Why can AC's new product Flying Tulip raise 1 billion dollars?

Original Title: Flying Tulip: Bootstrapping a Full-Stack Exchange, Rethinking Fundraising
Original Author: Lemniscap
Translated by: Ismay, BlockBeats

 

Editor's Note: Flying Tulip's fundraising target of up to 1.1 billions USD may seem daunting at first glance, even raising concerns about "sky-high financing and project teams cashing out." However, according to Lao Bai (@Wuhuoqiu), its unique mechanism design is precisely aimed at avoiding the pitfalls of traditional token fundraising. This massive fund is not directly controlled by the team, but rather serves as the project's treasury, generating stable operational 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, if investors believe the project’s prospects are poor or the token price falls below the issue price, they can choose to redeem their investment at the original price, with no loss of principal. The only cost to investors is the time and opportunity cost of their funds. If everyone chooses to redeem, the team receives nothing. More importantly, whenever an investor redeems, the corresponding tokens are permanently burned. This means that from its inception, the $FT token enters a deflationary trajectory, with its total supply continuously decreasing as redemptions occur.

It is understood that the project is regarded by its founder, legendary DeFi builder Andre Cronje, as the "culmination" of his previous projects (such as YFI, KP3R, Solidly). It integrates core functions such as spot, lending, perpetual contracts, options, and on-chain insurance, aiming to push capital efficiency to new heights through synergies between modules. Therefore, Flying Tulip is not only a bold technical experiment but also a social experiment on the dynamic game between tokenomics, investor confidence, and project value. How DeFi king Andre Cronje’s comeback project will perform is worth watching.

The full text is as follows:

We are honored to announce that we participated in Flying Tulip's 200 millions USD seed round. Flying Tulip is a new initiative launched 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 yield products. Although its business scope is broad, in this article, we will focus on its fundraising model—an area where Flying Tulip is pioneering innovation.

Motivation and Opportunity

Competing head-on with DeFi giants is a daunting task. These giants have deeper capital, strong recurring revenues, and large teams, with operational capabilities far beyond those of lean startups. They enjoy entrenched network effects, deep ecosystem integration, and loyal user bases. In addition, there are "political" factors: influence over industry standards and partnerships, which are often as important as product quality.

Therefore, even if a small startup brings true innovation, successfully bringing it to market is a completely different battle. The challenge is not only technical but also financial and social. Flying Tulip addresses this challenge by reshaping the way capital is formed in crypto. It does not rely on "mercenary liquidity" or token mechanisms that falter after initial fundraising, but instead seeks to establish a fundraising model that can sustain project operations long-term, until its product suite can generate revenue independently.

Limitations of Token Fundraising

So far, crypto tokens have achieved the greatest success as a form of crowdfunding: selling tokens, raising capital, and launching projects. But once the initial phase ends, many tokens gradually become irrelevant, and as teams struggle to create sustained demand, their value tends toward zero.

Token-based utility remains an active area of experimentation, but in many cases, tokens primarily serve as a fundraising mechanism. This role makes the most sense during the project launch phase, after which the project gradually evolves into a self-sustaining company.

Flying Tulip candidly accepts this reality and attempts to build a new model around it.

Flying Tulip's Fundraising Model

Its core idea is simple: raise a large reserve fund through token sales, invest these funds in low-risk DeFi strategies, and use the generated yield 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 tokens, investors can return them at any time and recover their original investment. This put option never expires. Rationally, investors will only exercise this option when the token price falls below their purchase price, at which point their tokens are burned.

In practice, investors pay an opportunity cost of about 4% yield—the return they could have earned by investing directly in DeFi. In exchange, they gain FT’s upside potential, while this structure minimizes downside risk.

Flying Tulip aims to raise 1.1 billions USD. The tokens have no lock-up period, and 100% of the supply is distributed to investors at launch. With a treasury asset yield of about 4%, this can generate about 40 millions USD per year to support project operations and product suite launch, until fee income can take over.

Buyback and Burn Are the Core of the Model

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

Importantly, if investors sell FT tokens on the secondary market, their put option becomes invalid. Their initially invested capital is transferred to the foundation for buyback and token burning. This means that selling not only causes investors to lose protection, but also actively strengthens 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 Significance

Since the entire FT supply is in the hands of investors at launch, early market dynamics may be very volatile. Limited circulation combined with ongoing buyback plans creates conditions for strong reflexivity.

Unlike traditional fundraising where supply is split between the team and investors, Flying Tulip starts with 100% investor allocation. Over time, supply gradually shifts to the foundation and is eventually burned. In theory, the token may eventually fulfill its mission and disappear completely.

Our Investment Logic

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

For this fundraising "primitive" to succeed, the following factors are crucial:

• The ability to raise a large amount of capital, usually anchored by a key individual or team with the reputation, influence, and trust to attract capital.
• A sufficiently mature product suite that truly warrants such a large-scale launch.

In our view, Flying Tulip uniquely possesses both of these elements.

Andre is one of the top builders in the crypto world, highly influential but also controversial. His track record of launching original "primitives" is well established, and Flying Tulip fits this pattern: it adopts a non-traditional mechanism, fundamentally rethinks the token fundraising model, and its product suite directly targets existing market giants.

We support the Flying Tulip team because it represents a true rethinking of the token capital formation model, which is 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 such experiments that drive the crypto world forward.