Falcon Finance, the protocol for synthetic dollars, has hit a major milestone after reaching $50M in total value locked (TVL). The benchmark is particularly impressive given that Falcon is still in closed beta. In little more than a fortnight, Falcon’s TVL has doubled from its previous $25M threshold. The people, it appears, want tokenized dollars for the yield-bearing properties they provide.
Yield Chasers Zero In on Falcon
Finding sustainable yield in DeFi has become something of a treasure hunt that everyone from retail users to AI agents and institutions are embarked on. And in USDf, they seem to have found it and are loading up with size. While some aspects of Falcon’s protocol mirror those of other dollar-minting projects – starting with staking crypto assets to create an overcollateralized position – others are markedly different.
Specifically, USDf can be staked to create sUSDf, a yield-bearing synthetic dollar that provides an attractive APY that currently exceeds 22%. It’s an enticing proposition for DeFi users seeking a haven from market volatility and the opportunity to grow their portfolio. While retail users account for a good portion of the $50M in TVL it’s accrued, USDf is also attracting attention from institutions seeking yield that keeps flowing in whatever the broader market outlook.
The Dollar That Does It All
As Falcon’s whitepaper explains, the yield attainable on USDf comes from “basis spread, funding rate arbitrage, and advanced risk-adjusted yield generation strategies.” By incorporating a diverse range of institutional yield generation strategies, Falcon’s system aims to preserve the value of user deposits while keeping yields at an attractive level.
So far, it’s an approach that’s been paying dividends, with DeFi players entering the fray and putting their capital to work. Falcon has been aided in its efforts to build out its protocol by a $10M allocation from DeXe Protocol which got the ball rolling. DeXe is best known for its decentralized governance model, which allows token holders to select strategies that align with their interests and in USDf they’ve found a good fit.
Crypto Collateral Kickstarts the Process
From a user perspective, the wide range of collateral assets that Falcon accepts allow for flexibility, with USDC, USDT, FDUSD, BTC, and ETH all available to deposit as well as stablecoins. Individuals who are bullish on the crypto market, for example, may choose to deposit BTC or ETH, while those who are bearish or neutral can choose a non-volatile stablecoin option.
Once a deposit is completed, Falcon issues USDF to the user’s wallet and then they can start putting their synthetic dollars to work. Falcon is a KYC’d protocol, it should be noted, which is required in order to mint and redeem USDf. This requirement doesn’t appear to have diminished demand for its high-yield solution however. Falcon Finance is currently open to whitelisted users while its closed beta is completed. From there, it will open its doors to the full spectrum of onchain users, whereupon TVL is expected to soar.
