform to reduce the interest rate of existing loans by repaying and re-borrowing;
 
Bridge + automated lending tools. The annualized lending rate of Filecoin is very high compared to other platforms. We can develop a tool for bridging direct lending, or directly buy or sell FIT on other chains to enjoy lending benefits.
 
· Tools to increase lending rates: FILLiquid only provides pledged beneficiary addresses for 1:1 lending, which is mainly considered from the perspective of security. However, some platforms increase lending rates by staking Owners. Then, an intermediate product for staking Owners can be built. This product then pledges the beneficiary address to FILLiquid to obtain funds for lending, thereby alleviating funding pressure on the one hand and meeting the needs of SPs on the other;
 
Centralized lenders use FILLiquid to ease funding pressure: Some centralized lenders can provide high leverage, but they need to be based on more stringent terms and investigations. This can lower the threshold for some SPs to start up and give up some of their interests. Centralized lenders can directly call FILLiquid through contracts to obtain part of the funds and give SPs more protection.
 
·FIT re-staking: The value of FIT is fixed to FIL in a certain proportion and continues to increase in value, so FIT will become a very good collateral. FIT re-staking can provide endorsement for stablecoins; FIT can also provide endorsement for DePin validators when staking, which has a wide range of uses.
 
There are so many ideas that everyone can create. All of these are more valuable because of Trustless. This is also the key feature of FILLiquid.