Flying Tulip: The DeFi Godfather's "1 Billion Deflationary Engine" Experiment
As DeFi giants dominate and the efficiency of traditional financing models declines, can this full-stack trading ecosystem break the deadlock through innovative mechanisms?
Amid the current monopoly of DeFi giants and the declining efficiency of traditional financing models, can this full-stack trading ecosystem break the deadlock through mechanism innovation?
Written by: Griša Černe, Lemniscap
Translated by: Saoirse, Foresight News
Editor's Note: On September 30, Flying Tulip, founded by the "DeFi Godfather" Andre Cronje, announced the completion of a $200 million private fundraising round and will launch a public sale of its native token FT at the same valuation, aiming to raise a total of $1 billion. The project innovatively introduces a perpetual on-chain redemption right, allowing investors to redeem tokens at the original price and burn them at any time. Supported by a 4% low-risk yield from the treasury for operations and a buyback-and-burn deflationary mechanism, it establishes a new financing paradigm of "principal protection + yield feedback + deflationary cycle." Lemniscap, where the author works, participated in Flying Tulip's $200 million seed round. The full content is as follows:
We are very pleased to announce our participation in Flying Tulip's $200 million seed round. Flying Tulip is a brand-new project launched by Andre Cronje and his team, aiming to build a "full-stack exchange" from scratch—covering spot trading, perpetual contracts, options trading, and extending to lending and structured yield products. Although the project is ambitious in scale, this article will focus on its breakthrough innovation in financing models.
Motivation and Opportunity
Directly competing with giants in the DeFi sector is undoubtedly a daunting task. These industry leaders have stronger capital, stable recurring revenues, and operational capabilities far beyond those of lean startups; in addition, they possess solid network effects, deep ecosystem integration, and loyal user bases. More crucially, there is also the challenge of "ecosystem discourse power": influence over industry standards and control of collaborative resources are often as important as product quality.
Therefore, even if a small startup achieves genuine technological innovation, bringing that innovation to market still requires overcoming numerous obstacles—not just technical challenges, but also the dual tests of capital reserves and ecosystem recognition. Flying Tulip addresses this by redefining the logic of capital formation in crypto: it no longer relies on short-term speculative liquidity, nor on "token mechanisms that become invalid after initial fundraising," but instead builds a financing model that can support long-term operations, ensuring the product system can stand independently in the market.
Limitations of Token-Based Financing Models
To date, the most successful application scenario for crypto tokens remains crowdfunding: raising funds by selling tokens to launch projects. However, after the initial fundraising stage, many tokens gradually lose value—as teams struggle to create sustained demand, token prices often continue to fall, eventually approaching zero.
Although "token utility" remains a hot area of experimentation in the industry, in most cases, the core role of tokens is still as a "financing tool." This role may be reasonable in the early stages of a project (before it becomes a self-sustaining enterprise), but it is difficult to support long-term operations. Flying Tulip faces this industry reality head-on and has built a new financing model around this pain point.
Flying Tulip's Financing Model
The core logic of this model is simple and clear, summarized in "three steps":
- Raise a large capital reserve through token sales;
- Invest the raised funds in low-risk DeFi strategies to obtain stable yields;
- Use these yields to support project operations until the product system generates its own revenue (such as trading fees).
In the specific design, the Flying Tulip (FT) tokens obtained by investors are protected by a perpetual put option: as long as they hold the tokens, investors can redeem them at any time to recover their initial principal, and this option never expires. From a rational decision-making perspective, investors will only exercise this option when "the token trading price is lower than the purchase price"—after exercise, the corresponding tokens will be burned.
In practice, investors bear about a 4% "opportunity cost of yield": if they invested directly in DeFi, they could have obtained this portion of the yield; in exchange, investors gain exposure to the upside of FT tokens, and the entire mechanism minimizes downside risk.
According to the plan, Flying Tulip's target fundraising amount is $1 billion, with no lock-up period—at the time of token issuance, 100% of the supply will be directly allocated to investors. Based on a 4% annualized yield from the treasury, approximately $40 million in revenue can be generated each year to cover operating costs and product launch expenses, until fee income can independently support the project.
Buyback and Burn Mechanism
Treasury yields will be allocated proportionally to "operating expenses" and "FT token buybacks"; over time, fee income generated by the product system will become another major source of buyback funds.
What is particularly crucial: if investors sell FT tokens on the secondary market, their "perpetual put option" immediately becomes invalid, and the corresponding initial principal is transferred to the project foundation—the foundation can use these funds to buy back and burn FT tokens. This means that "selling tokens" not only causes investors to lose principal protection but also actively strengthens the "deflationary attribute" of FT tokens.
With multiple mechanisms working together, FT tokens are "deflationary assets" from the moment of issuance, with mutually reinforcing sources of demand and channels for supply reduction.
Economic Impact Analysis
Since 100% of FT tokens are held by investors at issuance, early market volatility may be high: limited circulating supply combined with ongoing buyback plans will result in strong "reflexivity" in the market (i.e., price fluctuations will further amplify their own trends).
Unlike traditional financing models (where teams and investors share token supply proportionally), Flying Tulip starts with "full investor allocation," with subsequent token supply gradually transferring to the foundation and continuously reduced through burning. In theory, FT tokens may completely exit circulation after fulfilling their mission.
Why We Invested in Flying Tulip
Flying Tulip is not a risk-free project, but rather a highly original experiment. Its success depends on three core capabilities: the team's effective management of the treasury, the ability to maintain yield stability, and the competitiveness of the product system. The "cost" of this model is reflected in capital efficiency—investors forgo direct DeFi yields, and only if the project succeeds does this trade-off make sense.
We believe that for such innovative financing models to succeed, two key conditions must be met:
- Large-scale fundraising capability: usually relying on the reputation, influence, and trust endorsement of core individuals or teams;
- Mature product foundation: the product system must have sufficient potential to support the deployment of large-scale startup capital.
And Flying Tulip happens to possess both of these conditions.
Andre is one of the top developers in the crypto space—he is both influential and controversial, but his track record of launching original foundational protocols (such as the early Yearn Finance) is well recognized. Flying Tulip continues this style: it not only redefines token financing through non-traditional mechanisms but also directly launches a product system targeting industry giants.
Our core reason for supporting the Flying Tulip team is that they are truly attempting to reconstruct the "token-based capital formation mechanism"—which is the core driving force of the crypto industry's development. If the model succeeds, it will accelerate the launch process of ambitious innovative projects, enhance the competitiveness of the entire ecosystem, and ultimately benefit end users.
This is still an experiment full of unknowns, but it is precisely such experiments that continue to drive the crypto industry forward.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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