Fluidity Money is a DeFi yield primitive that redefines the term ‘spend-to-earn’. With Fluidity, instead of locking up assets for yield, users simply earn rewards for every transaction they perform. Fluidity rewards users for spending their money by randomly awarding them dividends each time they send, receive, or swap their crypto assets.
Fluid assets are one-to-one mapped, wrapped versions of tokens that can be redeemed for the base asset at any point of time. Unlike most DeFi use-cases, where you have to lend, stake, or lock up your assets in one way or another to earn yields, Fluidity pays you rewards for actively using your crypto assets. Rewards range from a few cents to millions of dollars, and are unlocked by sending, receiving or swapping your fluid assets.
If User A transfers fUSDC to User B, both User A and User B stand a chance to win a random reward (the yield split 80:20 between sender and receiver); roughly 50–70 percent of transactions using fluid assets will be yield-bearing.
How does this work? The collateral you deposit to receive fluid assets will earn yield, and a novel algorithm — the Transfer Reward Function (TRF) — will allow Fluidity to distribute that yield whenever the fluid-wrapped assets are used.
The utility structure of Fluidity is clear. But, what were the biggest gap in the current crypto incentive structure that Fluidity is solving? How will Fluidity create sustainable yield for users doing what they’d already naturally do, and give a leg-up to new protocol’s looking to tap into DeFi liquidity?
The yield farming and liquidity generation paradigm in this DeFi epoch is highly unsustainable. Take the case of liquidity mining, where protocols announce mining programmes to attract users to provide liquidity with the promise of high APYs.
Over time, as the resources decay and the actual rewards revert to mean, the same users will fan out in search of higher APYs elsewhere. That is, the protocol will be paying over the odds for liquidity devoid of stickiness and a user base not incentivised to explore the protocol. In addition, liquidity mining disproportionately rewards high-capital users who corner a large percentage of the APYs.
That is where Fluidity’s Transfer Reward Function (TRF) comes in, in the form of the upcoming Utility Mining function. Its purpose is to reward genuine users of a given protocol, paying them with governance token rewards on top of the usual TRF rewards for actively engaging with a protocol’s tech.
Utility Mining will let protocols distribute their supply to active, engaged users instead of flighty, speculative capital, building up more resilient communities with longer-term aligned incentives as a result. Fluidity will help other protocols build bigger and better communities by leasing their incentive layer to them.
For example, if DODO signs up for Utility Mining, and a user performs a designated transaction with an fDAI on DODO, the user could stand to win up to three types of yields: TRF rewards, Fluid governance tokens, and DODO governance tokens.
With Utility Mining, protocols can also advertise a higher yield, and, by extension, attract the highest user attention. To control Utility Mining emissions, utility gauges are in place—Fluidity DAO users and protocols with power to vote on emissions can decide which platform receives the highest emissions.
Think Curve Wars (fight for the flow of liquidity in DeFi), and extrapolate it to a competition to control the flow of users across chains and protocols; here, liquidity is just the second-order effect of utility. On a high level, Fluidity is an incentive layer that gives protocols a chance to bid for the attention of highly engaged users who are aligned with the overall vision of the protocol.
The mainnet is now live, meaning users can take advantage right now. Head over to Fluidity Money, where you can exchange the USDC for fUSDC and begin earning random rewards every time you make a trade. You can also follow the latest updates from the protocol, including the announcement of a successful $1.3 million seed raise led by Multicoin Capital and progress of the Utility Mining feature, on their Twitter and Medium.
