Analyzing the details of Flying Tulip's $1 billion "reversible financing" operation, how should retail investors participate?

Written by: Azuma, Odaily On

September 30, Flying Tulip, a full-stack on-chain exchange built by Andre Cronje (AC), the "old king of DeFi", officially announced that it has completed a private placement of $200 million and plans to raise an additional $800 million at a valuation of $1 billion to create a platform that integrates native stablecoins, lending, spot trading, contract trading, and a comprehensive platform for on-chain insurance.

the huge funding target of "$1 billion", the most striking thing about Flying Tulip is that Flying Tulip will use a completely different fundraising method from traditional private or public offerings - specifically, Flying Tulip will provide all investors with a reversible "redemption" option through perpetual put options, allowing investors to burn token FT at any time and use the invested assets (such as ETH) to redeem the principal.

However, Flying Tulip did not disclose too much details of the mechanism in its initial announcement on September 30, until yesterday evening, when Flying Tulip officially released the project document, which not only covered the specific design of various product lines such as trading and lending, but also explained in detail the specific operating logic of the "on-chain redemption right".

The following is a detailed analysis of the project's financing based on the official document of Flying Tulip, hoping to provide decision-making assistance for users who are interested in investing.

Point 1: Total Fundraising and Total FT Supply

maximum supply of FT tokens is 10 billion, with a fixed supply, no inflation, and will only be burned.

For every $1 invested, investors receive 10 FT. Flying Tulip will only mint FT based on the actual funds raised - if only $500 million is raised, only 5 billion FT tokens will be minted and distributed; When the fundraising scale reaches $1 billion, the minting of FT will also reach 10 billion, and the minting window will be closed and there will be no additional issuance in the future.

Key Point 2: "Redemption" Rights

According to Flying Tulip, after investors contribute capital, the corresponding FT will be locked in a "permanent put option", which will attach a long-term valid "on-chain redemption option" to these token shares.

based on market conditions, investors always have three operations to dispose of their token shares - Flying Tulip does not limit the user's proportion of operations, such as the freedom to choose to hold a portion of the position while redeeming a portion of the position.

• The first operation is to hold a static position, which simply means doing nothing to retain the redemption rights or wait for the FT to appreciate. There is no time limit for the "perpetual puts" offered by Flying Tulip.

• The second operation is to redeem the principal, and the user can choose to redeem part or all of the exact assets initially invested. Once redeemed is chosen, the corresponding amount of FT will be permanently burned. For example, if FT falls below the issue price ($0.1) after the market opens, users can redeem their principal to avoid losses.

• The third operation is to withdraw FT, after which users will have the freedom to dispose of their FT tokens, which can be traded on CEXs or DEXs, or participate in various DeFi opportunities. Once you choose to withdraw, the corresponding "perpetual put option" will also expire immediately, and the principal of the user's private or public investment will also be released, and Flying Tulip will use these funds for protocol operation and FT buyback.

It is worth mentioning that any FT purchased on the open market does not include a "perpetual put option" other than the initial investment, which means that secondary market participants do not have the same "redemption" rights as the initial investor.

Point 3: Use of Financing Funds

Although Flying Tulip promises not to use the funds raised from financing, in fact, during the duration of a "perpetual put option", the corresponding financing amount will be allocated by Flying Tulip to a low-risk on-chain income strategy (without leverage and cross-chain) to ensure that it can respond to investors' redemption needs in a timely manner - objectively speaking, this is a major risk point for Flying Tulip. But the risk level is relatively low.

Flying Tulip provides examples of the interest generation methods of some major supported currencies during financing, such as mainstream stablecoins deposited into Aave, ETH staked as stETH, SOL staked as jupSOL, AVAX staked natively, and USDe staked as sUSDe.

– >

As for the proceeds generated by these funds, Flying Tulip said that the primary use is to fund the continued development of the ecosystem, infrastructure and operations, and the remaining proceeds will be used to continue buybacks and burn FTs once the ecosystem budget is met.

important to clarify here that this benefit is not directly tied to the incentives of the Flying Tulip team. The income of the Flying Tulip Foundation and its team will only come from the income generated by the project's full range of products (lending, trading, etc.), and the relevant income will be distributed to the foundation, team, ecosystem, and incentives in a ratio of 40:20:20:20.

Point 4: How to participate in financing

Flying Tulip has disclosed in its official documents that the financing will support five chains - Ethereum, Solana, Sonic, BNB Chain, and Avalanche.

• Supported currencies on the Ethereum chain: USDC, ETH, USDT, USDe, USDS, USDtb, WBTC, cbBTC;

• Supported currencies on the Solana chain: USDC, SOL;

• Supported currencies on the Sonic chain: USDC, S;

• BNB Chain supports currencies on the chain: USDC, BNB;

• Supported currencies on the Avalanche chain: USDC, AVAX;

The specific timing of the financing launch has not been disclosed, but you can follow Odaily Planet Daily for further details. In addition, Flying Tulip has also stated on its official X a few days ago that due to the strong demand from institutional investors for public offerings, if users plan to participate in more than $25 million, they can contact the official to obtain customized hosting solutions.

Personal strategy: If you can rush to

the conclusion, you will be more inclined to participate.

One is because 100% of FT will be minted in the form of a private or public offering at the same price, which means that the cost is equal for all investors; second, the "perpetual put option" provides sufficient downside protection when the FT price is below or equal to $0.1, even when it is above $0.1, the potential downside protection will give strong psychological support to coin holders; Third, Flying Tulip has designed more FT repurchase mechanisms, which may be conducive to potential currency price upward movement.

are not many opportunities for the industry to "guarantee the income of the game", and compared with "whether to participate", perhaps the real question is whether "can you grab the quota" after the public offering opens.