Author: @thedefiedge, Crypto KOL

Compiled by: Felix, PANews

On December 4, the Fluid Protocol, a DeFi protocol under the Instadapp team, announced a brand redesign and growth plan proposal, intending to rename the token INST to FLUID and implement a revenue buyback plan of up to 100%. Fluid plans to launch a series of upgrades over the next 12 months, including launching a DEX on L2, upgrading the ETH Lite Vault, adding more asset support, and launching DEX v2. Crypto KOL @thedefiedge provided an interpretation of Fluid Protocol, with the following details.

Project Name: Fluid

Token: FLUID (formerly INST)

Market Cap: $362.4 million

TVL: $3.47 billion

Number of Holders: 5,823

Track: DeFi - Lending + DEX

The project has no venture capital, no marketing hype, no points or gamification, just pure product dominance.

Fluid is the most innovative DeFi protocol of the year. Instadapp has just completed the rebranding of Fluid and renamed it; this article is a brief report on the protocol.

Imagine a platform where your lending not only costs you money but also makes you money. This is the uniqueness of Fluid. Fluid (formerly Instadapp) has been building since 2018 and is no stranger to DeFi innovation.

During the DeFi summer, Fluid managed over $15 billion in TVL, solidifying its position as a key infrastructure player and being one of the earliest middleware solutions in DeFi.

Middleware can be seen as a bridge. It connects users to different DeFi protocols like Aave, Compound, and Maker, making it easier to access their services from one platform.

Users can manage everything, including lending and earning yields, without having to access each protocol separately. All of this is done through Instadapp.

Now, Instadapp is being rebranded as Fluid, an ecosystem that combines money markets and DEXs to make liquidity and debt more efficient. It is at the core of a suite of four products, including:

• Instadapp Pro: Advanced tools for DeFi power users.
• Instadapp Lite: A simplified, user-friendly DeFi gateway.
• Avocado Wallet: A next-generation smart wallet for seamless cross-chain interactions.
• Fluid Protocol: Combining money markets and DEXs for unprecedented liquidity efficiency.

Fluid aims to make DeFi easier and more efficient by introducing features like smart collateral and smart debt, which can help users earn more money and do more with their assets.

Game-Changing Innovations

Smart Collateral: Most lending protocols allow users to deposit collateral, while Fluid enables users to deposit currency pairs like ETH>wstETH, allowing their collateral to support loans and earn trading fees as liquidity in the DEX.

Smart Debt: Debt has always been a cost. Fluid transforms debt into an asset. Borrowed funds are used as trading liquidity, earning fees, thus reducing users' borrowing costs. In some cases, high trading volumes may even mean that users are effectively being rewarded for borrowing.

Let's understand this through an example:

In the example above, due to the trading APR offsetting about 5%, the borrowing cost is reduced to about 7.57% (initially 12.44%).

This is a practical application of smart debt, where users' borrowing positions can earn trading fees, effectively lowering the borrowing APY.

The Bigger Picture of Fluid

In the next 2-3 years, DeFi lending is expected to grow into a market opportunity exceeding $100 billion. Currently, giants like Aave and Compound dominate, but challengers with new ideas also have room for growth.

Fluid's niche lies in combining lending with DEX liquidity, with liquidity sufficient to challenge Uniswap, aiming for a market size of $10 billion by 2025.

Fluid Dex has already become the third-largest DEX on Ethereum, with a 7-day trading volume of $428 million and a TVL of $1.42 billion within a month of its launch.

Top three Ethereum DEXs by trading volume market share:

• Uniswap: 66.9%
• Curve Finance: 15.0%
• Fluid Dex: 4.5%

Fluid's Dex trading volume, Dune

Fluid's DEX allows users to trade more intelligently. With features like smart collateral, LPs can use their liquidity positions as collateral while earning trading fees and reducing risk.

For borrowers, Fluid offers higher efficiency compared to competitors like Aave, Compound, and MakerDAO.

For example, Fluid's wstETH > ETH token pair has a liquidation penalty as low as 0.1%, making it cheaper and safer for users.

Fluid has processed over $1 billion in trading volume and plans to expand into derivatives, real-world assets, interest rate swaps, and foreign exchange markets.

On the Ethereum mainnet, the average yield for USDC is 15%, while GHO's average yield is 14%. The yield for USDC on Base and Arbitrum is around 18%.

With such yields, it is no surprise that stablecoins are flowing in.

Renaming to FLUID aligns with Instadapp's vision of creating a sustainable DeFi ecosystem that brings strong value accumulation for token holders.

The buyback plan and enhanced governance are expected to drive speculative demand and organic growth.

Key Catalysts

• Renaming INST to FLUID and conducting a 1:1 token migration (non-dilutive).
• Initiating a buyback plan when annual revenue reaches $10 million, using up to 100% of the revenue.
• Proposal for a strategic partnership between Lido Protocol and Fluid.
• Aave DAO proposes to acquire 1% of the total supply of INST tokens.
• Expansion: Increasing support for new markets such as derivatives and real-world assets.
• Growth incentives aim for a market size of $10 billion by 2025.
• 12% of FLUID allocation for CEX listings, market making, and financing.
• Developing protocol-owned FLUID liquidity on FLUID DEX.
• FLUID will launch on ByBit, with more CEX listings expected.

Instadapp is operated by a team with over 5 years of experience and is supported by institutions such as Naval Ravikant, Balaji Srinivasan, Coinbase Ventures, and Pantera Capital.

Team members include @smykjain, @sowmayjain, @DeFiMade_Here.

What Sets Fluid Apart

• Commitment to security: Instadapp has not been hacked in the past 6 years and has undergone 6 audits to date.
• Revenue-sharing opportunities: Fluid combines lending and trading fees, providing users with multiple income sources and driving higher TVL.

As the protocol develops, future plans include algorithmic buybacks to reward token holders.

Roadmap: Fluid is expanding into derivatives, real-world assets, and foreign exchange markets. Encouraging lending and DEX activity, with up to 0.5% of the total supply used monthly. New token economics (such as revenue sharing) aim to attract more users and create value.

Strategic Cooperation:

The Lido Alliance has proposed establishing a partnership to promote the adoption of wstETH on Fluid, targeting billions in TVL.

• Lido will provide TVL growth incentives, brand support, and promote adoption on L2.
• Fluid will share 30% of fees from the Instadapp Lite ETH treasury and 50% from the LRT>wstETH treasury.

Wintermute has proposed a 700,000 INST/FLUID loan for one year, offering a $10 execution price repayment option to provide liquidity on major DeFi and CEX platforms.

Aave DAO will use GHO to purchase "INST tokens worth $4 million (about 1% of the total supply of INST with a FDV of approximately $350 million)."

Aave DAO will allocate up to 1/3 of INST tokens through Merit to support the GHO pair on Fluid.

Use Cases of FLUID Token

The FLUID token is not only used for governance but also plays a core role in the protocol's growth and value accumulation:

• Revenue Sharing: Up to 100% of the protocol's revenue will be used for buybacks, supporting token value.
• Governance: Token holders can influence key decisions such as fee structures, fund usage, and future upgrades.
• Liquidity Rewards: FLUID will provide incentives for stablecoin lending, DEX activities, and the protocol's own liquidity for token holders.

In recent years, there haven't been many exciting changes in DeFi. Most protocols have only made minor improvements, lacking anything truly groundbreaking.

Fluid is the first protocol to genuinely challenge Uniswap, becoming the third-largest DEX on Ethereum within just one month, with a weekly trading volume of $428 million.

This is the key point. They achieved this with only three pools. Imagine what will happen when they scale up.

It's not just ordinary users who have noticed this; DeFi institutions like Lido and Aave are lining up to collaborate with Fluid, and those familiar with the field are heavily betting on Fluid. Fluid is not just another DEX or lending protocol. With smart collateral, users' assets won't sit idle and will earn trading fees. With smart debt, users' loans can generate income, thereby reducing borrowing costs.

Related Article: TVL Monthly Growth Rate Up to 3 Times, Will DeFi Newcomer Fluid Disrupt Aave and Uniswap?

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