Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
This week, we cover the first-ever flatcoin to launch on Base, called UNIT by Flat Money! If you’ve been captivated by the double-digit yield being earned by Ethena, Flat Money protocol is right up your alley.
Even with $160B in stablecoins today onchain, Flat Money believes “we need a better form of money that isn’t tied to any one fiat currency or exposed to fiat inflation.”
A flatcoin is poised to become an increasingly popular alternative to stablecoins pegged to the US dollar and other fiat currencies.
A flatcoin like UNIT can only be built onchain: uncensorable, inflation-resistant and backed by decentralized collateral such as rETH by Rocket Pool. While stablecoin holders suffer from the inherited inflation of fiat-dependent stablecoins, Flatcoins are designed to outpace inflation and preserve your purchasing power.
From a DeFi purist standpoint, a flatcoin is extremely attractive because it looks to mitigate any exposure to legacy offchain financial risks.
Here’s how the Flat Money protocol and the UNIT flatcoin work:
- Flat Money marries 2 types of users: those who seek volatility (leverage traders) and those who seek stability.
- The flatcoin UNIT is backed by rETH, combined with a delta-neutral marketplace.
- UNIT is minted by depositing rETH. To mint UNIT, you go to the Flat Money app here.
- Once you have entered the amount of rETH you want to deposit, you see an estimated amount of UNIT that will be minted if you select the Trade button.
- Under the hood, a portion of the rETH deposited is used to short rETH and earn the funding basis when the rate is positive and paying shorts, while the rest of the rETH is pooled and available for leverage traders to borrow and go up to 25X long on rETH.
The end result of this is UNIT holders enjoy a less volatile asset, not tied to the US dollar, while they earn trading, borrowing, and liquidation fees from rETH leverage traders (currently netting 27% APY).
Traders enjoy a competitive funding for rETH perps, which further fuels a funding rate that enables the underlying basis trade for UNIT holders to get paid a native yield.
This design optimizes for a fully onchain mechanism underpinning UNIT, to power a new more uncensorable yield-bearing flatcoin.
Different than Ethena’s USDe which is more of a tokenized basis trade that is priced at $1 when it works as designed, Flat Money aims to cater to an audience seeking a maximally decentralized flatcoin, that’s not pegged to the USD. In doing so, Flat Money also enables the most liquid onchain perps trading for rETH.
On April 15, 2024, Flat Money announced being live on Base. During Phase 1 of their launch, they’ll be limiting deposits in the UNIT Market to 1000 rETH. Early Leverage Traders can earn FMP incentives based on their trading volume. Traders can earn FMP for every 1 rETH of volume according to the following distribution schedule.
- 100 FMP per 1 rETH | $0–$10M of volume
- 50 FMP per 1 rETH | $10M–$100M of volume
- 25 FMP per 1 rETH | $100M–$500M of volume
- 10 FMP per 1 rETH | $500M–$1B of volume
Today, I’ll focus on the simplest part of this new launch and show how I can earn an estimated 27% APY minting and holding UNIT.
How to Earn 27% APY…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
