The term 'involution' is not an exclusive dilemma of society or enterprises. In the current DeFi space, we are also witnessing an intense zero-sum game: in the liquidity mining yield competition, capital migrates frequently between different protocols, chasing unsustainable APYs, leaving behind a pile of highly inflationary tokens and exhausted liquidity; governance has become an arbitrage tool for whales; competition between protocols often devolves into simple fee wars or token release subsidy wars. This model is not only unsustainable but also deviates from the original intention of DeFi to create genuine value. The underlying game theory design of Falcon Finance aims to disrupt this paradigm, shifting competition from a zero-sum game of 'dividing the pie' to a positive-sum game of 'growing the pie', building a non-zero-sum financial network where all participants can continuously benefit from the overall ecological growth.
One, The root of zero-sum games in DeFi: Mismatched incentives and a void of value
The current incentive models of most DeFi protocols have fundamental flaws:
1. Token release as ultimate subsidy: The core appeal of the protocol is not the real value of its products or services, but the speculative value of its tokens. This has led to the prevalence of short-term mining and selling.
2. Disconnection between governance and value: Voting rights of governance tokens often conflict with long-term interests, and 'tourist capital' holding large amounts of tokens can use voting rights to pursue short-term interests, harming the long-term health of the protocol.
3. Mutual exclusivity competition between protocols: Due to the scarcity of liquidity, user attention, and capital, the relationship between protocols is seen as 'you die, I live', rather than cooperative symbiosis. This stifles innovation and forces resource waste on defense rather than creation.
Falcon Finance believes that the solution lies in redesigning the rules of the game so that individual rational choices (pursuing their own interests) and collective rational outcomes (ecological prosperity) spontaneously align.
Two, The positive-sum game mechanism of Falcon Finance: Cooperation, reputation, and ecological coupling
1. Inter-protocol cooperative alliance based on 'joint staking'
One of the core innovations of Falcon Finance is the shared security and liquidity framework. Other protocols (such as a lending protocol or derivatives DApp in a specific vertical) can form a 'joint staking' pair with their native tokens and $FF tokens.
· Positive-sum effect: In doing so, the protocol not only gains liquidity injection and user base from the Falcon Finance ecology but, more importantly, it connects to Falcon Finance's security and credibility framework. Stakers (who provide liquidity for this LP pair) receive rewards that partly come from the income of the vertical protocol and partly from Falcon Finance's development fund.
· Incentive compatibility: Vertical protocols have the motivation to improve their own products to attract users and increase income because this will enhance the yield of their LP pairs, attract more staking, and strengthen their own ecology and that of Falcon Finance. Falcon Finance, through this 'federal model' expansion, permeates its economic model and governance influence into broader financial scenarios, where the growth of all participating protocols translates into the expansion of the $FF ecological base. Moving from competition to shared prosperity.
2. Dynamic reputation system and 'long-termism' capital premium
Falcon Finance maintains an on-chain verifiable 'reputation score' for each address, based on:
· Time-decaying contributions: Long-term holding of $FF, providing liquidity over the long term, and continuous participation in governance voting will accumulate positive reputation, but its value will slowly decay over time, requiring continued participation.
· Negative externality punishment: Participating in 'flash loan attacks' on other protocols, frequently engaging in adversarial voting in governance for personal short-term arbitrage, etc., will be arbitrated by the community through decentralized courts (such as Kleros) and may result in reputation points being deducted.
· Capitalization of reputation: High-reputation addresses enjoy privileges within the ecology: for example, having higher weight or better conditions when obtaining ecological fund support, participating in early project investments, or even borrowing at lower collateral rates in certain cases. This makes 'doing things that benefit the ecology' a long-term asset that can be accumulated and capitalized.
3. Turning 'parasitism' into 'symbiosis': MEV capture and redistribution
Miner extractable value (MEV) is a typical negative-sum game in DeFi (arbitrageurs profit, regular users and LPs suffer). Falcon Finance does not attempt to completely eliminate MEV (which may not be realistic), but rather seeks to standardize, make transparent, and redistribute it through its customized transaction sorter (based on the Falcon chain or closely collaborating Layer 2).
· Democratization of MEV auctions: Searchers bid for favorable transaction ordering rights, and this bidding income does not belong solely to validators but is directly injected into a 'public goods fund'.
· Use of funds: This fund is governed by $FF holders, used to finance the development of public goods within the ecology (such as open-source tools, security audits, educational content), subsidize regular users' transactions harmed by MEV (e.g., through gas refunds), or repurchase and destroy $FF. Transforming negative externalities that originally harm the ecology into nutrients that nourish it.
Three, Case: A positive-sum game flywheel—Falcon Finance and the gaming asset lending protocol 'GameFiLend'
1. Alliance: GameFiLend chooses to form a joint staking pair with its governance token $GFL and $FF.
2. Incentives: LP providers of $FF/$GFL receive dual rewards from both protocols. A large number of $FF holders become LPs in this pool to gain exposure to $GFL's profits, bringing the trust and liquidity needed for GameFiLend's launch.
3. Growth: With the help of liquidity and Falcon Finance's user base, GameFiLend rapidly develops, and its $GFL token appreciates in value due to actual use and income growth.
4. Feedback:
· The value increase of $GFL makes the LP pool of $FF/$GFL yield higher returns, attracting more funds and enhancing the liquidity and stability of both tokens.
· A portion of GameFiLend's income (e.g., 5% of lending interest) automatically purchases $FF and injects it into the Falcon Finance treasury.
· Gamers naturally come into contact with and may enter the entire Falcon Finance ecology by using GameFiLend.
5. Governance synergy: Holders of $GFL (many of whom are also $FF holders) tend to push for decisions that are synergistic with the Falcon Finance ecology in governance because their interests are deeply tied.
Result: GameFiLend did not compete with Falcon Finance for liquidity but became a flourishing 'province' of its ecology. The users, capital, and growth of both sides mutually promote each other, creating a positive-sum flywheel of 1+1>2. Capital is no longer a zero-sum game between the two but achieves better risk-adjusted returns through their combination.
Four, Challenges: Balancing complexity and fairness
· Complexity of mechanism design: Positive-sum game mechanisms are often more complex than zero-sum games, requiring user education and high transparency. Falcon Finance must invest significant resources in interface design and user guidance.
· Preventing new power centers: Mechanisms like joint staking may give rise to new 'alliance oligarchs'. Falcon Finance suppresses centralization risk by setting dynamic adjustments to participation thresholds, capping alliance protocol income contributions, and maintaining broad distribution of core governance power.
· Guiding long-term behavior: The reputation system must be carefully calibrated to avoid becoming a 'rich man's game' or overly subjective. It needs to balance objective data from on-chain behavior with reasonable subjective evaluations from the community.
Five, Future: From financial protocols to economic coordination game platforms
In the long run, Falcon Finance aims to become a superstructure for economic coordination. It not only defines the game rules for internal participants but also provides a ready-made template for any economic entity (protocols, DAOs, even traditional enterprises) that connects to it on 'how to participate in positive-sum cooperation' through its joint staking, reputation system, and value flow design. The $FF token becomes the 'trust medium' and 'coordinating capital' in this cooperative network.
Conclusion: Beyond inward competition, fly toward the blue ocean of collaborative evolution
The next development stage of DeFi should not be a more brutal zero-sum struggle in a red ocean, but rather an exploration of how to deeply bind individual interests with collective prosperity in a new frontier. Falcon Finance, with its profound insights into game theory and sophisticated mechanism design, shows us such a possibility: finance need not be a winner-takes-all game, but can be a forest of shared prosperity.
In this forest, the growth of each tree (protocol) makes the entire forest (ecology) more prosperous, and the prosperous forest provides each tree with a more solid foundation and abundant nutrients. The reason the eagle flies high is not only because of its powerful wings but also because it knows how to use the rising air currents. Falcon Finance aims to create and guide such 'synergistic air currents', allowing all participants who choose to soar together with it to fly higher, farther, and more steadily. Perhaps this is the deeper social transformation that decentralized finance can bring beyond the disruption of technology.
