#FalconFinance #falconfinance $FF @Falcon Finance
I would like to begin in a very transparent manner. I tend to be wary whenever I read the phrase new yield infrastructure in crypto. Not that yield is bad in itself but because history has shown me that yield is what is first talked of and last considered carefully. I have too often watched systems that were fine on the surface and then failed the instant the markets ceased to be agreeable.
And when I first encountered Falcon Finance I did not consider it as an additional stablecoin project or another DeFi primitive that will offer higher yields. I happened to view it in a far more awkward position. I asked a simple question. What ruptures first when there is a loss of liquidity.
Experience shows that the answer is nearly never interface. It is never the charts. It is never the marketing. The collateral model is the first one to break. This is where Falcon Finance is concentrating its attention.
It is only when collateral assumptions are put to the test that most DeFi users can truly understand how fragile they are. All is well when markets are peaceful. Prices move slowly. Liquidations are rare. Risk feels theoretical. However when volatility strikes those assumptions are very soon revealed.
Suddenly, illiquid assets become important. A correlation is self-evident. Unwounding of overlevered positions. And systems that appeared diversified show that they were all dependent on the same underlying exposure.
I have experienced periods when various positions in various protocols all began failing simultaneously. Different names. Different dashboards. Same risk underneath. It was then that I realized that there was indeed no yield problem in DeFi. It has a collateral architecture problem.
Falcon Finance was constructed out of that awareness.
A mute fact of liquidity in DeFi that is not talked about enough is that this is in fact a silent truth. Yield draws in capital but the quality of collateral decides whether the capital remains. When things are good, people pursue yield. When they have faith in the building, they remain.
Falcon does not begin by stating what yield it is capable of. It begins by posing the question of how assets could be left in usable form without being constantly threatened by liquidation. The change of those thoughts is subtle yet significant.
Falcon Finance defines its mission as universal collateralization infrastructure. On the face of it that resembles marketing jargon. But with it stripped bare the idea is simple and bold.
Any liquid enough asset ought to be allowed to be productive collateral without subjecting users to liquidation cycles.
Most systems do not operate that way nowadays. In the majority of DeFi, you unlock liquidity by accepting one of three outcomes. You sell your asset. You lock it in a rigid vault. Or you borrow on it and take the chance that a sudden movement will leave you penniless.
Falcon is attempting to do that by considering the utilization of assets instead of just placing everything into a very small pool of approved tokens. This is important since capital efficiency is not supposed to be at the expense of long term ownership.
This leads us to USDf which is overcollateralized synthetic dollar Falcon Finance. On paper that rings true. We have witnessed numerous variations of this concept. However, the difference is manifested in the behavior of the system under stress rather than in its description.
USDf is created to offer on chain liquidity without compelling users to sell their underlying assets. It might sound easy, but a customer who has ever borrowed in DeFi is aware of how infrequent that emotion is.
I have not borrowed on many occasions not because I was not in need of liquidity but because I was not convinced of the liquidation mechanics in the fast markets. A single step to the right and I have lost a long term job.
USDf attempts to minimize that risk materializing through its overcollateralized design and through its asset flexibility. It is not constructed to aggressively expand. It is built for stability.
It has nothing to do with printing dollars faster. It concerns reaping off of assets without ruining long term positioning. That difference alters your usage of the system.
The most interesting part of Falcon Finance is that it includes digital assets as well as tokenized real world assets as collateral. It is not merely a narrative choice. It is a structural one.
Practically most DeFi protocols consider real world assets a marketing feature. They exist on the side. They do not form part of the risk model. Falcon seems to be approaching more artificially.
In stability-based collateral systems, real world assets are rational. They are less volatile. They possess more transparent valuation structures. They produce consistent production throughout their lives. However, a poor integration can be risky.
Caught up RWA integration produces spurious confidence. It makes systems appear to be safer than they are. Falcon does not seem to be in a hurry about this. That patience matters.
Overcollateralization is another aspect that should be discussed. At one point in crypto, undercollateralized systems were even glorified. They were fast. Capital efficient. Innovative. Stress was one thing that many of them could not endure.
Overcollateralization is not exciting, but is honest. It recognizes uncertainty. It acknowledges the irrationality of markets. Falcon does not struggle with that fact.
I do not think that is a weakness. It is a sign of maturity.
Another thing I like is the fact that Falcon does not make yield central to its story. Yield is present but it is not an offer but an outcome. That order matters.
There are too many protocols that begin with the question of how much yield they can advertise. Falcon begins by questioning the question of how users can unlock their liquidity with safety. The yield is later and it is better capital usage and less forced selling.
What I have discovered over the years is that when yield is the headline risk often disguises itself behind yield. Risk associated with design is more manageable when it comes first.
I would like to illustrate this in a more practical way. Consider an ETH a tokenized bond being in your possession together with a yielding stable asset. These would have to be kept distinct in most systems. Different vaults. Different liquidation limits. Different risks.
Falcon universal collateral approach is designed to allow you to look at your balance sheet as a block. Not as isolated silos. That is more in line with the operation of traditional finance, which DeFi has been slow to embrace.
This also connects to the most ignored side of DeFi which is the mental effect of liquidation. Liquidation is not only a financial event. It is emotional. It breaks trust.
I have observed competent users give up on DeFi altogether following a single poor liquidation. Not that the loss was irrevocable but because the system seemed cruel and detached.
Falcon design recognizes that its users are human. Minimizing forced liquidation is not soft power. It is about sustainability.
However no system is flawless. Collateralization is hard to be universal. Correlation of assets rises in crisis. Accuracy of valuation is particularly important in the case of RWAs. It is harder to make governance decisions in times of stress.
These conditions have to be proven by Falcon. Design alone is not enough. If this approach works, it will depend on the execution.
I have witnessed beautiful systems fail due to hurried incentives. I have also witnessed simple conservative systems living through on their slowness. Falcon is more aligned to the second category.
In prospect, the next round of DeFi is not in my opinion going to be fueled by the jack of higher APYs or louder narratives. It will be movement by capital that wishes to remain on chain and is not in constant fear.
Falcon Finance is creating the user who does not sell. Who do not want to gamble. Who desire their property to labor, without ever being exposed.
That group is not loud. But it is loyal.
Speed and underrate structure in crypto. Falcon is late in the right situations and ambitious in the right ones.
Universal collateralization is not glittering. It is a foundation. And foundations do not trend. They silently carry all that is created above.
People will not rejoice loudly in case Falcon gets this right. They will simply use it.
And in DeFi that is typically the most potent one.
