AC's new work Flying Tulip: Want to use Decentralized Finance government bonds to cultivate an exchange?

Author: Lemniscap

Compiled by: Tim, PANews

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We are excited to announce our participation in the $200 million seed round financing of Flying Tulip. Flying Tulip is a new project created by AC and his team, aimed at building a full-stack exchange covering spot, perpetual contracts, options trading, lending, and structured income, representing a grand vision starting from scratch. Although the project covers a wide range, this article will focus on its pioneering fundraising model. Why was Flying Tulip born? Facing off against DeFi giants is a daunting task. They have stronger capital, robust recurring revenue, and a well-established team structure, operating on a scale that small startup teams cannot compare to. These giants enjoy extremely deep network effects, deeply integrated ecosystems, and loyal user bases. Additionally, there is a “political” layer of competition: the importance of voice in industry standards and partnerships is often no less than that of product quality itself. Therefore, even small startups with truly innovative technology face entirely different challenges when trying to successfully enter the market. This is not only a test at the technical level but also involves funding and social challenges. Flying Tulip addresses this challenge by reconstructing the capital formation model in the crypto space, abandoning the reliance on short-term profit-seeking liquidity and token mechanisms, and striving to establish a fundraising model that can sustainably support business development, allowing the product matrix enough time and space to grow independently and mature. Limitations of the current token fundraising model To date, the most successful application model in cryptocurrency is crowdfunding: raising funds through token issuance to support project launches. However, once the initial phase ends, many tokens gradually disappear as project parties struggle to maintain ongoing demand, causing their value to approach zero indefinitely. Regarding the use of tokens, it remains an active experimental field, but in many cases, tokens primarily serve as fundraising tools, a role that is most meaningful during the project launch phase, before it develops into a self-sustaining company. Flying Tulip acknowledges this reality and attempts to build a corresponding model based on it. The unique fundraising model of Flying Tulip Its core idea is simple: to raise a large amount of money through token sales, invest the funds in low-risk DeFi strategies, and use the generated revenue to sustain operations until the product line achieves self-profitability. Investors can obtain Flying Tulip(FT) tokens supported by perpetual put options. As long as they hold the tokens, investors can redeem them at the original investment value at any time, and this put option never expires. From a rational perspective, investors will only exercise their option when the token price is below the purchase price, at which point their held tokens will be destroyed. In fact, investors bear the opportunity cost: if they had invested this capital directly into certain DeFi strategies, they could have earned about a 4% return. What they gain is the upside potential of FT tokens while controlling the downside risk to a minimum through structured design. “Flying Tulip” ultimately plans to raise $1 billion. There is no lock-up period for the tokens, and all tokens will flow to investors at issuance. Based on an estimated annual return of about 4% for the project treasury, approximately $40 million can be generated each year, which will be used for operational expenses and guiding product portfolio development until fee income becomes the main source of revenue. Buyback and destruction: the core of the model DeFi treasury bond yields will be used to pay operating costs and buy back FT tokens. In the future, fees generated by the core product portfolio will become another source of buyback demand. It is important to emphasize that if investors sell their FT tokens in the secondary market, their put options will become immediately invalid. This portion of original capital will be transferred to the foundation for buyback and token destruction. This means that selling will not only cause investors to lose protection but will also directly reinforce the token's deflationary mechanism. In summary, these designs create new buying pressure on the demand side for FT tokens while the supply side continues to decrease, leading to a self-reinforcing deflationary positive cycle. The impact of token economics Since the total supply of FT is held by investors at the time of listing, early market prices may experience extreme volatility. Limited circulation combined with ongoing buyback measures lays the foundation for strong reflexivity. Unlike traditional token issuance, where supply is allocated between the team and investors, the “Flying Tulip” project initially allocates 100% of the tokens to investors, and then the supply will gradually shift towards the foundation, ultimately leading to deflationary destruction. Theoretically, this token may completely exit the circulation domain after completing its historical mission. Our thoughts “Flying Tulip” is not a surefire investment, but rather a unique attempt. The success of this model depends on whether the team can effectively manage funds, maintain stable returns, and create a competitive product system. Its cost is reflected in capital inefficiency, as investors forgo potential direct investment returns, with project success being the only way to compensate for this opportunity cost. For massive financing to succeed, the following factors are crucial: The ability to raise a large amount of capital, typically relying on a key individual or team to attract capital through their credibility, influence, and trust. A sufficiently mature product line that is truly worthy of large-scale fundraising expansion. In our view, Flying Tulip uniquely combines these two factors. AC is one of the most astute builders in the crypto space, known for both influence and controversy. His numerous achievements in pioneering crypto primitives are well-known, and the “Flying Tulip” project is a continuation of this tradition: completely reconstructing the token fundraising model with unprecedented mechanisms while launching a product matrix aimed directly at industry giants. We support the Flying Tulip team because it represents a rethinking of the token fundraising model, which is central to the crypto movement. If viable, it could accelerate the launch phase of ambitious projects, enhance ecological competitiveness, and ultimately benefit end users. While this is an experiment filled with unresolved issues, it is precisely such exploration that drives the crypto industry forward.