The Defiant

Fyde is an on-chain, AI harnessing, portfolio and liquidity optimiser. The non-custodial liquid vault helps users consistently lock in gains, earn yield, and stay liquid. In doing so, this allows users to grow their crypto holdings faster and with less volatility.

The purpose of Fyde Protocol is to provide users a better way to manage their crypto portfolios. The protocol introduces multi-strategy vaults directly accessible via 40+ different types of tokens.

Within DeFi, vaults aggregate users' funds which are then collectively invested based on a given strategy. The vault process aims to deliver users optimal returns while saving them both time and fees.

Through the collective use of funds within diverse pools, vault solutions can efficiently generate consistent returns and yield for their depositors. This makes users' return on investment more predictable and less volatile depending on the nature of the vault service, which allows for faster growth and compounding.

The protocol uses AI agents, simulation modeling, and diversified allocations to lower portfolio risk. Machine learning then finetunes the liquidity of Fyde’s Liquid Vaults in real time, providing increased trading depth and pathways for participants.

Who Can Benefit From Fyde?

Given the fast paced and highly volatile nature of crypto, many investors and traders find it difficult to track their different positions, and stay on top of time sensitive events such as DeFi yield resets and airdrops.

In addition to the volatile environment, the landscape within crypto is often changing with different narratives and metagames. Often, the question is: “Which rising category or token narrative should I be buying or selling in the first place? DeFi, RWA, DePin, AI, Meme, Base, Ordinal/Runes?”

Fyde’s Liquid Vaults looks to help solve this for users. The Liquid Vaults accepts a variety of tokens which are automatically distributed across a diverse range of tokens and narratives. Gains from winners are locked in and losses from losers are minimized. Through its AI and machine learning models, Fyde is often improving itself to help protect against events such as rugpulls and high downside volatility.

By lowering the volatility of a user’s returns, Fyde is a liquid tool that can help users grow and compound their portfolios. As indicated in the chart below that was provided by Fyde, both portfolios have an average return of 5% per year, but the higher volatility portfolio is down -10% while the lower volatility portfolio is up 22%.

The Fyde Liquid Vault

The Liquid Vault itself returns a yield-generating wrapper token pegged to the underlying basket that can be traded in the open market, unlocking new liquidity pathways for depositors which are further optimized by machine learning agents. This wrapper token, known as $TRSY, functions as a receipt token in a manner similar to liquid staking through services such as Lido. Users are also able to retain voting rights on their native tokens which remain in the liquid vault and participate in their native communities’ governance.

At the time of deposit users receive $TRSY backed 1-to-1 to the value of the initial deposit like one would with liquid staking. However, $TRSY represents the value of the overall vault, meaning that the token fluctuates in price depending on the performance of the assets within the vault.

The vault rebalancing mechanism itself is done via algorithmic incentives. Penalties prevent users from depositing too much of a single token into the vault or withdrawing tokens that the vault needs. Post-TGE of Fyde’s own governance token ($FYDE), rewards will be given for users to supply the right tokens or to help rebalance the outperforming tokens. To keep the price of $TRSY pegged, arbitrage loops exist which brings the value of $TRSY back in line with the true value of the vault.

Through this system $TRSY can act as a liquid receipt token to be used across DeFi, or can be held for the appreciation of the value of tokens within Fyde’s vault, and is always backed dollar for dollar by the on-chain assets within the vault.

How AI Plays a Role

Fyde incorporates AI in the protocol primarily for: risk management, asset concentrations, and liquidity optimization. For risk management, Fyde runs proprietary machine learning and analysis of blockchain transactions and wallet behavior.

By leveraging this technology to see the relationships between network transactions, wallet flows and token prices, Fyde can then quantify risks of different tokens in real time, assign a score and decide if this token should stay in the vault, be quarantined, or be ejected. A visual example of this network analysis can be seen below:

Here, Fyde uses a proprietary subset of AI called Graph Machine Learning to develop network graphs that include a variety of different on-chain parameters. These parameters are then used to predict information about wallets (for example if it’s a wallet tied to a market maker) and for transactions (such as prediction volume flows into Uniswap V3). This can help Fyde identify items like centralisation risk, wash trading patterns and more.

In addition, Fyde implements risk identification systems like Hypernative, which uses machine learning for preventative threat detection. This monitors on-chain transactions to pre-emptively identify things like liquidity pool risk, governance attacks, hacks, etc.

To increase liquidity of Fyde’s tokens, Fyde runs agent based simulation models to measure how DEX liquidity should be structured. These agents mimic trading behavior of participants in DeFi to model things like optimal arbitrage amounts and certain trader behaviors.

These elements are all fed into the Fyde simulation engine, which uses frameworks like Monte Carlo analysis to not only identify network patterns that the human eye can’t see, but also to identify how to best provide on-chain liquidity. Fyde incorporates these tools into the vault as safeguards against rugpulls, hacks, and more, providing a layer of protection for users’ assets that can be more difficult to access by users themselves.

How to Use Fyde

Users can learn more about Fyde via their homepage Fyde.fi and access the dApp here: https://app.fyde.fi/

Once you sign in with your non-custodial wallet you will see the page below.

Users can deposit by selecting the Deposit button on the screen, at which point they will be brought to the page below. Users can select one of the many different tokens eligible for deposit, and upon depositing, will receive the $TRSY token which represents their share of the Liquid Vault.

Summary

Vault solutions such as Fyde can be a good fit for a variety of DeFi users, from less experienced investors who may be better off allowing others to invest for them, to larger power users that are seeking to gain liquidity and compound their portfolio. With the vaults governed and distributed entirely on-chain, users can verify the state of their deposits at any time, providing them with true transparency.

As more capital continues to flow into DeFi, a wider audience and perhaps more traditional-minded investors will begin to dip their toes in on-chain finance. Vaults like Fyde can deliver them a comfortable experience similar to what they are used to, while saving them on fees and helping them avoid costly investing mistakes. This familiar experience paired with the optionality of liquid receipt tokens and on-chain governance looks to be both an excellent stepping stone for newer investors, and a reliable source of returns for experienced ones.