Data as of April 30, 2023
This article introduces the purpose, design mechanism, driving force, and future plans of Freedom Finance, which involves interesting and exciting currency theory and an experiment on incentive mechanism design.
The vision of Freedom Finance is to make its token FDO a stable and freely floating (non-anchored) currency backed by assets, serving as the base currency of the cryptocurrency economy, and establishing a convenient settlement tool between cryptocurrencies and fiat currencies through global payments. Like a private bank, it mints its own banknotes (FDO), which are supported by assets (USDT) in the treasury (FDO pool). Freedom Finance uses various application ecologies and payment scenarios to influence the market value of FDO.
A paper by Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System,” gave birth to the blockchain industry, and the idea of decentralization and its derivative business has been embraced by the world. However, from the birth of blockchain to 2023, after 14 years, blockchain or cryptocurrencies still cannot solve a practical problem: “the basic function of money – payment.” Perhaps the transfer of cryptocurrencies has been widely accepted by industry professionals and can be easily used for large transfers, but it seems that it is still far from real life and society. How to apply cryptocurrencies to real life and make it convenient for all human beings around the world to use is still a problem that the cryptocurrency industry urgently needs to solve.
What currency can play an important role as a global payment?
BTC and ETH have independent currency policies, but their prices fluctuate greatly, making them unsuitable as currencies. Although stablecoins are stable, they are pegged to the US dollar, which makes them subject to the influence of the US Federal Reserve’s policies and regulatory risks from the US government. What we need is an independent and uncontrollable currency that can fulfill the basic functions of currency, not only circulating in the crypto community but also facilitating payments in the traditional financial world, allowing everyone to use cryptocurrencies easily and conveniently.
The initial plan of Freedom Finance is to inject an initial circulation of 100,000 FDO/10,000 USDT into the treasury (FDO bottom pool). The price of FDO is 0.1 USDT/coin, which is also the initial price of FDO. This means that new FDO can only be minted when the FDO treasury (FDO bottom pool) has corresponding USDT. When the ratio between FDO and USDT changes, the price of FDO will fluctuate. Why adopt the concept of a private bank? Because FDO can be regarded as the promissory note issued by Freedom Finance, fully supported by the USDT assets in the treasury. Just like a bank issuing wealth management products and then lending these assets to earn income, the USDT of Freedom Finance’s crypto finance can be used in Defi protocols and as market makers’ profits to earn interest, which belongs to FDO holders.
Overview of FDO Coin Minting Mechanism
The purpose of this protocol is to achieve stability through a coin minting algorithm and ample funds in the national treasury. The encrypted financial products will inject USDT assets into the FDO national treasury at an average daily yield of 100%, and 60% of the assets (USDT) injected into the treasury each day will be used for coin minting. After minting, the assets will flow back into the FDO national treasury, which means that every time FDO is minted, it will have 166% of the assets (USDT) as support and flow into the treasury. This means that the national treasury will receive an additional 40% of USDT assets every day, which will cause a continuous change in the price of FDO and lead to its continuous appreciation.
How is this achieved? For example, if the current price of FDO is 0.3 USDT/coin and the bottom pool has 200,000 FDO coins, in order to maintain the value of FDO, the bottom pool needs to have assets of 60,000 USDT (AMM automatic market maker mechanism), which is also one of the ways that DeFi forms prices. At this point, assuming that the scale of encrypted finance has reached 5 million USDT, the daily interest payment for encrypted finance yields is 0.7%, which means that 35,000 USDT needs to be paid to all encrypted finance users every day. According to the protocol, all 35,000 USDT will flow into the FDO bottom pool. At this time, the bottom pool will change from 60,000 USDT to 95,000 USDT. “60% of the assets (USDT) injected into the treasury each day will be used for coin minting”, which means that the daily minting amount is 21,000 USDT (35,000 x 60%), and the minting price for the day is 0.3 USDT/FDO, which means that 21,000 USDT can mint 70,000 FDO coins. At this point, the protocol will flow all the minted tokens and USDT into the bottom pool. The bottom pool will change as follows: (200,000 + 70,000) FDO / (60,000 + 35,000) USDT, and the price of FDO will also change from 0.3 FDO/USDT to 0.35185, an increase of 17.28%. This is the coin minting and token appreciation logic of FDO. Through the appreciation logic of FDO, we can see that the value of FDO is not set out of thin air, but that each FDO token has assets as support. The supply of FDO (total amount) will also increase over time, and FDO tokens will continue to appreciate with the changes in USDT and FDO.
In order to maintain the value consensus of FDO, FDO has set a 180-240 day incubation period since the protocol launch on April 10. During the incubation period, the buying fee for FDO in SWAP is 100%. On May 15, 2023, the FDO buying fee will be reduced from 100% to 70% to increase the liquidity of FDO and provide more ways for FDO consensus participants to participate. FDO LP liquidity mining will also be launched on May 15th. This will require all FDO participants to obtain FDO by purchasing encrypted financial products. The funds entrusted to encrypted financial products will be operated by FDO market-making teams to generate profits, which will be injected into the FDO bottom pool to increase FDO liquidity and market capitalization.
FDO liquidity mining will migrate all FDO SWAP to Pancakeswap. Due to the extremely scarce current FDO production, the market premium of FDO has exceeded three times, and it is still uncertain whether FDO can be received, which will limit the ecological development of FDO. Some investors choose simpler encrypted financial methods to obtain FDO, while others hope to obtain FDO through decentralized exchanges. This seems unfriendly to the market value development of FDO and how to avoid speculators, but FDO has a better solution.
After the migration of FDO SWAP to Pancakeswap, the FDO liquidity pool will be officially locked on Pinksale for a locking period of 99 years, and the buy tax of FDO will be lowered from 100% to 70%. The reduction in the buy tax of FDO will allow crypto users to buy FDO directly on Pancakeswap, even though 70% will be destroyed. This is still a convenient way to obtain FDO when compared to the off-market FDO trading with a three-fold premium and the situation where FDO has no market value.
As the value of FDO’s token continues to increase, the liquidity pool will continue to grow, and with FDO’s marketing plan, FDO will have more popularity and heat in the crypto community. More crypto users may buy FDO on Pancakeswap, and some of them may not understand the rules of FDO’s buy tax and directly buy FDO, immediately destroying 70% of it, contributing to the price growth and ecological development of FDO.
Of course, investors who are optimistic about the future development and value appreciation model of FDO and are unwilling to join crypto finance can also buy FDO on Pancakeswap at a premium of 3.33 times. This approach not only ensures the development of the ecosystem but also ensures that secondary market participants do not affect the normal token appreciation and value incubation mechanism of FDO. Users who buy FDO in the secondary market not only will not affect the development of FDO but will also have a long-term impact on the depth of FDO’s liquidity pool, token appreciation, and consensus growth. Buyers who buy FDO at a premium of 3.33 times on the trading platform also make sure that there is no selling pressure on FDO in the short term. If they sell FDO and make a profit of twice the amount they paid, then secondary market buyers would need FDO’s value to increase 6.66 times before they can make a profit of one time. However, the funds of the buyers who enter FDO’s liquidity pool in the range of FDO’s value appreciation of 6.66 times will keep increasing the size of FDO’s liquidity pool and serve as liquidity. A larger liquidity pool will attract more powerful crypto investors to participate in FDO’s crypto finance and ecosystem, which will make FDO’s market value appreciation enter a healthy cycle.
Why is the value of FDO so high if only 1.66 times its assets are used as support?
The price of FDO is driven by protocol and consensus, as well as the premium paid by FDO holders for the potential of Freedom Finance. The daily protocol mints coins with a mechanism of (60%, 100%), which means that 60% FDO/60% USDT is injected into the liquidity pool, and an additional 40% of the daily yield paid to crypto investors is automatically used to buy FDO in the pool, continuously increasing the value of FDO. Even if someone sells FDO midway, the daily payment of 40% yield funds (USDT) will still be automatically used to buy FDO in the pool, pushing FDO to continue to appreciate. Crypto users cannot influence the protocol’s daily continuous buying of FDO from the pool, whether they buy or sell on the secondary market.
How has Freedom Finance (FDO) performed?
The above theoretical analysis has been conducted on FDO’s incentive structure and coin minting model. How has FDO actually performed? Due to the daily injection of 100% and 60% yield funds into the liquidity pool, FDO’s pool and token price have continued to grow, which is indeed a strong incentive for people to pay attention to and purchase crypto finance.
On April 10th, the FDO bottom pool was officially launched for coin casting starting at an initial price of 100,000 FDO/10,000 USDT. After a total of 20 days, on April 30th, the price had increased by 214% to reach a total of 226,422.83 FDO/71,720.27 USDT. With the continued strong performance of FDO, after the migration from FDOSWAP to Pancakeswap and the opening of LP liquidity mining, FDO’s liquidity and depth are expected to perform even better, driving the dual development of FDO in crypto finance and LP liquidity mining. This will enable the bottom pool to quickly accumulate a large amount of funds and drive the upward momentum of FDO. As the bottom pool has more liquidity injected, the impact of injected funds or sold tokens on the FDO price will continue to decrease, making FDO relatively stable. Having more liquidity and more assets in the bottom pool will also give mature crypto investors more confidence, as they will no longer pursue high returns and FDO’s high appreciation, but rather stable income brought by the massive bottom pool.
For Freedom Finance, this is just the beginning. Although FDO has a long way to go to become the base currency of the crypto economy, it needs larger assets to support it to be relatively stable, and to form such a consensus: it needs global payment channels and huge profits to support these currencies. Freedom Finance plans to update its decentralized wallet in late May to early June and launch the world’s first decentralized privacy wallet “Darker Wallet” in July-August 2023, which includes global payments, anonymous MasterCard, privacy transactions, multi-chain cross-chain protocols and DarkPool. The global payment business will be launched in September 2023. FDO will function as an authorized pledge asset in Darker Wallet, and locking a certain amount of FDO will give you a $5,000 usage limit in the anonymous MasterCard bound to the Darker Wallet, which can be used for payment/withdrawal, of course, with a 1%-2% handling fee deducted.
To promote the FDO global payment business and the Darker Wallet, Freedom Finance has also set up an Asian headquarters in Bangkok and simultaneously established FDAO communication centers in Korea, mainland China, Taiwan, Japan, Hong Kong, Malaysia, Singapore, Indonesia, Vietnam, and the Philippines, as well as recruiting global country agents.
Freedom Finance is a very early project that has made a good start and established a bridge between WEB2 and WEB3. The unprecedented coin casting model frees the appreciation of tokens from the influence of human factors, a historic moment for DeFi, driven by protocol and consensus to promote token development. In summary, FDO has already met the standard of becoming a global currency, and whether it can fulfill this great vision will be decided by all FDO holders together.