A Detailed Explanation of AC's New Project: What is the Financial Innovation Logic Behind the $200 Million Financing?

I've seen a lot of interpretations about the new project @flyingtulip_ by the father of DeFi AC @AndreCronjeTech, and it seems everyone is bewildered by the explosive news of a $200M funding at a $1B valuation. 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 high financing? Let me share my personal understanding:

1. The feeling of AC being the original leader in DeFi innovation has returned.

When it comes to AC, everyone should temporarily forget about the shortcomings of the @SonicLabs chain; its true appeal lies in defining the paradigm of DeFi innovation, and the logic behind its high valuation should also be hidden here.

Flying Tulip is defined as a full-stack DeFi exchange, including spot, contracts, options, lending, derivatives, etc. It sounds like it aggregates the functionalities originally possessed by Uniswap, AAVE, GMX, and others. Wow, is it another Frankenstein?

No, the innovation of this product lies in the fully integrated single liquidity pool, allowing users to simultaneously fulfill their needs that previously required jumping between multiple DeFi protocols, including providing liquidity + collateralized lending + leveraged trading, etc.

This is undoubtedly the result of the simultaneous maturation of the logic behind chain infrastructure + DeFi applications + financial business integration. Will it end up being a failed experiment like AC's past Keep3r and Solidly? But the aggregation of liquidity function comes at just the right time;

2. "Put options" address the pain points of the VC coin model.

I see many people interpreting the permanent put options of Flying Tulip as "capital-preserving wealth management," which is too superficial. The deeper layer is that it has designed a game mechanism for a DeFi financing system, and the courage to bet 200 million dollars comes from this.

The Achilles' heel of traditional VC coins lies in the structural unfairness of profit distribution. The so-called institutions buy in at low prices and lock their coins for a long time, while by the time retail investors are eligible to buy in, the institutions' coins are already starting to unlock, meaning retail investors end up paying for the institutions' profits.

The Flying Tulip put options have directly turned the table, giving 100% of the chips directly to the investors with 0 lockup. Isn't that very aggressive?

Holding FT tokens means retaining the right to capital preservation for investors. If unsatisfied, they can redeem the staked stablecoins and crypto assets at any time (sacrificing a bit of opportunity cost); alternatively, selling FT tokens will result in the principal being automatically transferred to the foundation for buyback and destruction (giving up the principal).

In other words, Flying Tulip has transformed into a "self-sustaining" DeFi hedge fund: investors contribute principal to inject into the pool, while the project team utilizes the stable interest from the pool to operate. The market trading speculation of FT tokens has then turned into a continuous repurchase of tokens to create a deflationary growth loop.

In simpler terms, the biggest selling pressure and speculative behavior of the original project has been transformed into buyback momentum, forcing investors to continuously hold and act like family.

3. Use innovation in capital structure to exchange for the landing time of product PMF.

After introducing the innovative mechanism above, one can immediately spot a bug: if investors collectively exercise their redemption rights, wouldn't that just lead to the end? That's correct, but if the product gains traction, the income from transaction fees will provide a continuous additional buyback support, and the tokens will enter a positive feedback loop. I want to emphasize again that this is an innovation in the mechanism at the level of game theory, rather than a simple functional improvement.

In my opinion, this is the impressive aspect of the new product AC. The reason why most current projects cannot escape the ultimate failure of experiments is that the pure governance token mechanism does not function until the product achieves Product-Market Fit (PMF), and combined with the market's uniform profit-seeking behavior, it leads to the demise of most products.

Flying Tulip provides the project team with the correct path to build the project, simply locking in a certain low yield in the DeFi pool (a $1B fund pool generating $40M at an annualized rate of 4% is sufficient to support slow-paced development for 5-10 years). As for whether the project will quickly wither or grow rapidly, it is left for the market to decide through its own competition. (The biggest problem with AC is that it starts strong but ends weak; well, if there is a weak ending this time, we won't blame AC.)

Above.

The question arises, can DeFi be imitated in the future? The answer may still be too early. The most critical point of innovation in the financing model of Flying Tulip lies in the person AC: in the early stage, there needs to be sufficient funds injected into the fund pool (to ensure that interest covers costs), in the mid-term, there must be enough technological innovation to drive (to ensure product growth data), and finally, the tokens must have sufficient support from secondary market trading games (trading volume and liquidity are vital).

In any case, in my opinion, the innovation of this Flying Tulip represents a bold innovation in the financing model of Crypto, and it will be a monumental work of AC in the world of Decentralized Finance!

However, with the precedent of Keep3r falling through and Solidly ending abruptly, will Flying Tulip ultimately be the redemption masterpiece of AC, or will it once again lose its luster? Let's wait and see.