Original Article Title: Flying Tulip: Bootstrapping a Full-Stack Exchange, Rethinking Fundraising

Original Article Author: Lemniscap

Original Article Translation: Ismay, BlockBeats

Editor's Note: At first glance, Flying Tulip's ambitious $1 billion fundraising goal may seem daunting, even raising concerns about "sky-high financing and project team cash-outs." However, according to Lao Bai (@Wuhuoqiu)'s analysis, its unique mechanism design is precisely aimed at avoiding the pitfalls of traditional token fundraising. This substantial funding is not directly controlled by the team, but rather serves as a project treasury, generating stable operating funds through investments in low-risk US Treasuries and on-chain yield protocols (such as Ethena).

For investors, their principal is protected by a "perpetual put option." This means that at any time when investors see a bleak project outlook or if the token price falls below the issuance price, they can choose to redeem their investment at the original price without any loss of principal. Investors only incur the cost of time and opportunity of their funds. If everyone chooses to redeem, the team will not take a penny. More importantly, each time an investor redeems, the corresponding tokens will be permanently burned. This puts the $FT token on a deflationary path from its inception, with its total supply decreasing with each redemption.

It is understood that the project is considered by its founder, the legendary DeFi builder Andre Cronje, as the "culmination" of past projects (such as YFI, KP3R, Solidly). It integrates spot trading, lending, perpetual contracts, options, on-chain insurance, and other core functions, aiming to elevate capital efficiency to new heights through synergies between modules. Therefore, Flying Tulip is not only a bold technical experiment but also a social experiment of the dynamic game between tokenomics, investor confidence, and project value. The return work of the DeFi king Andre Cronje is eagerly awaited.

Below is the full text:

We are pleased to announce that we have participated in Flying Tulip's $200 million seed round financing. Flying Tulip is a new initiative led by Andre Cronje and his team. This is an ambitious attempt to build a full-stack trading platform from scratch, covering spot, perpetual contracts, options trading, as well as lending and structured income products. While its business scope is broad, in this article, we will focus on its fundraising model — the very area where Flying Tulip is pioneering innovation.

Motivation and Opportunity

Competing head-on with the giants in the DeFi space is a daunting task. These giants have more capital, robust recurring revenue, and large teams, making their operational capabilities unmatched by lean startup teams. They enjoy entrenched network effects, deep ecosystem integrations, and loyal user bases. Furthermore, there are "political" factors at play: influence over industry standards and partnerships, the importance of which often rivals product quality.

Therefore, even if a small startup brings true innovation, successfully bringing it to market is an entirely different battle. The challenge lies not only in technology but also in funding and social aspects. Flying Tulip tackles this challenge by reshaping the capital formation in the crypto space. It does not rely on "mercenary liquidity" or token mechanisms that become powerless after the initial fundraising but seeks to establish a fundraising model that can sustain project operations long-term until its product suite can become self-sustaining.

Limitations of Token Fundraising

So far, crypto tokens have been most successful as a crowdfunding mechanism: selling tokens, raising capital, and launching projects. However, once the initial stage is over, many tokens gradually become irrelevant as teams struggle to create sustained demand, causing their value to trend towards zero.

Token utility remains an active experimental field, but in many cases, tokens primarily serve as a fundraising mechanism. This role is often most meaningful in the project's early stages, after which the project will evolve into a self-sustaining entity.

Flying Tulip readily accepts this reality and seeks to build a new model around it.

Flying Tulip's Fundraising Model

The core idea is simple: raise a significant reserve of funds through a token sale, deploy these funds into low-risk DeFi strategies, and use the generated returns to fund project operations until the product suite can generate its own revenue.

Investors receive FT tokens backed by a perpetual put option. As long as they hold the token, investors can redeem it at any time and receive their initial investment back. The put option never expires. Rationally, investors will only exercise the option when the token price falls below their purchase price, at which point their tokens will be burned.

In practice, investors incur an opportunity cost of approximately a 4% yield—what they could have directly earned by investing in DeFi themselves. In exchange, they gain the upside potential of FT, a structure that maximally mitigates downside risk.

The goal of Flying Tulip is to raise $1 billion. The tokens have no lock-up period, and 100% of the supply flows to investors at launch. With a treasury asset generating approximately a 4% yield, around $40 million in funds can be generated annually to support project operations and the product suite's launch until fee revenue can take over.

Buyback and Burn are at the Core of the Model

The income generated from the treasury will be allocated between operational expenses and FT token buybacks. Over time, the fees generated by the core product suite will provide a new source for buyback demand.

Importantly, if investors sell FT tokens on the secondary market, their put options will become invalid. The capital initially invested by them will be transferred to the foundation for token buyback and burn. This means that selling not only strips investors of protection but actively reinforces the token's deflationary mechanism.

In summary, these dynamics make FT a deflationary asset from day one, with multiple mutually reinforcing sources of demand and supply reduction.

Economic Implications

Since all of FT's supply is held by investors from the outset, early market dynamics could be very turbulent. Limited circulation coupled with an ongoing buyback plan creates conditions for strong reflexivity.

Unlike traditional fundraising where the team and investors share the supply, Flying Tulip starts with 100% investor distribution. Over time, the supply will gradually shift to the foundation and ultimately be burned. In theory, the token might eventually fulfill its mission and disappear entirely.

Our Investment Thesis

Flying Tulip is not a risk-free investment, but it is unique. The success of this model hinges on the team's ability to effectively manage the treasury, sustain yields, and deliver a competitive product suite. The cost is in capital efficiency loss: investors forgo gains they could have had directly, and this sacrifice only pays off if the project succeeds.

To make this fundraising primitive successful, the following factors are crucial:

· Being able to raise a significant amount of capital, usually anchored by a key individual or team who must have the reputation, influence, and trust to attract capital.

· A mature enough product suite that truly justifies a plan of this magnitude.

In our view, Flying Tulip uniquely combines these two elements.

Andre is one of the top builders in the crypto world, with significant influence but also surrounded by controversy. His track record of introducing original "primitives" is well known, and Flying Tulip follows a similar pattern: it adopts a non-traditional mechanism that fundamentally rethinks the token fundraising model, while the product suite launched directly challenges existing market giants.

We support the Flying Tulip team because it represents a true rethinking of the token capital formation model, a mechanism at the core of the crypto movement. If successful, it could accelerate the launch process of ambitious projects and make the entire ecosystem more competitive, ultimately benefiting end users.

This is an experiment full of unknowns. But it is precisely these types of experiments that drive the continuous advancement of the crypto world.

"Original Article Link"

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia