Firebird Finance is a multi-chain DEX aggregator on a quest to distance itself from the competition within the exceedingly dynamic landscape of DEXs and DEX aggregators. First launched on Polygon, Firebird has since expanded to 7 other chains, including BSC, Avalanche, and Fantom.
At inception, Firebird had lofty goals. The aggregator set out to become a one-stop shop for DeFi, fulfilling all users\’ basic needs with one platform.
Since then, the market has become a treacherous landscape for protocols and users alike, many facing turbulent headwinds they’ve never felt before. The current bear market has forced projects to prioritize survival as the battle for market share becomes increasingly more competitive and cutthroat.
Firebird is no exception.
Firebird has shifted from their initial goals of being a jack-of-all-trades, to laser-focusing development on their main product: DEX aggregation.
Let’s dive in!
What is a DEX Aggregator?
DEX aggregators seek liquidity on your behalf. They hunt for the deepest liquidity across multiple DEXs to find you the best swap rate for a given pair of assets. This often involves splitting an order and routing it across multiple DEXs to optimize rates and minimize slippage. This service has little downside as the fees are roughly the same as using any one DEX directly.
Adapting to the Current Landscape
Over the last few months, the market has put the industry under a massive stress test, forcing companies to evaluate each facet of their operations; there is no room for inefficient use of capital in a bear market.
The DEX and DEX aggregator space in DeFi has become highly competitive over the past couple of years. There is much more room for new entrants during a bull market as money, and new users rapidly flow into the industry. But, as interest rates rise and the printing party grinds to a temporary halt, proactive measures must be taken by those competing for market share to retain users.
In light of current market conditions, Firebird’s team recently stated that they felt their resources were being stretched thin given everything they were trying to accomplish. Changes had to be made to remain afloat amidst the bear market storm.
Prior to the recent operational pivot, Firebird offered several products as part of their original vision of becoming an all-in-one platform.
- Pools → Users could offer their liquidity to be traded against, in return for any fees generated.
- Farms → A place to park LP tokens for additional yield.
- Vaults → Autocompounders that continually search for the best farming opportunities on behalf of the depositors.
- Farm-as-a-Service (F.a.a.S) → Enabled any project to create their own customizable yield farming pools using Firebird’s tech.
Development of these products will now cease to allow the team to focus entirely on their bread-and-butter: DEX aggregation.
Firebird’s most successful service has consistently been their aggregator, reaching over $8bn total volume swapped across all chains over the past year. The Firebird team has chosen to capitalize on its strengths and trim the fat fully.
The Future of Firebird
Moving forward, the entire team will be zeroed-in on optimizing DEX aggregation. This focused approach has one goal in mind: to become the best swapping aggregator across all chains.
The team has recently released a token to complement the directional shift, the Firebird Aggregator token: $FBA. The token aims to boost volume by incentivizing users to perform swaps on Firebird.
Cash Back for Swaps
Users who swap using Firebird on any chain will be rewarded with $FBA. Initially, for every $1 you generate in fees, you will receive 2 $FBA. This directly ties the value of $FBA to revenue generation, aligning user incentives to the team’s goals by rewarding swaps to increase volume.
The FBA token’s home base will remain on the Fantom network. Using Firebird on any chain will earn you cash back, but you must connect with Fantom to receive these rewards.
Further information, including a step-by-step walkthrough of swapping and claiming rewards, can be found here.
$FBA is only minted after a successful, fee-generating transaction. A qualified transaction must involve a whitelisted token from each chain; examples include the following:
As the token appreciates in price, less will be minted. The calculation for minting can be seen below:
This mechanism controls the emission rate by ensuring fewer tokens are printed as the price goes up.
But what about selling pressure? Many farm tokens are notorious for their downward price action, as users quickly dump rewards in fear of others doing the same. The result is typically a price chart that resembles a great ski run. While $FBA is not a typical farm token, the team is aware of the selling pressure that could occur from giving rewards out for protocol usage.
The minimum value of $FBA used when minting is $0.10. So, even if the price of $FBA is $0.01, the mint equation will be A = tx fees / $0.10.
The max supply of $FBA is 21 million.
Firebird will implement a veToken locking/voting system to discourage users from cashing in on their cash-back.
A veToken system involves users locking their Tokens in return for veTokens (“ve” stands for “vote escrow”). The veToken gives the user voting rights on protocol proposals and financial incentives/rewards for locking their Tokens.
The purpose of implementing a veToken locking system is to:
- Grant token holders voting rights on decisions made by the protocol.
- Incentivize users to lock their tokens thereby reducing potential selling pressure.
Historically, rewards are paid in the form of volatile assets – through emissions of tokens from partnered protocols (think Liquid Driver), by offering a percentage of generated revenue (see Balancer), or some combination of the two.
Firebird’s voting system has yet to be implemented, but once it goes live, users can stake their $FBA for $veFBA, granting voting power to $veFBA holders. Rewards for locking up $FBA will be paid out in $USDC. By rewarding users with a stable asset, Firebird expects that such an incentive will encourage most users to lock their $FBA, reducing the selling pressure that results from offering free tokens as cash-back in a “down-only” market.
The revenue generated by the aggregator will be split into three categories, the percentage weight of each decided on by the DAO:
- Protocol owned liquidity
- The treasury fund
- Profit sharing.
The vote will take place once a month, the first month’s weights assigned like so:
There is also a $20k infrastructure cost per month that is taken from the revenue before the rest is divided as per the gauge vote.
The team has provided some metrics and projections for what they expect to earn over the coming year. After three months of operations, Firebird has generated $700k in revenue, and they expect yearly revenue to reach $2m on Fantom alone, given an average trading volume of $15m per day. Their goal is to capture a considerable share of the DEX market and reach $100m in daily volume across all chains after only nine more months of operations. An average trading fee of 0.03% would generate roughly $30k in fees per day or ~$11m per year. This is an ambitious target, especially considering current market conditions and economic outlook for the rest of the year.
Users can receive further rewards through Firebird’s new referral program with cash back for swaps. Eligibility for the referral rewards comes in two forms:
- Another user enters your referral link.
- Another user completes a swap using your connection to the Firebird API.
HOPE Token Migration
FBA had a predecessor, the HOPE token. $HOPE was Firebird’s previous farm token, emitted as incentives for liquidity providers and vault depositors. It will now join the other legacy products on the shelf; its holders will be compensated via an $FBA replacement. $HOPE holders are being directed to a migration platform that allows them to burn their $HOPE in return for $FBA. The details are as follows:
$HOPE emissions ended on June 13th; holders have 180 days to claim their $FBA on Fantom, claimable linearly (claim a portion each day over some time).
Firebird’s future success relies entirely on attracting users and increasing trading volume. In order to reach their goal, they must consistently offer the best swap rates on the market. Most users are not emotionally or idealistically tied to one protocol or another, they go wherever they can get the best price. If Firebird can provide that on a regular basis, they will naturally grow their user base.
In my experience, Firebird’s aggregator has often given me the best price on my swaps compared to other aggregators. Now that it has become their sole focus, I believe they have a good chance of separating themselves from the competition. Concentration and specialization breeds expertise.
Thank you for reading! Let me know if there is anything I got wrong, feedback is always appreciated 🙂
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