Original｜Odaily Planet Daily ( @OdailyChina )
Author: CryptoLeo ( @LeoAndCrypto )
After the Crypto Summit, the market entered hell mode again. Except for the giant whale with 50x leverage on Hyperliquid, no one seemed to be winning. There was no good news in the short term, and the altcoin season was nowhere in sight. During this period, the most important thing for users is to pursue returns without shrinking their assets, such as participating in new listings on exchanges, investing in potential coins, making money, and financial management.
Recently, Odaily Planet Daily discovered a synthetic dollar stablecoin protocol, Falcon Finance. The most attractive thing about it is that the protocol can provide an APY of 22.6%.
Falcon Finance is not unknown. The protocol was launched by DWF Labs partner Andrei Grachev. Earlier in January, Andrei Grachev said that he would launch the synthetic dollar stablecoin protocol Falcon Finance. Soon, its beta version of the app was launched in February. Its official documents show that Falcon is a platform that converts synthetic dollars into sustainable income opportunities, focusing on exploring the true income potential of crypto assets for users and institutions.
Stable APY in a highly volatile market, Falcon Finance’s income strategy and dual-currency system
Falcons operating mechanism is also in line with the current volatile market. It adopts a comprehensive and sustainable approach to generate returns, not just delta neutral strategies and positive funding rate arbitrage.
1. Not only stablecoins, but also more potential tokens as collateral
Falcon Finance not only supports stablecoins such as USDT, USDC, FDUSD as collateral, but also accepts other mainstream assets and potential tokens on the market. Its official App shows that Falcon Finance currently supports 13 non-stablecoins such as BTC, ETH, XRP, SOL, TRX, POL, NEAR, DEXE, TON, etc., and a total of 16 tokens as collateral. More currencies will be added in the future based on liquidity and token potential.
2. Profit exploration, combined strategy of funding rate arbitrage and cross-exchange spread arbitrage
With more diversified collateral support, Falcon Finances main income now comes from funding rate arbitrage (similar to Ethena, long spot short contracts and selling spot long contracts, short/long positions will receive funding fees when the funding rate is positive/negative) and cross-exchange price spread arbitrage.
First, the stability of returns under different systems is ensured through positive funding rate arbitrage and staking of stablecoins, combined with negative funding rate arbitrage and short-term staking of altcoins.
Another institutional yield-generating strategy employed by Falcon Finance is cross-exchange spread arbitrage, and its institutional-grade infrastructure can efficiently execute strategies such as CEX-to-CEX and DEX-to-CEX arbitrage.
As shown above, the data comparison of ETH positive funding rate arbitrage and other income strategies from 2023 to 2025 (orange is the expected combination strategy adopted by Falcon, including different strategies for altcoins and stablecoins), namely funding rate arbitrage, exchange spread arbitrage (Binance) and staking income. It can be clearly seen that the potential performance of this strategys income under various market conditions.
3. Dual Currency System of Overcollateralized Stablecoin USDf and Interest-Bearing Coin sUSDf
The two most important tokens of Falcon Finance are USDf and sUSDf. USDf is an over-collateralized stablecoin generated after users deposit collateral. The stablecoins supported by deposits are 1:1 mint for USDf. For non-stablecoin deposits, an over-collateralization ratio will be used to ensure that each USDf created is fully backed by collateral.
In addition, when redeeming assets, if the collateral market price is lower than or equal to its initial price, users can redeem all the initial collateral of the overcollateralized buffer, but if the redemption market price of the collateral is higher than its initial price, users can only redeem the overcollateral equivalent to the total value of the initial price. (If the token price falls, the overcollateral can be redeemed in full; if the price rises, only tokens equal to the initial value of the overcollateral can be redeemed.)
After minting USDf, users can stake it to get sUSDf, and use the ERC-4626 vault standard to distribute income to ensure transparency and efficiency. However, the amount of sUSDf received after staking USDf is not the same. The amount after staking is calculated based on the current sUSDf-to-USDf Vaule, which reflects the total supply of sUSDf relative to the total USDf and the accumulated USDf protocol income ratio. See the figure below for details.
That is to say, the initial sUSDf may all be obtained through USDf staking, but as the USDf rewards generated by staking increase, the sUSDf-to-USDf Vaule will be greater than 1, and the value of sUSDf will rise over time. The protocol will distribute the income of the combined strategy to the staking pool, and then distribute it to users according to the ratio of the USDf staked by the user to the total USDf staked.
sUSDf also supports token re-staking. After re-staking sUSDf, the system will generate an ERC-721 NFT based on the amount of sUSDf and the lock-up period. The longer the lock-up period, the higher the return . Similarly, the mechanism of destroying sUSDf in exchange for USDf is the same as staking USDf for sUSDf (reverse deduction).
Two-tier monitoring system, audit reports and insurance funds ensure the transparency and security of the protocol
In terms of security, Falcon Finance also uses a combination of a two-layer monitoring system and manual supervision to monitor and manage positions, and uses its advanced trading infrastructure to deal with risks during market fluctuations. In addition, the protocol protects the security of users assets in a variety of ways, including offline storage, multi-party computing, and multi-signature schemes. At the same time, the protocol provides real-time asset status information and comprehensive reserve information, including Total Value Locked (TVL), the number of sUSDf issued and pledged, and the number of USDf.
In addition, Falcon Finance publishes quarterly and annual audits conducted by independent third-party companies. The quarterly audit covers detailed proof of reserves (POR), which integrates on-chain and off-chain data, including aggregated metrics from DEX, CEX, and wallets.
In addition, in addition to being distributed to users, a portion of the monthly profits will be allocated to the insurance fund it sets up and will increase with the growth of protocol adoption and TVL . The insurance fund can alleviate special market periods of zero or negative returns. If the market Falcon Finance may increase reserves to ensure the stability of the protocol.
This insurance fund is composed of stablecoins to compensate for unforeseen risks and mitigate potential losses. The fund is held by a multi-signature address consisting of Falcon Finance internal members and external contributors.
How to participate in Falcon Finance
Currently, Falcon Finance is still in the Beta testing version, and data such as TVL are not yet displayed. The current USDf supply is 64.18 million, and the sUSDf supply is 39.28 million.
The gameplay is also very simple:
-To apply for the Beta version, you need to fill in your email, Twitter, TG and other related information, and you can go directly to it with one click ;
- After completing KYC verification, select the chain and asset (the 16 tokens mentioned above) and deposit;
- After confirming the deposit of relevant assets, choose Mint as USDf (for example, deposit 1 NEAR and use 0.2 NEAR as excess collateral), or choose Mint and pledge as sUSDf;
- Pledged USDf is divided into basic pledge (can be unpledged at any time) and locked pledge (USDf and sUSDf) Boosted Yield, which are 3 months, 6 months and 1 year respectively. The longer the time, the higher the APY (APY is a valuation calculated based on the weekly protocol income). The current basic pledge APY is 22.6%, and the locked pledge APY is as shown in the figure below. In addition, locked pledge has a guaranteed APY (currently 12%), so you can get the minimum guarantee no matter how volatile the market is.
For the current Beta version, USDf has been deployed on Ethereum. As mentioned in the previous article, it took Falcon Finance less than a month from the time Andrei Grachev mentioned the launch of the protocol to the early test version. In the future, USDf’s multi-chain deployment and dynamic display of interface data will also be completed soon.
In addition, the current altcoin market conditions and high volatility are also very suitable for Falcon Finances negative funding rate arbitrage and cross-exchange spread arbitrage strategies. The following figure compares the cross-exchange spot, contract spreads and funding rates of Binance and other CEXs in a high volatility market:
In general, Falcon Finance has rationally utilized the volatility of the market and converted it into income. Through dynamic position management, funding rate strategy, cross-exchange arbitrage and insurance funds, it provides users with higher APY (and a minimum guarantee for locked positions) and security. The positioning of Falcon Finance can refer to Ethena Labs, or it can be regarded as an advanced version of Ethena Labs. Its stable income strategy and dual-currency mechanism also ensure that Falcon Finance can achieve good development in both bull and bear markets.
Reference: https://falcon.finance/whitepaper.pdf
