Fluid (FLUID): Utilizing Debt and Collateral as Liquidity

Decentralized finance provides all sorts of exciting opportunities for users. By getting rid of middlemen and institutional policies, DeFi creates a more accessible, flexible space for people to explore the world of finance. Fluid is a new DeFi protocol that hopes to provide these perks and more to its customers. Can Fluid's user friendly interface and highly capital efficient crypto trading system distinguish it from all the other startups in the web3 space? Keep reading for a deep dive into Fluid's design and its FLUID cryptocurrency’s potential. 

Key Takeaways:

• Fluid is a decentralized financial protocol that focuses on lending and liquidity.

• Looking to trade Fluid tokens? Bybit now offers the FLUID/USDT Spot trading pair. To celebrate this listing, Bybit is holding two exclusive events where you can earn a share of the 70,000 FLUID prize pool.

What Is Fluid?

Fluid is a decentralized financial protocol that focuses on lending and liquidity. This system also includes a decentralized exchange (DEX), staking mechanisms and other exciting features. Fluid prides itself on being one of the most flexible, secure and advanced DeFi lending protocols around.

History of Fluid

The Fluid protocol is part of the Instadapp ecosystem that was founded by brothers Sowmay and Samyak Jain in 2019. Originally studying to be accountants, the brothers dropped out of college, winning the ETHIndia hackathon. They specialize in creating "middleware" that connects users with the exciting features of web3 finance. 

After raising $10 million in funding largely from Standard Crypto, the Jain brothers were able to expand their ecosystem until it became the fourth-largest DeFi system by total value locked. A somewhat new addition to the Instadapp ecosystem, Fluid was released in late 2023. It was inspired by the Jains’ experience building on other systems, such as Aave, Compound and Uniswap, and is meant to be their own custom version of these DeFi protocols.

What Does Fluid Aim to Achieve?

Fluid hopes to combine the best of multiple DeFi protocols into a single system. It ambitiously aspires to become the most advanced, secure, flexible and capital efficient option in the DeFi lending/borrowing space. When designing the system, Fluid's creators focused on optimizing automated market maker (AMM) liquidity, reducing gas trading fees and providing accurate risk assessment. They hope that combining so many excellent features into one system will help them maintain their competitive edge in the DeFi space. 

While Fluid does provide a lot of cutting-edge features, it also aims to maintain the accessibility for which the Instadapp ecosystem is known. Fluid’s system aims to provide a user-friendly interface that traders can grasp in a few clicks. Like Instadapp's other products, Fluid prioritizes user satisfaction and intends to offer services that multiple DeFi traders have asked for.

How Does Fluid Work?

The Fluid protocol runs on a complex blend of blockchains and software. It uses traditional coding methods to handle many of its user interfaces, while tools from Cardano, Arbitrum, Ethereum and other blockchains help to manage the back-end functions. Key mechanics that Fluid uses to keep its system working smoothly include the following.

• Liquidity layer: This is the central hub that consolidates all of Fluid's services in one central location. It uses a unified AMM liquidity pool to manage utilization rates, set automated limits and deploy rate models.

• Automated limits: These smart contracts dynamically adjust debt ceilings as market trends change. Their limits constantly change in order to prevent abnormal borrowing or community losses.

• Lending protocols: Fluid's lending system follows the ERC-4626 standard meant to optimize gas trading fees. It's designed to benefit borrowers and lenders equally.

• Vault protocol: Fluid's Vault protocol is borrower-targeted, offering perks like enhanced capital efficiency, low liquidation penalties and a simple user experience.

• DEX protocol: The DEX protocol uses an AMM system to match market orders as effectively as possible. It's based on Uniswap's design, but also allows people to use debt as an asset.

Features of Fluid

Fluid contains a broad range of different services for users to try. Following are the main features available through the Fluid website and app. 

Vaults

Vaults are similar to liquidity pools found in other DeFi systems. They consist of pairs of tokens, such as ETH and USDT. Each vault offers both a supply rate and a borrow rate, so users can join a vault to either lend or borrow money. Each vault uses enhanced capital efficiency and innovative liquidation mechanisms to streamline token transfer without impacting market prices. 

Lend

With Fluid, users can temporarily lend their tokens to others. The system supports a variety of tokens, and allows yields of up to 1.5 times your initial investment. Fluid's lending system is set up to ensure that lenders continue to earn staking rewards, delegation power and voting power associated with their tokens, even while they're locked in a lending contract. Traders start by connecting their wallets, and can begin lending almost instantly.

Borrow

Fluid's borrowing protocol requires users to place a small amount of tokens as smart collateral in exchange for temporarily borrowing funds. Its fairly high collateral ratio lets people borrow up to 95% against their initial collateral. Additionally, it boasts low liquidation penalties of just 0.1%, so users don't have to worry about losing all of their smart collateral the moment that market trends shift.

Fluid Road Map

Since its deployment in late 2023, Fluid has grown to become the third-largest DEX on Ethereum by volume. So far, advancement for Fluid has focused on expanding its pools to provide more lending and crypto trading options for users, and upgrading its vaults to support more assets. However, Fluid has big plans for the future. 

Like other protocols on Instadapp, Fluid is an entirely community-run project. Proposals for its growth show that most members of Instadapp's governing body are thinking about long-term growth for Fluid. Users hope to rebrand Fluid as a standalone project, with its own definitive token. They also hope to add further protocols to support market orders, such as derivatives, stablecoins, interest rate swaps and forex trading. 

FLUID’s Tokenomics

FLUID is the native token of the entire Instadapp system. Initially called INST, this token was recently rebranded as FLUID in order to highlight its pivotal role in running the Fluid DeFi protocol. As a utility and governance token, FLUID is responsible for everything from managing governance body votes to paying fees. Just as with INST, FLUID has a total token supply of 100 million. However, the rebranding of INST did involve slightly adjusting its distribution schedule. The new distribution for the FLUID token will be as follows:

• Community: 55%

• Team: 24%

• Investors: 12%

• Future ecosystem partners: 8%

• Advisors: 1%

FLUID Price Prediction

Since its release in 2021, prices for the FLUID token have primarily ranged from $0.05–$2. However, the announcement of the token rebrand propelled its value to $9 in early December 2024, and people expect its price will continue to rise as news about Fluid’s DEX is released.CoinCodex predicts that FLUID’s price will more than double to reach $22 within a month. However, once the initial excitement begins to fade, its price may drop slightly. CoinCodex suggests that the FLUID token’s price will return to a more stable price of around $13 by the summer of 2025. 

Where to Buy FLUID

Looking to trade the FLUID token? Bybit now offers the FLUID/USDT Spot trading pair. To get started, you’ll first need to create a Bybit account, then fund it with cryptocurrency and navigate to the FLUID/USDT Spot trading page. 

To celebrate this listing, Bybit is holding two exclusive events where you can earn a share of the 70,000 FLUID prize pool.

Is FLUID a Good Investment?

FLUID is certainly an intriguing option that combines the reliability of a long-term token with the excitement of a new launch. While its price might not stay high forever, it’s unlikely to drop drastically any time soon. This means there’s a strong potential for making money from FLUID. 

For most investors, the challenge of working with FLUID will be to time their purchases. Though you may lose money if you purchase at the peak of the Fluid DEX hype, buying at any other time could result in either short- or long-term profit. If you want to avoid the dangers of market volatility, you need to do your research and remember to keep your portfolio diverse. 

Closing Thoughts

Fluid’s DeFi protocol provides valuable services to investors looking for an easy way to borrow, lend and/or trade crypto. While Fluid's parent company, Instadapp, has been around for a while, the Fluid project is just getting started. In the few months since its launch, Fluid has rapidly increased its services and attracted users from around the Web. As its system continues to evolve, users can expect more exciting news ahead.

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