Original Title: Flying Tulip: Bootstrapping a Full-Stack Exchange, Rethinking Fundraising
Original Author: Lemniscap
Original Translation: Ismay, BlockBeats
Editor’s Note: The $1 billion fundraising target of Flying Tulip may seem daunting at first glance, even raising concerns about "sky-high financing and project teams cashing out." However, according to Lao Bai (@Wuhuoqiu), its unique mechanism design is precisely aimed at avoiding the pitfalls of traditional token financing. This massive fund is not directly controlled by the team but is used as a project treasury, generating stable operating funds through investments in low-risk U.S. Treasury bonds and on-chain yield protocols (such as Ethena).
For investors, their principal is secured by a "perpetual put option." This means that whenever investors believe the project’s prospects are poor or the token price falls below the issue price, they can choose to redeem their investment at the original price, with no loss of principal. Investors only incur the time and opportunity cost of their funds. If everyone chooses to redeem, the team will take nothing. More importantly, every time an investor redeems, the corresponding tokens will be permanently destroyed. This puts the $FT token on a deflationary path from the moment of its inception, with its total supply continuously decreasing as redemptions occur.
It is understood that the project is viewed by its founder, the legendary DeFi builder Andre Cronje, as the "culmination" of past projects (such as YFI, KP3R, Solidly). It integrates core functions such as spot trading, lending, perpetual contracts, options, and on-chain insurance, aiming to elevate capital efficiency through the synergy between modules. Therefore, Flying Tulip is not only a bold technical attempt but also a social experiment on the dynamic interplay between token economics, investor confidence, and project value. It remains to be seen how the return of DeFi king Andre Cronje will perform.
The following is the full content:
We are honored to announce our participation in the $200 million seed round financing of Flying Tulip. Flying Tulip is a new initiative launched by Andre Cronje and his team. It is an ambitious attempt to build a full-stack trading platform from scratch, covering spot trading, perpetual contracts, options trading, as well as lending and structured yield products. Although its business scope is broad, this article will focus on its fundraising model—this is precisely the area where Flying Tulip seeks innovation.
Motivation and Opportunity
Competing head-to-head with giants in the DeFi space is a daunting task. These giants have stronger capital, robust recurring revenue, and large teams, making their operational capabilities incomparable to those of a lean startup. They enjoy entrenched network effects, deep ecosystem integration, and a loyal user base. Additionally, there are "political" factors: the influence over industry standards and partnerships is often as important as product quality.
Therefore, even if a small startup brings genuine innovation, successfully pushing it to market is an entirely different battle. The challenge lies not only in technology but also in funding and social aspects. Flying Tulip addresses this challenge by reshaping the way capital is formed in the crypto space. It does not rely on "mercenary liquidity" or token mechanisms that falter after initial financing but seeks to establish a fundraising model that can sustain project operations long-term until its product suite can generate self-sustaining revenue.
Limitations of Token Fundraising
So far, crypto tokens have achieved the greatest success as a form of crowdfunding: selling tokens, raising capital, and launching projects. However, once the initial phase ends, many tokens gradually become irrelevant, and their value tends to zero as teams struggle to create sustained demand.
Utility-based tokens remain an active experimental field, but in many cases, tokens primarily serve as a fundraising mechanism. This role is often most meaningful during the project launch phase, after which the project gradually evolves into a self-sustaining company.
Flying Tulip candidly accepts this reality and attempts to build a new model around it.
Flying Tulip's Fundraising Model
The core idea is simple: raise a large reserve of funds through token sales, invest these funds in low-risk DeFi strategies, and use the generated returns to fund project operations until the product suite can generate its own income.
Investors will receive FT tokens backed by a perpetual put option. As long as they hold the tokens, investors can redeem them at any time and recover their original investment. This put option never expires. Rationally, investors will only exercise this option when the token price is below their purchase price, at which point the tokens in their possession will be destroyed.
In practice, investors incur an opportunity cost of about 4% yield—this is the return they could have earned by directly investing in DeFi. In exchange, they gain the upside potential of FT, while this structure maximizes the downside risk reduction.
Flying Tulip aims to raise $1 billion. There is no lock-up period for the tokens, and 100% of the supply flows to investors at launch. With an approximate 4% yield on treasury assets, about $40 million can be generated annually to support project operations and the launch of the product suite until fee income can take over.
Buybacks and Destruction are the Core of the Model
The income generated from treasury returns will be allocated between operating expenses and FT token buybacks. Over time, the fees generated by the main product suite will provide a new source for buyback demand.
Importantly, if investors sell FT tokens on the secondary market, their put options will become void. The capital they initially invested will be transferred to the foundation for buybacks and token destruction. This means that selling not only causes investors to lose their protection but actively enhances the token's deflationary mechanism.
In summary, these dynamics make FT a deflationary asset from day one, with demand and supply reduction having multiple mutually reinforcing sources.
Economic Significance
Since the entire supply of FT is in the hands of investors at launch, early market dynamics may be very volatile. Limited circulation combined with a continuous buyback plan creates conditions for strong "reflexivity."
Unlike traditional fundraising where the supply is divided between the team and investors, Flying Tulip starts with 100% investor allocation. Over time, the supply will gradually shift to the foundation and eventually be destroyed. Theoretically, the token may ultimately fulfill its mission and completely disappear.
Our Investment Logic
Flying Tulip is not a risk-free investment, but it is unique. The success of this model depends on the team's ability to effectively manage the treasury, maintain returns, and deliver a competitive product suite. The cost is a loss of capital efficiency: investors forgo returns they could have directly obtained, and this forgoing is only worthwhile if the project succeeds.
For this fundraising "primitive" to succeed, the following factors are crucial:
The ability to raise a large amount of capital, typically supported by a key individual or team with a reputation, influence, and trust sufficient to attract capital.
A sufficiently mature product suite that truly warrants such a large-scale launch.
In our view, Flying Tulip rarely possesses both of these elements simultaneously.
Andre is one of the top builders in the crypto world, with significant influence but also controversy. His past achievements in launching original "primitives" are well-documented, and Flying Tulip aligns with this pattern: it employs a non-traditional mechanism that fundamentally rethinks the token fundraising model while launching a product suite that directly targets existing market giants.
We support the Flying Tulip team because it represents a genuine reflection on the token capital formation model, which is at the core of the crypto movement. If it succeeds, it could accelerate the launch process of ambitious projects and make the entire ecosystem more competitive, ultimately benefiting end users.
This is an experiment full of unknowns. But it is precisely these kinds of experiments that drive the crypto world forward.
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