Fluid Growth Vision & Community Buyback Discussion

22

Some additional considerations, upon reading comments & thinking:

Buyback or not?

It appears that Fluid is spending roughly the same amount of incentives as it generates revenue. As such, the protocol is not yet profitable, and the buyback program cannot be considered as a sustainable way to return value to token holders. Instead, it should be viewed as a growth strategy. Here are some scenarios to be evaluated:

  1. (Positive) Buyback ~> FDV ↑ ~> Incentives ↑ ~> TVL ↑ ~> Revenue ↑
  2. (Positive) Buyback ~> FDV ↑ ~> # of holders ↑ ~> Narrative & Distribution ↑ ~> TVL ↑ ~> Revenue ↑
  3. (Negative) Buyback ~> FDV ↓ (for some reason) ~> Treasury ↓ & Incentives ↓

It is not clear if benefits of 1 & 2 outweigh the risks of 3. It may make sense to try out a 6 month buyback program, and see how it works. To minimize the risk of 3, it is important to correctly choose the signal of Fluid’s valuation (see below), in order to maximize the chances of positive effect on the FDV after buybacks.

Implementation

Agree with @DMH that for a comparative analysis with other protocols it is probably better to use FDV/annualized-fees metric, since fees is the most comparable metric. So one could try to determine undervalued levels of FDV/annualized-fees, and based on that allocate % of revenue to buybacks.

However, as @bmpalatiello pointed out, the market of DeFi protocols is (1) heterogeneous, and also (2) nascent. What this means is that choosing the right levels will be (1) complicated and (2) mandatory to review. In view of this, it may make sense to adopt a “self-correcting” strategy that @bmpalatiello suggested, i.e. take the long-term moving average as the fair valuation, and short-term moving average as the current valuation. And based on these two signals allocate a % of revenue to buybacks.

The choice of signal still remains, however. One may choose FDV/annualized-fees, FDV/annualized-revenue, or choose to account for incentives & use FDV/annualized-earnings. Note that even though earnings are close to 0 in case of Fluid, the difference between long-term moving average and short-term moving average can still indicate that token is undervalued.

23

An easy, low-hanging fruit task to increase the Fluid TVL without needing to spend any DAO treasury assets would be to onboard superOETHb to the Base instance of Fluid. A superOETHb proposal has been patiently sitting on the forum since October 2024: Deploy Super OETH markets on Fluid - Base

24

Each proposal comes with its own issues, too many variables and scenarios.

Why not just follow Hyperliquid’s approach? Their buyback program actually works, no need to overcomplicate things.

1 Like
25

One of the main challenges $FLUID currently faces is a lack of liquidity. For that reason, I fully support a buyback in whatever form it may take. My main concern, however, is the currently stated 0.5 billion FDV. Adjusting this to 0.75 billion would better align with the existing DEX liquidity, while also signaling confidence that the current valuation underprices both present performance and future growth potential.

1 Like
26

I agree with you. The protocol should focus more on growth and not short term price. There are several discussion wether token buy backs make sense or not and I believe they only make sense to show alignment between token and project. But Fluid is different, since we have a very respectable team and we trust them with the DAO treasury.

So I would use the revenue to grow faster and not buy back token and increase price in the short term (30day MA is only relevant in the short term). It also makes no sense to buy back tokens with hard earned revenue and then distribute tokens to increase lenders to increase TVL.

Hold the cash for harder times or use it to grow faster.

1 Like
27

All this fuss about… Nothing?! :sweat_smile:

You’re the one who dangled the buyback in front of the community… You’re already unable to get listed on a “decent” exchange that would allow for volume on the token… Now the buyback will be canceled.

What’s the point of making a media fuss only to end up doing nothing? Discord is already half-dead, there’s no follow-up… It’s not worthy of a major protocol.

At least SYRUP is keeping their promises, and it shows in the organized growth of their token.

28

I wanted to contribute a perspective to the ongoing discussion around the community buyback program, as I believe there’s a related problem that deserves attention which is the current state of $fluid on-chain order book liquidity.

The Problem

Right now, the FLUID token’s order book liquidity is not reflective of the blue-chip status that Fluid has grown into. The token remains relatively volatile, and its on-chain order books show significant short-term downside risk.

While I personally hold FLUID with a long-term mindset, I see two strong reasons why stabilizing its price and reducing downside volatility is important:

  1. Trust and perception – Token prices have a psychological impact on market participants. A stable and liquid market inspires confidence.

  2. Capital efficiency for growth – Fluid’s moat comes from deep liquidity in the liquidity layer that powers primitives like Smart Debt, traditional borrowing, and other future credit products. The more lenders contribute tokens to this layer, the stronger this moat becomes. A healthier token price makes incentives more effective, as a fixed number of tokens can attract more liquidity.

Improving the buy side of the order book

Currently, the buy-side is extremely thin, only around ~25 ETH of buy-side liquidity sits in the two main Uniswap pools.

Instead of using buybacks to market buy tokens, I propose directing buyback funds toward placing resting bid liquidity, for example, limit buy orders ~5% below spot. Practically, this could be done by the Fluid team every two weeks, alling a percentage of protocol revenue to these bids.

This has two benefits:

  • It builds visible buy-side depth, increasing market confidence and attracting new buyers.

  • It allows the DAO to acquire tokens at more favorable prices from sellers compared to market buying from them.

Improving Sell side order book by turning fluid into a yield bearing asset

On the sell side, liquidity is also thin in terms of slippage, even if the notional size in the Uniswap pool appears large (i think this is currently provided by the team but not sure).

One way to improve this sustainably could be to spin up liquidity using EulerSwap, which I believe is well-suited for long-tail asset markets.(if you want to better understand EulerSwap you can read this https://x.com/letsgetonchain/status/1966095252822847924).

A possible setup:

  • Deploy two vaults: one for FLUID and one escrow-only vault for stETH.

  • The Fluid team supplies stETH to the escrow vault.

  • The community supplies FLUID tokens to the FLUID vault.

  • The team runs a just-in-time EulerSwap market that provides one sided from the FLUID vault, just in time borrowing FLUID against the stETH collateral.

This design has several benefits:

  • FLUID holders earn lending yield on their tokens.

  • The team earns trading fees from the EulerSwap pool.

  • Borrowing costs and the short FLUID exposure the FLuid DAO would bee exposed in case of FLUID price token rise would be naturally hedged by the DAO’s large treasury of FLUID.

  • It would be very easy to execute and not divert core team resources away from revenue-generating products (as this can be configured via Euler’s UI using audited code).

Minimal Operational Overhead

Operationally, this would be light-touch:

  • Every two weeks, adjust the Uniswap bids as part of the buyback strategy.

  • Configure and maintain the sell-side EulerSwap operator.

I see this as a way to align the buyback program with a broader liquidity vision which makes the FLUID market more resilient and attracts new participants.

2 Likes
29

Update on $FLUID Buybacks

Buybacks will kick off on October 1st as indicated in the original message.

For the first month, 100% of the revenue from the mainnet instance will be allocated to buybacks.

Reasoning

The team is currently evaluating and building a proper model and tracking system to calculate the optimal amount of revenue that should go into buybacks. This automated solution requires more development time, as the team’s focus has recently been on:

  • Launching Fluid on Solana
  • Preparing for the Plasma launch
  • Developing DEX v2

Because of these priorities, the automated buyback infrastructure isn’t yet complete. In the meantime, we’re dedicating all mainnet revenue for the first month to buybacks.

Revenue Sources

Mainnet currently generates over 80% of Fluid’s total revenue, making it the primary source for buybacks at this stage. This will result in $1.3-1.5M of buying pressure (at current market prices). The team will divide the buyback into multiple small transactions starting on the 1st of October.

Next Steps

Once the buyback infrastructure is complete, we’ll move to a more structured approach which will be discussed here on the forum. At that point, Jupiter Lend and L2 revenue streams will also be incorporated into the overall buyback program.

5 Likes
30

Thank you for your comment, but I don’t believe this setup is viable. Fluid already has access to its native token through the treasury, so there’s no need to borrow it from users and incur liquidation risk if the token price rises. Treasury-based liquidity is also far more predictable.

Your proposal would require Fluid to shift a significant portion of its ETH reserves to Euler and then find $FLUID lenders to match the current $20M buy-side liquidity. This would reduce overall liquidity, add extra costs, introduce liquidation risks, and move liquidity away from Fluid to Euler - none of which would improve DAO operations.

The only clear benefit of your proposed integration is yield on $FLUID, but that yield would be subsidized by the treasury, effectively mirroring the well-known APE DAO "stake-not-to-sell” staking program.

2 Likes