#FalconFinance #falconfinance $FF @Falcon Finance
It began with something less pleasant.
Why is it that on-chain liquidity is always premised at the price of selling assets?
I am long enough in the crypto industry to recall when it was believed that liquidations are healthy.
Probably they are, in the case of protocol survival.
However, to a user, liquidations are punitive.
You have something you believe in.
Market dips.
Oracle updates.
In no time your job is lost.
And everybody says, That is the way that DeFi works.
Falcon Finance doubts that assumption.
And honestly, that’s overdue.
It is not that volatility is the deeper problem.
Crypto will never cease to be volatile.
The issue runs even deeper since most of the DeFi systems are automated based on forced choices.
You either keep your asset
or
you get liquidity.
Rarely both.
Falcon Finance is attempting to eliminate that tradeoff in a manner of force.
Not with magic.
Not with leverage games.
But with structure.
Collateral is in the heart of Falcon Finance.
Non collateral in the narrow DeFi sense.
Not only ETH or BTC or any other token that is trending.
Falcon approaches collateral the same way finance does.
As balance sheet material.
Digital tokens.
Tokenized real-world assets.
Already valuable assets that are not being utilized on-chain.
Falcon does not force users to sell such assets, as opposed to pushing them to sell.
Locked, yes.
But not destroyed.
That difference is massive.
Here is something that people seldom discuss.
Selling is irreversible.
Once you sell an asset:
You lose upside.
You lose governance power.
You are losing strategic position.
You might trigger taxes.
When collaterally borrowing is responsible, optionality is retained.
Falcon Finance is a company that is highly oriented towards that notion.
USDf is there due to such a philosophy.
It is not meant to be exciting.
When a stablecoin is exciting, then already it is a red flag.
USDf is meant to be usable.
An overcollateralized synthetic dollar, which is issued on holdings that people already possess, but do not wish to divest.
I like that restraint.
No promises of “new money.”
No illusion of free yield.
Access to liquidity without defaulting as the default case.
Many DeFi stablecoins have collapsed due to attempting to do too much.
Trade settlement.
Yield engine.
Speculation tool.
Governance lever.
USDf keeps its role narrow.
Liquidity.
Stability.
Predictability.
This is money supposed to do.
The other thing that comes out when you ponder deeply about Falcon Finance is how it goes about yield.
Theater in DeFi is yield.
Large figures that are dependent on emissions.
Constant inflow dependent loops.
Complicated mechanisms, which fall as soon as the direction is switched.
The yield model used by Falcon is less noisy.
It is the result of capital efficiency rather than leverage addiction.
Assets remain productive as they remain as collateral.
Liquidities are made without dumping assets in the market.
The system does not require hype at all times.
Boring again.
And boring is underrated.
However, now we should discuss tokenized real-world assets as it is where a lot of protocols express the words but are unprepared to face the reality.
Assets in the real world do not act in the same way.
They don’t trade 24/7.
They don’t react instantly.
They do not share a liquidity profile with crypto tokens.
The Falcon Finance is designed to manage the difference.
It does not make RWAs mere tokens with a logo.
They are considered as being slower and heavier collateral.
It is the only way RWAs would be able to work on-chain in the long term.
Everything else is mere marketing.
Falcon Finance does not have risk under wraps.
That is one more thing I admire.
The collateral ratios are not pushed to the limit so as to attract users.
Liquidation is not fully eliminated, as it will be irresponsible.
Nonetheless, it is not the main generator of liquidity.
That distinction matters.
The systems, which rely on liquidation to work, have the propensity of cannibalizing their users.
Falcon attempts to escape that pitfall.
One thing that you observe as you take a step back is the way Falcon Finance drags things back.
That may not be a good thing crypto-wise.
Slower systems are easier to manage systems.
Less reflexive selling.
Less panic cascades.
Less sudden death spirals.
Liquidity that does not immediately transform into selling pressure is better liquidity.
USDf as an overcollateralized and conservatively issued financial instrument is more of a financial instrument than a trading chip.
That’s important.
To take on-chain finance seriously, it should have instruments that perform in the same manner regardless of the market regime.
Bull market.
Bear market.
Sideways boredom.
Falcon appears to be tailored to the three.
This is not a protocol that is tourist friendly.
When one desires high rate of return, high rate of exit, high rate of dopamine, Falcon will feel snail-slow.
However, to those who do not view week as the measurement unit, the design is logical.
Long-term holders.
On-chain balance sheet testing institutions.
Constructors seeking fixed liquidity.
That’s the audience.
I will make a rather provocative statement.
The majority of DeFi protocols fail not due to hacks, but due to poor incentives.
They lead users to behavior that is good in the short and kills them in the long-term.
Falcon Finance drives the users to preservation.
Preserve assets.
Preserve exposure.
Preserve optionality.
That is quite another psychological paradigm.
Another subtle point.
Markets would become less reflexive when users do not need to sell them.
The downside will not be exaggerated as much because forced selling is reduced.
This does not do away with volatility.
But it minimizes unwarranted harm.
It is not only beneficial to the Falcon users.
System design-wise Falcon Finance seems more reminiscent of a traditional financial infrastructure as opposed to what DeFi experiments usually entail.
That’s not an insult.
That’s a compliment.
TradFi is here to stay as it honors 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.
Create liquidity that will not wipe out.
Construct yield not evaporated.
Create an asset that acts in a manner of money.
This type of work does not always go viral on Twitter.
But it’s the work that lasts.
Unless the vision of DeFi is to remain at the speculation tier, such systems are required.
Those that do not make users make bad decisions.
Systems that are not based on unchecked growth.
The systems built to honor capital.
Falcon Finance is one that fits that direction.
The reason why Falcon Finance exists is that the concept of something in DeFi has never felt right to me, even in the good times.
I recall a time when the bull markets were green, protocols were printing yields, dashboards were looking healthy, and below the hood the system was seen to be shaky. There were too many positions which one bad wick would have liquidated. The number of users in profit but psychologically stuck was too high. All were on the defensive against volatility other than creating conviction.
Personally, I do not think that is a healthy financial system. That is a casino as infrastructure.
It is a place and an unease that Falcon Finance appears to begin with.
It does not pose the question of how to get the greatest liquidity as soon as possible, but a more challenging question. How do you make people get access to liquidity without compelling them to divest the assets that they are interested in holding?
It is a question that changes everything.
The majority of DeFi protocols are based on some kind of a tradeoff, consciously or not.
You either directly or indirectly give up ownership in order to get liquidity. You sell your property, or you risk that it shall be sold on your behalf. This seems to be manageable in quiet markets. When the market is volatile, it turns savage.
Personally, I have seen very robust long term positions destroyed not due to a fault of the thesis, but due to poor timing. A market crash, a new release of an oracle, a sequence of bankruptcies, six months of patience fade away in a few minutes.
People say this is “efficient.” I don’t fully agree.
Efficiency that continually punishes the conviction ultimately kills participation.
Falcon Finance disputes that reasoning by architecturing around collateral retention, rather than collateral divestiture.
The concept of universal collateralization initially seems abstract, but on your seat, it is even very intuitive.
Collateral in the real world of finance is not ideological. Banks do not mind how you get rich; whether it is through property, equities, bonds, or cash. Their concern is on value, stability and structure.
DeFi has long been very ideological on collateral. Some are good, others are disregarded, physical assets are regarded as marketing slogans as opposed to significant balance-sheet items.
The mental barrier is eliminated by Falcon Finance.
It regards collateral as something of value, but not as a story.
Cryptographic representation of real-world assets, whether in a digital form or not, instruments not based on hype cycles. All these may co-exist within a single system, within the same logic, without posing to act identically.
That difference is minimal, yet important.
And, last consideration, and this is what I truly think.
Survivable protocols tend to have a single characteristic.
They do not pose everything.
Falcon Finance is not going to make you a millionaire.
It is guaranteed not to bury you but avails you the liquidity.
That’s a much better promise.
