A Reflection on Crypto Risk Culture: Capital Preservation and New Fundraising Paradigms

In previous cycles, Sonic (formerly Fantom) blockchain founder Andre Cronje was known as the “DeFi King.”

Now, this former king has made a comeback, bringing a new financing paradigm to the crypto market.

In today’s highly cautious market environment, Flying Tulip completed approximately $200 million in seed funding last month and plans to raise an additional $800 million through a public offering, aiming for a total valuation of $1 billion.

How is this possible?

AC’s latest project—Flying Tulip—is positioned as a “full-stack on-chain financial marketplace,” aiming to integrate spot trading, lending, perpetual contracts, and more through a unified risk and pricing model. Technologically, it emphasizes a hybrid AMM (automated market maker) plus order book, volatility-adjusted lending, and cross-chain support.

Put simply, its goal is to reuse the “same collateral” across different functions to improve capital efficiency.

The most innovative aspect of this project is its reversible financing mechanism—what they call “non-dissipative financing.” This mainly includes:

• On-chain redemption rights: Flying Tulip’s financing structure includes an “on-chain redemption right” (meaning investors can, under certain conditions, burn tokens to redeem their original investment). All private and public investors have this redemption right at any time (similar to a perpetual put option), allowing them to redeem at the original investment amount and creating an asymmetric payoff structure—limited downside with potential upside.
• Redemption process: Executed via audited smart contracts, with rate limits and queuing systems to ensure solvency.
• Fund deployment: The raised capital isn’t spent directly; instead, it’s invested in protocols like Aave, Ethena, Spark, earning about 4% annualized yield.
• Cash flow management: Some funds are allocated to low-risk DeFi strategies or structured products to cover operational expenses and redemption needs.
• Risk isolation: Redemption reserves are separated from operational funds to ensure safety.

This model allows the financing capital to remain intact, supported by yield, enabling the project to operate without consuming the principal.

In terms of incentives, the FT team has adopted an innovative approach inspired by leading decentralized exchanges like Hyperliquid, with a token buyback mechanism:

• No initial token allocation: The team does not receive an initial token distribution; instead, they fund operations through protocol-generated revenue used to buy back tokens on the open market.
• Revenue-linked: The team’s earnings depend entirely on the protocol’s actual usage and long-term performance.
• Continuous buybacks: All revenue sources (trading fees, lending spreads, stablecoin yields, etc.) are used to repurchase and burn tokens.
• Transparency: The buyback schedule will be clearly outlined, avoiding the opacity often seen in traditional projects’ token releases.
• Fixed supply and deflation: FT has a cap of 10 billion tokens. Each $1 of collateral corresponds to 10 tokens, with no inflation—creating a deflationary dynamic that increases token scarcity and holder value over time.

Essentially, this financing is akin to investors purchasing a long-term put option that can be redeemed at any time, with the project providing low-risk DeFi yields to support operations.

This means investors can always exchange their tokens back for their original dollar (or equivalent stablecoin). The $200 million raised is locked in low-risk DeFi yield strategies (like Aave, Ethena, Spark), generating about 4% annualized returns. For example, raising $1 billion could produce roughly $40 million annually in passive income to cover operational costs.

This approach ensures that the raised funds serve as a stable capital base, not being consumed, with passive yields used solely to sustain the project. Long-term sustainability depends on platform-generated revenue to achieve self-sufficiency.

For investors, participating in this financing involves the opportunity cost of their capital—this is the key innovation that differentiates it from traditional fundraising. Investors bear opportunity costs but are protected from principal loss, as the structure effectively offers a long-term, redeemable put option. However, in a bull market, this slower development approach might lead some funds to be redeemed in pursuit of higher returns.

Currently, disclosed or rumored institutional backers include Brevan Howard Digital, CoinFund, DWF Labs, FalconX, Hypersphere, Lemniscap, Nascent, Republic Digital, and others.

For the project, this method establishes a sustainable funding pool and stable cash flow. Moving forward, other projects seeking institutional investment may need to adopt similar principal protection and revenue-linked mechanisms—tying team rewards to platform usage to prevent early sell-offs. This could push the industry toward “revenue-backed buybacks” and “performance-aligned” financing models.

In any case, the interests of original investors are prioritized over secondary market buyers and the team, a principle embedded in the mechanism design. This model has the potential to reshape primary market financing standards in crypto, offering investors greater safety margins and sustainability.

Of course, the ultimate success depends on whether the core product can outperform in a fiercely competitive market. While time is needed for validation, we look forward to seeing this positive flywheel in action. This model may set a new, higher benchmark for early-stage startups in the industry.