Weekly Gauge #79 : Fluid by Instadapp
From innovation to aggregation
At the beginning was isolated DeFi bricks, where innovation came in the form of new primitives, bringing missing elements to a financial world that still needed fundamentals. Building ecosystems based on composability and cooperation between protocols, newcomers leveraging the trust of blue chips and printing incentives to maintain their growth in exchange.
As projects developed more and more advanced models for every verticals, and the ecosystem became more compelling, the increasing complexity to design something new encouraged builders to shift interest from innovating toward consolidating mechanisms available in DeFi.
With respect to decentralization ethos, many protocols open sourced their codebase and contributed to the rise of this new trend of all in one protocols. Today we will study this phenomenon through the case of Fluid by Instadapp, a melting pot of standard crypto use cases.
Fundamentals
At the heart of every financial market lies two basic components, exchange and debt. Once those functions established, goods and services can develop and find demand.
Born from a single asset fulfilling all functions of money —Bitcoin-, the crypto industry’s first steps were actually guided by the above principles, leading to the early development of marketplaces and later on of lending markets following the creation of application layers such as Ethereum.
With the rapid growth of DEXs and AMMs came accordingly a sharp increase in swap size and volumes, which highlighted the scalability issues of siloed trading pairs. One efficient solution appeared in the form of routing and aggregation, a first step toward the unification of dAPPs by primitives. Bridges, DEXs, Lending, Yield, the aggregation model then became a standard to foster efficiency instead of focusing on innovation.
InstaDapp
InstaDapp is a flagship example of this evolution from building disruptive technologies to democratizing it with institutional grade efficiency and user friendly interfaces/experiences. Launched in 2019, InstaDApp integrates other DApps and provides a one-stop platform where users can manage all of their funds.
The first protocols integrated with InstaDApp were MakerDAO, Compound, and Uniswap. By integrating these, users could lend, borrow, swap, manage liquidity pools, and refinance collateralized debt positions (CDP) across protocols via one unique dashboard.
To make this possible, InstaDapp introduced DeFi Smart Accounts (DSAs) which later evolved into Avocado smart contract wallet ; solving one of the biggest pain points in the multi-chain world, the management of a multi chain portfolio..
ETH on Mainnet. MATIC on Polygon. AVAX on Avalanche. OpETH on Optimism, GAS on Binance, and so on. Making it so the user has to manage and hold multiple gas tokens to interact across networks. Avocado abstracts gas by using a unified USDC gas tank. Top up using USDC from any network. and pay all transaction fees on your Avocado wallet with the USDC gas tank on all networks. When completing a transaction on Avocado the fees will be priced in USDC.
In addition, as a pioneer of the aggregation model, Avocado RPC is a network aggregator. You will connect to Avocado and then can interact with many different networks, as Avocado is not a network your transactions will execute on the destination chain.
Finally, by consolidating and aggregating liquidity from all the integrated protocols, InstaDapp was able to create and deepen the “liquidity layer” that will serve as a cornerstone to go from a middleware project to a native product suite encompassing all crypto basic use cases.
Fluid
Built upon the foundation of liquidity consolidation, automated limits, and cutting-edge protocols, Fluid simplifies user experiences and paves the way for a more efficient and interconnected DeFi ecosystem.
« Fluid is the culmination of experience gained from building on top of Aave, Compound, Uniswap, Maker, and Curve. It takes the best features they offer to transform the lending and borrowing space. » - Samyak Jain
The Liquidity Layer is a simple contract with no advanced algorithm or logic, that holds all the liquidity of the Fluid protocols and makes sure that assets are highly secured, on top of which are built Fluid DEX and Fluid lending.
Killer Features (refer to https://blog.instadapp.io/fluid/ for further details):
Fluid Lending:
Soft liquidations – similar to crvUSD LLAMA (liquidations only happen until the liquidation threshold is met, nothing extra)
Lower liquidation penalty – 0.1% (liquidations work like a swap but with better rates, any trader of any size can liquidate any amount of debt.)
Increased borrowing capacity – up to 95%
Automated limits:
Dynamic assets debt ceiling (mitigate protocol risk exposure to various assets)
Price manipulation stops (the Liquidity Layer will restrict abnormally large and sudden borrowings & withdrawals)
Fluid DEX:
Smart debt/collateral (Smart collateral pools is like any AMM pool, where users can earn from trading fee while simultaneously lending their collateral & borrowing against it. On the other hand, the smart debt pools can be considered as an inverse of any AMM pool, allowing borrowers to use their debt as liquidity and getting discount on debt through trading fees.)
In conclusion, InstaDapp layered architecture, beginning with its foundational liquidity layer and extending through Fluid DEX and Lending, demonstrates how consolidation doesn't mean compromise. By thoughtfully aggregating and optimizing existing mechanisms – from soft liquidations to smart debt/collateral pools – Instadapp has created a system that enhances rather than merely combines. Their Avocado smart contract wallet's elegant solution to multi-chain complexity further illustrates how consolidation can itself be a form of innovation, proving that the maturation of DeFi doesn't require constant reinvention, but rather thoughtful integration of proven mechanisms into more fluid and user-centric systems.