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What is Fluidity

Most DEFI platforms incentivize user for locking their assets. Most DEFI protocols allow users to borrow against their collateral, however borrowing APY can be very high and if a user lends a stable coin versus a variable asset, he’s at risk of liquidation risk, so he has to constantly check the health factor. This concept encourages users to lock their assets and discourages micro transactions.

Fluidity aims to solve this problem by allowing users to convert their assets to their “fluid” counterpart. Fluidity protocol automatically invests the native assets in DEFI apps like Compound or Solend. Assets can also be used in in yield generating strategies. When a fluid asset is converted back to the native asset, the latter is removed from the defi protocols.

To encourage transactions, fluidity distributes the rewards when a user uses fluid assets. A random factor in calculating the reward is added to incentivize users while protection mechanisms are in place to prevent transaction spamming.

Project outlook

The basic concept is good, however it might be too abstract for the average user. We can see the layers of smart contract risks is piling up since fluidity uses other protocols for yield generation. There’s also a risk of loss in defi investing strategies which might depeg the ratio of 1:1 of fluid assets. A full review of how the native assets are lent out should be done if you plan to convert a sizeable amount. You can review the full documentation.

The project is audited and for now, there’s still a lot of centralization. The centralization is mostly at the level of the defi protocol configuration, large rewards are reviewed before distribution. So the project is still very dependent on the team. This helps to stabilize the project as it moves towards decentralization.

Airdrop potential

The governance token of fluidity FLY is already issued. It is mostly used as a governance token, but it is planned to be used as a utility token. For now it can be staked and used in vaults. The FLY token was dropped in 2 “waves” and a 3rd “wave” is currently ongoing.

You can earn “loot bottles” convertible to FLY token for the next 74 days by staking FLY and you can earn a multiplier by transacting FLY and FUSDC on selected platforms like

You can check their airdrop campaign and don’t forget to do your own research before jumping on board.