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Why was Fluo built?
What was our thesis behind building Fluo?
CEX poses significant issues for users, such as long onboarding processes, counterparty risk, adhoc maintenance, unexplained transaction freezes, scam wicks, non-transparent market making, market makers leaving CEXs resulting in more inefficient pricing, and more.
Problems related to centralized exchanges (CEXs) have been highlighted due to the collapse of platforms like FTX, Celsius, Voyager, and BlockFi. This has led to a rise in the use of decentralized trading protocols like GMX, GNS, dYdX, and other perp DEXs.
Users can already trade funds on perp DEXs without giving up custody of their funds or doing KYC by simply connecting their wallets, resulting in an inevitable exodus of CEX trading towards DEX trading.
Due to the above thesis, perp DEXs are popping up left and right trying to attract traders to trade on their platform.
This is similar to a gold rush where perp DEXs are like people trying to strike gold (big CEX traders), however, most of them lack the tools to succeed (liquidity).
Fluo recognizes that all perp DEXs need better liquidity. Instead of competing with them, we provide the liquidity (shovel) that these perp DEXs need to strike gold.
Perp volume on DEXs is only 1.5% of perp volume on CEX today, indicating huge multplier growth potential as this number climbs towards a potential equilibrium of 50%.
Additionally, perp volume in general is 3-5x that of spot volume in crypto.
Overall volume of crypto is likely to continue in an uptrend at a rate around 50% YoY but slowing down as the technology matures and gets more adopted.
As crypto grows, it’ll become more interoperable, and users would bridge funds to different chains more often. This improves the velocity of money and overall ‘GDP’ of crypto, benefitting omnichain liquidity infrastructure.
Peer-to-pool models like GMX have found product market fit by improving capital efficiency and allowing LPs to earn fees by depositing liquidity to provide sufficient depth tp traders to take leveraged positions on-chain while acting as counterparty for traders.
Concentrated liquidity market making (CLMM) models like Perp Protocol that utilizes Uniswap v3’s range orders also allow traders to experience a CEX-like environment with limit and market orders, and allow for public liquidity providers instead of being exclusive to market makers, however there are some issues and we’ll touch upon them later.
On-chain Orderbook DEXs are starting to appear thanks to L2 rollup technology and app-chain technology that are fast enough to support an on-chain trading experience similar to CEX.
A protocol like $CRV has achieved an FDV of around $3b and has helped the crypto space with its product market fit of providing stableswap liquidity, Fluo is looking to achieve something similar by providing perp dex liquidity.
Ultimately, Fluo is the solution to the liquidity problem faced by perp DEXs. It is a game-changer that will revolutionize the perp DEX market and is able to ride these trend, increasing its value as the above theses continue to play out.