Guiding Principles of Formation Fi

The Formation Fi journey has begun. Like the plot of a book, it will develop and grow with each new chapter, but always leading to the same end vision: DeFi wins and everyone gets rich. But this book isn’t a story — it’s a playbook to staging a paradigm shift. And any decent paradigm worth shifting needs a set of guiding principles. So, here are ours.

Chain Agnostic

Early DeFi is a collection of protocols, chains, dapps, tokens, pools and other inventions. Some work together, most don’t. Most only work within their own vertical ecosystems. Investing optimally across them all, one at a time, is virtually impossible manually. Formation Fi therefore must take a holistic view — aiming to be chain-agnostic and all-inclusive. From the ideals of crypto and Web3 will come the internet of value, where all blockchains are seamlessly connected through a decentralised infrastructure of bridges and relays — in networking terms, the transport layer of money. We have started building that future. All types of DeFi assets will be able to move from point A to point B quickly and smoothly, with no barriers. Our goal is to make the network dependency irrelevant. In other words, ultimately all members of Formation Fi will be able to add any type of uncorrelated DeFi assets available in the world of Web3 to their portfolio, regardless of the protocols of the asset and those already in the portfolio and claim profits from the network of their choice.

Low Transaction Costs

DeFi investors have learnt that fees can eat into their capital at an alarming rate, becoming a barrier to entry for some of the more complicated protocols. Costs on Ethereum made it nearly unusable in 2020–21 for many yield farmers, forcing them to move to other blockchains with different scalability, decentralisation and security characteristics. Formation Fi will minimize our members’ costs at all opportunities. There are two types of costs to consider: fund management fees and the underlying protocols’ gas/network fees. Most Wall St. hedge funds traditionally charge in excess of 30% of fund profits as management fees and carried interest. Formation Fi will not only charge a significantly lower management fee (only 5%) but will also redistribute a share of the profits to holders of the Formation Fi token, $FORM. Fees for gas/network and other on-chain services such as oracles will also be kept low. For example, when it makes sense, instead of using expensive price feed oracles we will call sets of APIs or build our own oracles to achieve the same results. Over time and with progressive decentralization, we expect on-chain costs to reduce. Formation Fi will always strive to reduce costs and pass the savings and profits on to our members and token holders.

Radical Simplification

Many of the first-generation yield farming protocols were thrown together as fast as possible to catch as much of the new booming market as they could. Aspects like the user interface and automation were not top priorities. As a result, 50% of yield farming investing is repetitive and requires a high degree of understanding and attention to detail. This creates a barrier to entry for novice investors, is confusing for all but the most experienced and makes it far too easy to make very costly mistakes. Formation Fi will make the user experience as simple and efficient as possible. We will develop algorithms and bots to predict requirements and remove repetitive tasks. We will design the user experience to be simple and a pleasure to use. In short, we will let our members focus on investing instead of battling a screen.

Investment over Speculation

First-generation yield farming was about speculating on the next coin to go 100x and maximizing gains out of the latest scheme. Farmers rushed in, ignorant of the risks and in the long run will lose on gas, impermanent loss, slippage and other hidden fees. Formation Fi is at the lead of the second generation. We will motivate and enable our members to form coherent, sensible portfolios instead of collections of random coins. Second generation yield farming is about intelligent investing — calculating quantitative risk as well as reward. This methodology was pioneered by Benjamin Graham in his book The Intelligent Investor and employed extensively by Warren Buffet. We are taking techniques and skills learnt over decades on Wall Street and applying them through algorithms to DeFi. We aim to generate personalised funds that not only catch the market highs but also provide protection from the lows.

Communal Effort

DeFi is taking off because so many people can see the benefits of transparency and community governance over the centralised banks, which so often charge hidden fees and make secret backroom deals we’ll never know about. The community is what makes DeFi so compelling — but community governance is a double-edged sword. You can cast your vote and yield the reward, but you have to invest your stake and in reality, only the whales can achieve meaningful results. Formation Fi is turning that around. Ultimately, through progressive decentralization, our DAO will achieve open governance by financially incentivising long-term engagement and offering exclusive original research and quantitative analysis. We will empower a new generation of yield farmers to take control of their assets, achieve better risk-adjusted results and become better investors. Together, we can profitably demonstrate DeFi and DAOs over-achieving in the real world.

Long-Term Focus

Yield farming has been a fast-moving, get in and out quickly, type of business so far. The first generation of farmers were often risk-seeking ‘degens’ who loved the thrill of the 100x chase and if a coin failed, that’s ok — move on to the next one. That isn’t investing though and Formation Fi isn’t about short-term gambling. Second generation yield farming is for investors who want intelligent, serious management for the long haul with safe exposure to crypto. DeFi is growing up and Formation Fi is at the lead. Our algorithms will build personally risk-adjusted indexes for the long term that can automatically reinvest the yield across multiple chains so members can benefit from the laws of compound interest. Future development, guided by the DAO community and taking advantage of progressive decentralisation, will ensure a safe, intelligent and personalised haven for our members.

Constant Innovation and Safety

Innovation is taken as given in DeFi but unfortunately, for many, it’s a buzzword that means hitching onto the latest craze and heading off on a dozen random paths. The biggest casualties are then the users when it all implodes, taking their capital with it. We need to be better than that. Formation Fi has a strategic direction to build our vision of low-risk wealth for everyone. The force of innovation, and safety too, is with us constantly, every day keeping us strong, pushing us to outdo ourselves, striving to be better than yesterday. Our motivation comes from within because we believe in the purpose of the project. We will be guided by the DAO community and regulation, adopt progressive decentralisation, not hide behind security audit reports, care for the TVL as if it were our own money and try to safeguard it to the best of our abilities.