In this edition, we’re giving you the latest on Fluid, a DeFi protocol, and base for future financial systems by Instadapp.
Stay alert, stay informed ⬇
Background on Fluid
Instadapp is a protocol that builds a suite of tools to leverage the full potential of DeFi and bring it to the masses.
Samyak, Founder of Instadapp describes Fluid as a significant evolution in the DeFi space, aiming to address major challenges faced by the ecosystem.
Fluid is the "liquidity layer", which serves as a central hub for liquidity. This layer facilitates the construction of other protocols on top of it, ensuring high capital efficiency and minimizing liquidity fragmentation.
Liquidity layer serves as “a playground for newer better protocols to come to life”.
Liquidity fragmentation is a significant issue in the DeFi space. Fluid aims to address this by maintaining liquidity at the base layer, eliminating the need for liquidity migration when new protocol versions are introduced.
Fluid eliminates friction between lenders and borrowers.
A new borrowing protocol can be introduced without disrupting lenders, thereby enhancing efficiency.
Liquidity Layer and Security Features
The liquidity layer is a foundational element of the Fluid Protocol.
Its role is to unify liquidity and ensure high capital efficiency.
Security features include:
Automated Limits, inspired by other protocols like MakerDAO and Compound. These limits restrict borrowing and withdrawals based on predefined percentages over specific timeframes.
Borrowing limits, which can be set, for instance, at 10% over 24 hours. As borrowing approaches this limit, it gradually increases at a set rate, allowing organic users to continue borrowing seamlessly.
Withdrawal limits, which can also be set, for example, at 20% over 24 hours, ensuring that not all users can withdraw simultaneously. This adds a layer of protection against potential hacks.
Protocol class; new protocols added to the liquidity layer start as class zero, where guardians can pause them. Once a protocol proves itself over time, it can be upgraded to class one, where it cannot be paused by guardians, ensuring more decentralization.
Certain situations in DeFi history, like the Euler hack, could have potentially seen automated limits significantly reduce the impact in such scenarios.
Building on Liquidity Layer
The first 3 protocols built on Fluid will be:
Lending Protocol:
Vault Protocol ($ETH Borrowing Vault):
DEX Protocol:
Smart Debt and Passive Income
Smart Debt allows users to earn passive income through trading fees.
Users can potentially earn from their positions, effectively turning the tables so they're gaining rather than paying interest.
Liquidity is sourced from the liquidity layer; this layer can draw from various protocols, ensuring a steady flow of funds.
Traders operate on top of this debt, adjusting its configuration.
This dynamic system allows users to convert their debts to other assets.
With every trade, the debt value decreases due to the fees, leading to a gradual reduction in the overall debt over time.
Liquidation Process
Anyone can establish their own liquidation system on Fluid.
The process has been designed to be straightforward, making it accessible even to those who aren't professional liquidators.
Liquidation can actually be routed through DEX aggregators, adapting dynamically according to the prevailing prices.
Introucing $INST
Samyak introduced the role of $INST within the Fluid Protocol, emphasizing its significance in the governance of the protocol.
Governance will be responsible for making decisions related to fees, rates, and other essential configurations within the protocol.
The governance mechanism will become fully active and operational once the Fluid Protocol is officially launched.
Samyak highlights the robustness of the governance system, ensuring that it is resistant to potential attacks or manipulations. He emphasizes the importance of community involvement in governance decisions.
Samyak emphasizes the importance of community involvement in governance decisions.
He also recognizes inherent risks around allowing token holders to govern protocol parameters but believes the system is resistant to potential attacks or manipulation.
$INST could drive community engagement and participation, perhaps fostering a sense of ownership and involvement among token holders.
Growth Plans for Fluid Protocol
The team has the intention to distribute stablecoins and $ETH as rewards, AKA ‘real yield‘ rather than using $INST to incentivize.
The primary goal of attracting a significant amount of TVL into the protocol, ensure its growth and stability.
Samyak has brought up the potential for users to earn a higher lending APR, suggesting that this could serve as an incentive to draw more liquidity into the protocol.
To differentiate themselves from other DeFi protocols, the team highlights some features of Fluid, such as high loan-to-value (LTV) ratios and smart collateral,
These could make the protocol more unique when compared with other projects and could offer users better returns.
Key Dates for Fluid Protocol Launch
Security audits for the Fluid Protocol are anticipated to be finalized by the end of November 2023.
There are plans to make the code public for open audits after the completion of the security audits in November 2023.
He mentions that the main protocol is slated for deployment around mid-December 2023 but it won't be accessible to the public immediately.
Samyak has discussed an initiative to inject half a million dollars into the protocol, either through governance treasury or from the team's fund.
This would be followed by an open hacking competition, where anyone capable of hacking the system could claim the money.
The expectation is for the official launch of the main protocol to be around mid-January 2024.
Samyak has emphasized the importance of ensuring utmost security before the launch, including thorough audits by professional firms and open audits.
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