Hassan Maishera
Fluidity, a DeFi protocol whose backers include Multicoin Capital and Circle, has announced that it will launch on the Ethereum network on December 19. The protocol pioneers a spend-to-earn system that lets users accrue rewards simply by wrapping their crypto-assets at a 1:1 exchange rate and using said assets in everyday transactions.
Although the blockchain incentive layer will initially live on Ethereum, a network that has become synonymous with decentralized finance over the past three years, there are plans for future releases on additional chains such as Solana, Arbitrum and Polygon.
Both Solana and Polygon previously furnished the project with development grants, and Fluidity came fifth (of 6,000 participants) in Solana’s global IGNITION hackathon in 2021.
The project’s founder, Shahmeer Chaudhry, said: “Four or five years ago, everybody was saying DeFi could be the next big use of crypto. But it turned out NFTs and GameFi were more popular. At Fluidity, we want to gamify how people think about spending money and our long-term goal is to re-shape how people spend their funds.”
Spend to Accumulate
In effect, the spend-to-earn protocol aims to encourage adoption of Fluid Assets by incentivizing users every time they spend, swap, trade or indeed perform any on-chain transaction using the wrapped assets.
The system is conceived as an alternative to traditional yield-bearing protocols, which typically come in the form of liquidity mines promising users a generous APY in return for their staked assets. Unlike those dApps, Fluidity says it protects users from market volatility risks – particularly since users can redeem their base assets at any time.
The reward distribution mechanism (known as the Transfer Reward Function or TRF) at the core of Fluidity has been dubbed utility mining, wherein Fluidity and other protocols “can drive in users whose primary yield incentives are to explore the protocol and exhibit intended behaviours that are beneficial to all parties involved.”
Potential spend-to-earn use cases have certainly become more numerous over the past year, as more play-to-earn (P2E) games and DeFi protocols have come online. Simply purchasing an NFT from a marketplace, swapping assets using a DEX, or making a payment with a Fluid Asset could generate rewards for both sender and receiver, with the reward split on an 80:20 basis.
In total, Fluidity offers participants the opportunity to pocket three different types of yields: TRF rewards, Fluid governance tokens, and governance tokens from a third party – for example, a decentralized exchange with which the user has interacted. Pay-outs ranging from cents to millions are randomly triggered when Fluid assets are used for any kind of purpose.
Faith in crypto’s lending market has been badly shaken this year, a consequence of the collapse of both Celsius Network and BlockFi. With risk appetite down among the majority, it’s perhaps a good time for Fluidity to make its mark. The protocol has already been operating on the Solana devnet beta and Ethereum testnets, with some 50,000 users having put the system through its paces.
Several crypto platforms currently offer a form of spend-to-earn, principally through cashback programs. However, most compel users to transact using a native token rather than a stable, redeemable wrapped asset matched 1:1. Fluidity will be hoping for a flurry of pre-Christmas activity as users look for a new and less risky way to earn.
