#FalconFinance #falconfinance $FF @Falcon Finance
It began with something more painful.
Why is it, then, that on-chain liquidity is always at the expense of selling assets?
I have long been in crypto, and it was only recently that I heard the word liquidation being used to refer to liquidations as healthy.
Perhaps they are, protocol survival wise.
To a user, however, liquidations are punishment.
You are holding something you believe in.
Market dips.
Oracle updates.
One day you lose your job.
Everyone explains, that this is how DeFi works.
Falcon Finance doubts that assumption.
And honestly, that’s overdue.
Volatility is not the harsher issue.
Crypto is never going to stop being volatile.
This is more problematic: the majority of DeFi systems are constructed on coerced choices.
You either keep your asset
or
you get liquidity.
Rarely both.
Falcon Finance is attempting to eliminate that imposed tradeoff.
Not with magic.
Not with leverage games.
But with structure.
Falcon Finance is centered on collateral.
Not collateral in the strict DeFi definition.
Not ETH, BTC or any token that is in a trend.
Falcon handles collateral in the same way finance does.
As balance sheet material.
Digital tokens.
Tokenized real-world assets.
Value that is already held as an asset but not utilized on-chain.
Falcon does not compel users to sell those assets, which is why they are maintained.
Locked, yes.
But not destroyed.
That difference is massive.
This is what people hardly discuss.
Selling is irreversible.
Once you sell an asset:
You lose upside.
You lose governance power.
You lose strategic positioning.
You might trigger taxes.
When borrowing against collateral is done responsibly, optionality is maintained.
Falcon Finance is leaning towards that notion.
It is due to that philosophy that USDf exists.
It is not meant to be exciting.
When a stablecoin is exciting, it is already a red flag.
USDf is meant to be usable.
An overcollateralized synthetic dollar, which is issued on assets that individuals are already holding, and are not willing to relinquish.
I like that restraint.
No promises of “new money.”
No illusion of free yield.
Liquidity as a default outcome without liquidation.
Many DeFi stablecoins fail due to attempts to be overly ambitious.
Trade settlement.
Yield engine.
Speculation tool.
Governance lever.
USDf keeps its role narrow.
Liquidity.
Stability.
Predictability.
That is the way money is supposed to act.
The other thing that rings out when you cogitate on Falcon Finance is its approach towards yield.
Theater in DeFi is yield.
Large figures based on emissions.
Constant inflow dependent loops.
Complex mechanisms, which breakdown when attention is switched.
The yield model of Falcon is less noisy.
It is capital efficiency, and not leverage addiction.
The assets remain productive even when they are used as collateral.
Without dumping assets in the market, liquidity is created.
The system does not require being hyped all the time.
Boring again.
And boring is underrated.
Next we can discuss tokenized real-world assets, which is where a lot of protocols are talking, but are not prepared to face the reality.
Physical assets are different.
They don’t trade 24/7.
They don’t react instantly.
They lack the liquidity profile of crypto tokens.
Falcon Finance is organized to accommodate that difference.
It does not claim that RWAs are tokens with a logo.
They are considered as slower, more weighty collateral.
Only in this way RWAs can work on-chain in the long run.
The rest is mere marketing.
There is no secret risk in Falcon Finance.
That is another thing I admire.
There is no pushing of the collateral ratios to the extreme to impress the users.
Liquidation is not eliminated entirely, since that will be irresponsible.
However, it is not the engine of liquidity.
That distinction matters.
The systems that rely on liquidation as a method of operation end up consuming themselves.
Falcon attempts to escape that trap.
What you realise when you take a step back is that Falcon Finance slows down things.
That would be a negative thing in crypto.
However, slower systems are more controllable systems.
Less reflexive selling.
Less panic cascades.
Less sudden death spirals.
Liquidity not immediately converted into selling pressure is healthier liquidity.
USDf, which is overcollateralized and issued in a conservative fashion, acts more as a financial instrument as a trading chip.
That’s important.
To be taken seriously on-chain finance must have instruments that act predictably under every market regime.
Bull market.
Bear market.
Sideways boredom.
Falcon appears to be made to suit three.
This plan is not tourist friendly.
Falcon will be slow in case a person desires fast yield, fast exits, fast dopamine, Falcon will be slow.
However, the design is logical to those who do not count in weeks, but in years.
Long-term holders.
Institutions that test on-balance sheet.
Constructors that desire consistent liquidity.
That’s the audience.
Now I will tell you something a little bit provocative.
The majority of DeFi protocols fail not due to hacks, but due to poor incentives.
They drive consumers into actions that appear to be good in the short-term and ruin them in the long-run.
Falcon Finance drives its users towards preservation.
Preserve assets.
Preserve exposure.
Preserve optionality.
That is quite another psychological model.
Another subtle point.
Markets become less reflexive when they are not forced to sell.
Less hard sales translates to less overstated demerit.
This does not do away with volatility.
But it minimises unnecessary harm.
This is beneficial to the whole ecosystem not just the Falcon users.
Falcon Finance is more akin to traditional financial infrastructure than a typical DeFi experiment, to a system design.
That’s not an insult.
That’s a compliment.
TradFi remains alive due to its respect towards balance sheets.
DeFi often forgets that.
I do not believe that Falcon Finance is attempting to take over headlines.
It’s trying to exist quietly.
Establish liquidity that will not crumble.
Construct something that does not pass through the air.
Create a fixed asset and act like money.
That type of work is hardly trending on Twitter.
But it’s the work that lasts.
DeFi requires mechanisms such as this in order to leave the world of speculation.
Systems that do not require users to make bad decisions.
Systems that do not rely on perpetual growth.
Capital respecting systems.
Falcon Finance is aligned to that direction.
Falcon Finance is a result of the fact that something in DeFi has never felt right to me, even in the good times.
I recall bull markets when it was all green, protocols were printing yields, dashboards were healthy and yet internally the system was brittle. One bad wick away too many jobs were liable to liquidation. There were too many users who were technically in profit and psychologically caught. We were all on the defensive on volatility rather than conviction.
I have not found that a healthy financial system. It is a casino dressed up as infrastructure.
Falcon Finance appears to be based on that inconvenience.
Rather than the question is how to get the most liquidity in the shortest time, it is a more challenging question. How do you provide people with access to liquidity, without compelling them to give up the assets that they desire to possess?
That is a question that alters it all.
A majority of DeFi protocols are based on some form of a tradeoff, whether they acknowledge it or not.
You sacrifice ownership, either directly or indirectly, in order to have liquidity. You realize your property, or you subject it to the risk of being sold on your behalf. This seems bearable in normal markets. In unstable markets, it is savage.
I have personally seen great long-term positions wiped out not due to the wrongness of the thesis, but due to unfavorable timing. There is a fall, an update of an oracle, a ripple of liquidations and months of waiting are lost in a few minutes.
People say this is “efficient.” I don’t fully agree.
The efficiency never stops punishing conviction, which ultimately kills participation.
Falcon Finance disputes that rationale by structuring around collateral preservation rather than collateral disposal.
Universal collateralization is a hard concept to grasp initially, but once you sit with it the notion is so intuitively easy to grasp.
In practice, collateral is not ideological in the real finance. It does not matter to banks whether your wealth is based on property, equities, bonds or even cash. They are concerned with value, stability and structure.
Long-term, DeFi has been very ideological about collateral. Some tokens are good, some are disaggregated, physical assets are considered as marketing slogans instead of serious entries in the balance sheet.
Falcon Finance breaks that psychological barrier.
It views collateral as worth, rather than story.
Digital tokens, tokenized assets on the real world, instruments representing economic reality instead of a hype cycle. All these can co-exist within the same mechanism, on the same reasoning, without claiming to act the same way.
That difference is subtle, yet very important.
One last thing, and this is my sincere view.
Surviving protocols tend to have a single characteristic.
They do not offer it all.
Falcon Finance is not going to make you rich.
It will not destroy you but provide you with a source of liquidity.
That’s a much better promise.
