Written by: On-Chain View
After reading many interpretations of DeFi's father AC@AndreCronjeTech's new project @flyingtulip_, it feels like everyone is bewildered by the explosive news of a $1B valuation raising $200M. After all, the Ponzi naming of Flying Tulip and the high FDV VC coin curse are enough to stimulate everyone's sensitive nerves. But what is the logic behind this round of high financing? Here’s my personal understanding:
1) The feeling of AC as the original leader of DeFi innovation has returned.
When mentioning AC, everyone should temporarily forget about the setbacks of @SonicLabs chain; his true appeal lies in defining the paradigm of DeFi innovation, and the logic behind the high valuation should be hidden here.
Flying Tulip is defined as a full-stack DeFi exchange, encompassing spot, contracts, options, lending, derivatives, and more. It sounds like it aggregates the functions of existing platforms like Uniswap, AAVE, GMX, etc. Wow, is it another Frankenstein?
No, the innovation of this product lies in the full functional integration of a single liquidity pool. Users who previously needed to jump between multiple DeFi protocols can now complete their needs in Flying Tulip simultaneously, including providing liquidity, collateral lending, and leveraged trading.
This is, of course, the result of the simultaneous maturation of chain infrastructure, DeFi applications, and financial business integration logic. Will it experiment and fail like AC's past Keep3r and Solidly? Who knows. But its liquidity aggregation function comes at just the right time.
2) "Put options" solve the pain points of the VC coin model.
I see many people interpreting Flying Tulip's permanent put options as "capital preservation investment," which is too superficial. At a deeper level, it has designed a game mechanism for DeFi financing systems, and the courage to gamble $200 million comes from this.
The Achilles' heel of traditional VC coins lies in the structurally unfair distribution of benefits. The so-called institutions buy in at low prices and lock up for a long time, while retail investors can only buy in when the institutions' coins are starting to unlock, meaning retail investors end up paying for the institutions' profits.
Flying Tulip's put options turn the table completely, giving 100% of the chips to investors first, with 0 lock-up. Isn’t that aggressive?
Investors holding FT tokens retain their capital preservation rights; if dissatisfied, they can redeem their staked stablecoins and crypto assets at any time (sacrificing a bit of opportunity cost); or sell FT tokens, in which case the staked principal automatically transfers to the foundation for buyback and destruction (giving up the principal).
Essentially, Flying Tulip becomes a "self-sustaining" DeFi hedge fund: investors inject principal into the pool, while the project team uses the stable interest from the pool to operate. The market buying and selling speculation of FT tokens then transforms into a continuous buyback mechanism to drive deflationary growth.
In simpler terms, it converts the previous project's largest selling pressure speculation into a buyback motivation, forcing investors to continuously hold and act like family.
3) Innovating capital structure to exchange for the landing time of product PMF.
After introducing the above innovative mechanism, one can easily spot a bug: if investors collectively exercise their redemption rights, wouldn’t that be game over? Correct, but if the product takes off, the fee income will become a continuous buyback support, and the token will enter a positive feedback loop. Again, this emphasizes that it is a mechanism innovation at the game level, not a simple functional improvement.
In my view, this is the brilliance of AC's new product. The reason most current projects cannot escape the fate of experimental failure is that pure governance token mechanisms do not function until the product achieves PMF, combined with the market's consistent profit-seeking behavior, leading most products to end without results.
Flying Tulip provides the project team with the correct path to build the project: locking in the certainty of low returns in the DeFi pool (a $1B fund pool generating $40M at 4% annualized is enough to support 5-10 years of slow-paced development). Whether the project will quickly wither or grow rapidly is left for the market to gamble on. (AC's biggest problem is starting strong but ending weak; if this time there’s a weak ending, we won’t blame AC.)
That’s all.
The question arises: can DeFi imitate this in the future? The answer may still be too early. The key point of Flying Tulip's financing model innovation lies in AC himself: sufficient funds must be injected into the pool initially (to ensure interest covers costs), sufficient technological innovation must drive growth in the middle (to ensure product growth data), and finally, the token must have enough secondary market trading support (trading volume and liquidity are vital).
Regardless, in my view, this innovation of Flying Tulip represents a bold innovation in financing models in Crypto and will be AC's magnum opus in the DeFi world!
However, with precedents like Keep3r's unfinished business and Solidly's hasty conclusion, whether Flying Tulip will ultimately be AC's redemptive masterpiece or another case of losing momentum remains to be seen.
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