Fair3 Foundation Mechanism In-Depth Analysis: How Did the Coin Circle's First "Decentralized Insurance" Form a Buying Pressure Flywheel?

Article Source: Fair3

In the world of the cryptocurrency industry, scams are not uncommon. However, in the past two years, the speed, ingenuity, and scale of "rug pulls" have refreshed the public's understanding of this term. From projects backed by VCs to meme coins like $YZY supported by celebrities like Kanye West, to the recent disappearance of the Solana project AQUA, investors' funds have been drained like an open faucet, leaving behind chaos and helplessness.

According to RootData, since 2024, there have been over 260 Rug events in the Web3 market, involving a total amount exceeding $500 million. What's more critical is that the majority of victims do not have any form of recourse. While blockchain emphasizes "code is law," when it comes to scenarios such as project abandonment, social media account closure, and unaudited smart contracts, regular users have virtually no way to hold anyone accountable.

In the traditional financial markets, there are layers of risk mitigation mechanisms in place. However, in Web3, despite boasting of "decentralized autonomy," there is often a lack of systemic measures to address risk when it truly strikes. The response to a project collapse usually involves short-term community reassurance and post-disaster compensation rather than replicable and institutionalized solutions.

It is in this context that a new experiment is gaining community attention: the Fair3 Fairness Foundation. This is an on-chain insurance system that does not rely on the project team or exchanges but is entirely built by the community itself. It is attempting to answer a long-overlooked question: "What can we actually do when risk materializes?"

This mechanism is not just a "decentralized insurance" but could also become a new buying pressure driver, reshaping the tokenomics of the cryptocurrency economy.

Practical Implementation of Decentralized Insurance After the AQUA Event

In September 2025, a piece of news quickly spread in the Solana Chinese community: the AQUA project had gone missing. The project was once hailed as the "representative of the potential environmental track on Solana," but just three weeks after being listed on exchanges, the team went AWOL, the community disbanded, and the token went to zero.

To everyone's surprise, in the absence of any compensation action from the project team, the Fair3 Foundation became the first third party to step forward to provide insurance for community users.

According to the official announcement, Fair3 launched an insurance plan totaling 100,000 FAIR3 tokens. This insurance plan not only required users to provide on-chain holding screenshots but also introduced a "main claims pool + public pool" dual-track structure. Users were offered different claim amounts based on whether they held and staked FAIR3. The entire process was conducted transparently on-chain, and the source of the insurance funds came from the quarterly reserve fund previously injected by the foundation.

The actual operation of this mechanism has become a rare "non-project-led" compensation case in the crypto world. It not only brought about a short-term reversal of public opinion but also prompted the industry to rethink whether "is it possible to put public insurance mechanisms on-chain?"

Foundation's Core Logic: Insurance, but Decentralized

The core design of the foundation is to compensate users who have suffered injustice. It requires the victims to not only hold Fair3 and the tokens of the affected project at the time of the event but also stake their Fair3 to qualify for compensation. The compensation amount is determined by the user's staking ratio, with a maximum of 10% of the compensation pool. At the same time, staking more Fair3 not only means a higher coverage limit but also grants governance rights: holding over 5,000 tokens allows for voting, and holding over 100,000 tokens enables the proposal of compensation. In other words, the process of staking Fair3 is essentially equivalent to buying an insurance policy, which also gives users the power to influence the compensation result.

Traditionally, insurance is provided by centralized companies, where users pay premiums, and the company pays out in the event of an accident. The Fair3 Foundation fundamentally moves this model onto the chain and makes three key modifications:

On-chain transparency: Eligibility for compensation is verified through a snapshot to avoid post-incident asset accumulation for fraudulent claims.

Stake linkage: The compensation amount and voting rights are directly tied to the amount of staked $FAIR3.

Community governance: Whether an event is identified as a "compensation case" is determined by holders voting.

The result is: Buying $FAIR3 and staking is not just buying a coin but more like buying an "on-chain insurance policy."

Why Is It More Than Just Insurance?

If it were just insurance, the Fair3 Foundation would at most be considered as "users' stop-loss tools." The real uniqueness lies in the fact that this mechanism is inherently linked to the logic of buying pressure.

Holding equals protection: Users must stake $FAIR3 to be eligible for compensation.

The more you hold, the more protection you get: A large stake can not only increase the compensation limit but also grant proposal rights.

Governance binding: 5,000 $FAIR3 tokens are required to vote, and over 100,000 tokens are needed to make a proposal.

In other words, if you want protection and a voice, you must buy and stake $FAIR3 long term.

How Does Insurance Interact with Buying Pressure to Form a Flywheel?

The true power of this mechanism lies in its natural construction of a "Buy Pressure Flywheel":

Users buy and stake Fair3 — receiving insurance to ensure they will not lose all their funds in a rug pull event.

Users participate in governance — those holding more tokens can determine which events are added to the compensation list.

Users receive compensation — in the event of a black swan, funds from the foundation compensation pool are distributed based on staking ratio.

Users add more funds — to increase their compensation amount or governance weight, they must stake more $FAIR3.

New users are attracted — seeing real-world cases of foundation compensation, they are more willing to buy Fair3 to qualify for insurance.

Market cap and capability resonate — as Fair3's price increases, the foundation's compensation ability strengthens, further attracting more users.

This is a typical closed-loop flywheel:

Insurance brings buying pressure and staking → Buying pressure and staking bring market cap → Market cap brings stronger insurance capability → Stronger insurance capability brings more buying pressure.

Fair3 vs Traditional Projects: True Countercyclicality

Most crypto projects derive their value from a "narrative" or "use case," facing sell pressure once the hype dissipates.

What sets Fair3 apart is that it gives holders a tangible and long-term reason to hold:

Even without a bull market, staking Fair3 remains valuable because it serves as users' "market insurance policy";

The more chaotic the market, the higher the insurance value, contrary to the logic of most tokens shrinking in a bear market.

Therefore, Fair3 is more like a "countercyclical token."

Potential Impact: Fair3's Long-Term Holder Logic

This means that Fair3 could shape a new holder structure:

Short-term speculators may exit, but those who truly remain will be those who view Fair3 as an insurance and governance tool.

Institutions and whales may be more inclined to hold long-term because they need the most downside protection during market swings.

Retail holders, on the other hand, will naturally accumulate holdings due to the intuitive logic that "buying Fair3 = buying insurance."

When the buy-side motivation of a token shifts from "price speculation" to "risk hedging," its holder structure becomes healthier and more long-term.

For Project Teams: Introducing a Fair Collateral Mechanism

In addition to users, project teams are also brought into the flywheel.

The foundation introduces the "Fair Collateral Mechanism," allowing projects to proactively purchase and stake Fair3 as a commitment that they will not rug pull. If the project experiences a rug pull or a significant token price drop in the future, this collateral will be distributed to all users holding the corresponding token. Essentially, this is the project setting up its own insurance pool to demonstrate its confidence in the project, with the Fair3 Foundation's mechanism providing fairness and protection.

For the project, this is a public vote of confidence;

For users, investing in a project with fair collateral provides more security and confidence;

For Fair3, it means that in addition to user buy-side pressure and staking, project teams will also become a larger buy-side force, further accelerating the flywheel effect.

Conclusion: The Value Evolution from Insurance to Flywheel

Fair3 represents not only a "personal risk protection tool" but also an institutional governance product that can be jointly referenced by platforms, exchanges, and project teams.

During an interview, Fair3 CTO and former CEO of Kuaibo, Wang Xin, stated:

"Fair3 is not a project playing short-term games; it seeks to address the long-term lack of 'public product structure' in the crypto space, which requires time to build and real events to validate its value."

Similarly, Ann, founder of Unicorn Verse and an investor in Fair3, pointed out:

"Currently, project teams and platforms are trying to incentivize user engagement, but few are structurally building trust flywheels from an 'insurance mechanism' perspective. Fair3 shows us this possibility."

The Fair3 Foundation mechanism presents a new possibility:

It transforms "fairness" from an idealistic slogan into tangible compensation protection that users can see and touch;

It shifts "buying tokens" from a speculative behavior to a long-term logic of purchasing insurance and participating in governance.

The greatest value of this mechanism is not only to compensate victims but also, through the flywheel effect, to gradually build a community of long-term holders.

In the cryptocurrency world filled with uncertainty, this may be the most scarce "certainty."