Recently, a project in the DeFi space has become popular, called Falcon Finance. Simply put, it aims to do one thing: turn almost any valuable asset you have into cash that is readily available, without having to sell them.
This sounds a bit fantastical, but it indeed addresses a pain point for many large investors and institutions. Just think about it, when you are playing with DeFi, and you want to use Bitcoin or Ethereum as collateral for a loan, the protocols available are quite limited and the rules are rigid. What if you have tokenized stocks, bonds, or even real estate? Basically, it’s not feasible. You either have to sit tight or sell at a loss—having your money 'locked up' in assets is probably one of the most frustrating aspects of contemporary finance.
Falcon aims to be that "locksmith." Its core functionality is as follows: you deposit your assets (like Bitcoin, Ethereum, or even some compliant tokenized assets), the system applies a discount based on the asset type (this is called over-collateralization), and then immediately mints a stablecoin called USDf for you. You can use this USDf like dollars for trading, investing, or paying, while your original Bitcoin remains there, regardless of its price fluctuations.
This isn’t the end. If you’re not in a hurry to use the funds, you can further collateralize USDf to exchange for something called sUSDf. This sUSDf will automatically accrue interest, with returns coming from a set of strategies behind the protocol, such as market making or arbitrage. This means you maintain your original asset position while additionally earning liquidity returns—a typical case of wanting to have both the fish and the bear's paw.
Aiming high, but is it stable?
Falcon is bold in its approach, and its confidence comes from several designs:
First is over-collateralization + insurance fund. For highly volatile assets, the collateral requirement is higher; for instance, a Bitcoin worth 10,000 may only be able to borrow 6,000 USDf. Moreover, the protocol has set up an on-chain insurance fund, which can serve as a safety net in extreme market conditions.
Second is transparency. All collateral assets, lending data, and insurance fund balances are available on-chain for verification, and regular third-party audits are conducted to assure you: "I have no hidden operations."
Third is leaning towards compliance. They have engaged licensed custodians to manage some core assets, which is crucial for traditional institutions—DeFi is no longer entirely a "wild west."
Fourth is cross-chain. USDf operates not just on one chain but can be used across multiple chain ecosystems, making liquidity less likely to get bottlenecked.
Currently, the data looks promising: the issuance of USDf has already surpassed 1 billion USD, indicating that many people are indeed using it. The insurance fund is also growing, custodial collaborations are advancing, and it has even begun supporting some tokenized real-world assets (RWA).
But don’t rush to shout 'disruption'; there are still many pitfalls.
First, the risk of collateral hasn’t disappeared; it has merely shifted. If Bitcoin halves in value and your collateralization rate is still high, liquidation may still occur. Although there are buffers from over-collateralization and the insurance fund, when a black swan event occurs, the real testing begins.
Second, there is the risk of smart contracts. No amount of auditing can guarantee that there are no vulnerabilities, especially with complex protocols involving multiple chains and asset types.
Third, regulation hangs like a sword. Once there’s a significant influx of real-world assets (such as bonds or stocks), the regulatory gaze of traditional finance will undoubtedly turn toward it. Whether it will be deemed a 'security' or cross red lines is uncertain.
Fourth, competition is fierce. There are a plethora of synthetic stablecoins and collateral lending protocols; Falcon must rely on higher yields, broader asset support, and stronger credit to stand out.
So what exactly is it betting on?
Falcon bets on a trend: more and more assets will go on-chain, and once on-chain, they will require 'liquidity transformation.'
Whether it’s native crypto assets or stocks, bonds, and real estate, once they become tokens, holders will not be satisfied with merely holding. They will certainly ask: Can I access this money without selling?
If Falcon can truly manage risk well and navigate compliance paths, it could very well become that "converter" connecting on-chain and off-chain assets. Institutions can collateralize their government bonds and fund shares to instantly gain on-chain liquidity for DeFi participation; large holders won't have to choose between 'holding Bitcoin' and 'spending money.'
Of course, this road is still long. But Falcon at least points out a direction: the second half of DeFi may no longer be merely 'mining and trading coins' but genuinely addressing the issue of 'asset rigidity'—allowing all value to flow while not depriving you of ownership.
This is very idealistic and very challenging. But we all know that in the crypto world, those who dare to treat ideals as roadmaps are often the ones who end up succeeding.
@Falcon Finance #FalconFinance $FF
