"Solving the challenges of banking and achieving the highest level of yield in DeFi." "The full picture of InfiniFI, pioneering the future of DeFi led by depositors." "High yields with stablecoins! What is the next-generation DeFi protocol, InfiniFI?"

This article provides an easy-to-understand explanation for beginners about the noteworthy project "InfiniFI," which aims to offer the highest level of yield in DeFi (Decentralized Finance). We will deliver a more detailed look than anywhere else at the mechanism, future potential, and how to participate in the anticipated airdrop of InfiniFI, a project that challenges the issues of traditional banks with DeFi and aims to build a new financial system led by depositors.

InfiniFI is tackling head-on the deep-rooted problem within the banking system known as the "duration gap."

• What is a duration gap? Banks make profits by collecting deposits that can be withdrawn on short notice and lending them out to corporations and individuals for long terms. This discrepancy between the "period of collecting money" and the "period of investing money" is the "duration gap."
  • Example: A situation where depositors want to be able to "withdraw money at any time," while the party the bank has lent money to plans to "repay it over several years."
• What's the problem?
  • Interest Rate Fluctuation Risk: When interest rates change suddenly, the bank's profitability is more likely to deteriorate.
  • Liquidity Risk: If a large amount of deposits is withdrawn unexpectedly, the bank could face a shortage of funds (such as a bank run).

InfiniFI proposes a more flexible and efficient solution to this structural challenge of traditional finance by leveraging blockchain technology and the mechanics of DeFi.

Can DeFi do it better?

DeFi protocols have the strength of being able to adjust the balance of assets and liabilities in near real-time based on smart contracts (self-executing programs). They are also adept at flexibly combining various other DeFi services that generate yield.

InfiniFI's use of DeFi to solve the "duration gap" problem is precisely to leverage these characteristics of DeFi. By dynamically adjusting its portfolio in response to the fast-changing market environment and effectively managing duration risk, it aims to return stable, high yields to depositors. This can be seen as a challenge from DeFi to the inefficiencies of the existing financial system.

InfiniFI aims to build a more efficient and sustainable decentralized banking model.

This signifies a new form of financial system that does not rely on a specific central authority, has high transaction transparency, and where users—the depositors themselves—can be deeply involved in operations and decision-making. Specifically, it has the following three goals:

1. To provide the best yield in DeFi
2. To increase the transparency of asset management (Clarifying how deposited money is managed and generating returns)
3. To maximize capital efficiency (Managing deposited funds efficiently without waste)

Can a "sustainable decentralized banking model" be realized?

The history of DeFi is still short, and many projects have faced the "sustainability" wall due to hacking, token price crashes, operational difficulties, and more. How InfiniFI plans to achieve this "sustainability" is a very important point.

From the public information, the following strategies are apparent:

• Risk Diversification: Combining multiple sources of revenue (yield sources) to reduce the risk of relying on a single source.
• Security Measures: Thoroughly ensuring the safety of smart contracts.
• Depositor-Participatory Governance: Creating a mechanism where depositors are involved in the protocol's operation.

These indicate InfiniFI's serious commitment to aiming not just for short-term high yields, but also for long-term stability and growth.

DeFi Protocol Development and Receipt Tokens

At the core of InfiniFI is its proprietary DeFi protocol. Through this protocol, users can do the following:

• Deposit crypto assets: Deposit assets like USDC (a US dollar-pegged stablecoin) or ETH (Ethereum) as collateral.
• Mint receipt tokens: Issue "receipt tokens" corresponding to the collateral, such as iUSD (for USDC collateral) and iETH (for ETH collateral).
  • iUSD: A token with properties similar to a yield-bearing stablecoin, obtained by depositing USDC.
  • iETH: A yield-bearing token affected by ETH's price fluctuations, obtained by depositing ETH.
• Redeem receipt tokens: By returning iUSD or iETH to the protocol, you can get back the original collateral assets (USDC or ETH).

These receipt tokens are similar to Liquid Staking Derivatives (LSDs) like Lido's stETH. It's a popular DeFi mechanism where you don't have to lock up your assets; instead, you receive a token (iUSD or iETH) that represents their value, allowing you to maintain liquidity while aiming for investment returns. It is expected that these tokens will be usable in other DeFi services in the future.

"Yield Generation Service" that Produces High Yields

Another important service of InfiniFI is generating yield from deposited assets.

Assets deposited by users are managed in established external DeFi protocols (called "farms" within InfiniFI), such as:

• Aave: A major lending protocol.
• Pendle: A yield market protocol where future yields can be tokenized and traded.
• Ethena: A protocol gaining attention for its delta-neutral strategy (a strategy to earn yield while mitigating market price fluctuation risks).

Users are expected to be able to make choices based on their investment strategy and risk tolerance, such as:

• Liquidity Focus: An option with relatively stable yields, where funds can be withdrawn at any time.
• High-Yield Pursuit: An option to aim for higher yields by locking up funds for a certain period.

In its early stages, InfiniFI is also focusing on community building.

Waitlist Program [Airdrop Opportunity!]

Currently, a waitlist program is underway for early supporters of the project. This is an important step to get a chance for future rewards (like airdrops).

• How to participate:
  1. Connect a Web3 wallet (like MetaMask).
  2. Follow InfiniFI's official X (formerly Twitter).
  3. Join the official Discord server.
  4. Subscribe to the newsletter with your email address.
• Referral System: Inviting friends using your unique referral link may increase the rewards you receive in the future.

Unique "Button Game"

A unique engagement project called the "Button Game" is also being held exclusively for those on the waitlist. It features a countdown timer that resets every time someone clicks the button on the website, and participants compete to achieve a specific "Tier 1" status.

Why such a game?

• To generate continuous interest: Encouraging users to visit the site repeatedly.
• As an indicator of activity: Identifying who the enthusiastic users are.
• Word-of-mouth effect: Attracting new users through the game's buzz.

These activities suggest that future airdrop distribution criteria may consider not just registration, but also the degree of active participation. This is evidence that InfiniFI is trying to build a high-quality, active community from the beginning.

Underlying Technology

As a DeFi protocol, InfiniFI is developed with smart contracts at its core. According to information on its public GitHub, the smart contracts are written in Solidity, a programming language compatible with the Ethereum Virtual Machine (EVM).

Since partner DeFi protocols like Aave, Pendle, and Ethena primarily operate on EVM-compatible chains (like Ethereum, Arbitrum, etc.), it is highly likely that InfiniFI will also operate on a similar blockchain foundation.

• Benefits of choosing EVM-compatible chains:
  • Can leverage the liquidity and development tools of the existing DeFi ecosystem.
  • Easier to find experienced developers.
  • Easier to integrate with other EVM-compatible protocols (high composability).

This is expected to speed up development, enable advanced integration with existing DeFi services, and allow for outreach to a large number of crypto asset users.

The iUSD/iETH Mechanism: More Than Just a Receipt!

When a user deposits USDC or ETH, a corresponding iUSD or iETH is minted.

These are not just "receipts"; they hold two types of value:

1. Proof of ownership of the deposited collateral asset
2. The right to access the future yield generated from that collateral

In other words, simply holding iUSD/iETH means you possess both the collateral value and the expected revenue value.

Redemption (reverting to the original asset) is processed through RedemptionPool.sol. If there are sufficient funds in the protocol, it's executed instantly, but if there are many requests or it takes time to retrieve funds from investment sources, there might be a queue.

Is iUSD a Stablecoin? A Slightly Different Characteristic

Since iUSD is collateralized by USDC, rather than aiming for a strict 1 iUSD peg to 1 USDC, it is likely to have a value that comprehensively reflects the value of the deposited USDC and the expected returns from it. Therefore, the appeal of iUSD depends less on peg stability and more on how consistently InfiniFI can generate high yields.

InfiniFI's Key! The Yield Generation Strategy

The core of how InfiniFI provides high yields is its sophisticated yield generation strategy.

1. Integration with multiple external DeFi (Farms):

   • Integrates several proven DeFi services like Aave (lending), Pendle (yield markets), and Ethena (delta-neutral strategies).
   • Since each has different risk-return profiles and revenue sources, combining them enhances the overall stability and profitability of the portfolio.

2. Strategic use of "Liquid Farms" and "Illiquid/Maturity Farms":

   • Liquid Farms (e.g., Aave): Offer relatively stable yields and easy fund withdrawal/deposit. They serve to prepare for user withdrawals.
   • Illiquid/Maturity Farms (e.g., Pendle, Ethena): Offer the potential for higher yields but may involve locking funds for a period or longer withdrawal times. They serve to boost overall profitability.

3. Dynamic adjustment of deposit ratios and application of "Reserve Banking":

   • InfiniFI's most distinctive feature is its ability to dynamically adjust the allocation of funds to these two types of farms based on market conditions and user behavior.
   • This is an attempt to apply the "principle of reserve banking"—where traditional banks hold a portion of deposits as reserves and lend out the rest—to DeFi.
   • By using liquid farms as a "reserve pool" while actively allocating the remaining funds to more profitable illiquid/maturity farms, it aims to maximize the overall yield.

This strategy sets InfiniFI apart from mere yield aggregators (services that just collect yield information), and it increases the likelihood that users can enjoy optimized yields without having to construct complex investment strategies themselves.

Locking Feature and the "Unwinding Process"

For users who want to earn higher yields ("enhanced rewards"), InfiniFI offers a token locking feature.

• Mechanism: You lock the iUSD or iETH you've minted back into the InfiniFI protocol.
• Benefit: A higher APY (Annual Percentage Yield) is applied compared to a regular deposit (which can be withdrawn anytime).
• Note: To withdraw locked funds, an "unwinding process" is required.

What is the Unwinding Process?

Although locked positions are nominally "perpetual," to actually withdraw funds, you must first initiate an "unwinding period" and wait for a specified duration to complete before you can withdraw.

• Purpose:
  • To prevent a "bank run" scenario where users withdraw funds en masse.
  • To mitigate the risk of the protocol being exposed to excessive liquidity stress.
  • To secure time to systematically retrieve funds invested in highly illiquid farms (like hold-to-maturity tokens on Pendle) without negatively impacting market prices or incurring penalties.

This mechanism is a crucial element supporting the overall stability and sustainability of high yields for the protocol.

Everyone Decides! The Governance System

InfiniFI aims for a decentralized operational structure in the future, designing a governance system centered on voting by token holders.

• Weighted Voting System: Voting power is expected to be determined by the amount of locked tokens.
• Main Voting Topics: How to allocate investment funds to which external DeFi (farms) and in what proportion (farm allocation). There might be separate votes for allocation to liquid and illiquid farms.
• Epoch-Based: Voting occurs in set periods (epochs), and the results are reflected in the strategy for the next period.

This allows users to be directly involved in deciding the core yield strategy of the protocol, increases operational transparency, and is expected to pursue an optimal investment strategy by leveraging the collective intelligence of the community.

However, there are challenges...

• Increased influence of large holders (the "whale problem").
• The risk of skewing towards short-term profit-seeking, as not all holders are well-versed in DeFi strategies.

How InfiniFI addresses these challenges will be key to achieving truly decentralized and sustainable governance.

Sincere Approach to the "Duration Gap" Problem

InfiniFI's most unique point is its attempt to tackle the structural "duration gap" problem of traditional banking with DeFi. If successful, it could become a prime example of DeFi's potential to improve the flaws of traditional finance, possibly boosting the credibility of the entire DeFi sector and attracting interest from institutional investors.

A New "Depositor-Led" Financial System

InfiniFI advocates for a "depositor-led system," aiming for a mechanism where depositors can actively participate in deciding the protocol's operational policies and yield strategies. This embodies the fundamental principles of DeFi and is crucial for enhancing user engagement and fostering long-term trust.

Transparent Capital Efficiency and Sophisticated Yield Strategy

It builds a sophisticated yield generation system by combining strategic integration with multiple external DeFi farms, fine-tuned fund allocation adjustments, and locking mechanisms, aiming for sustainably high returns. At the same time, it emphasizes "transparent capital efficiency" by leveraging the characteristics of the blockchain. However, due to the complexity of the strategy, clear information disclosure (such as dashboard functions and operational reports) is essential for users to experience that transparency.

Future Goals

As of mid-2024, InfiniFI has not released a detailed official roadmap, but the following goals can be inferred:

• Establishment and popularization of a "more efficient and sustainable decentralized banking model"
• Mainnet launch and full-scale operation of the protocol
• Expansion of use cases for receipt tokens like iUSD/iETH (utilization in other DeFi services)
• Issuance of a governance token and transition to a DAO (Decentralized Autonomous Organization)
• Expansion of supported collateral assets and integrated farms

Current Status and Near-Term Moves

The InfiniFI project is currently progressing through several important stages simultaneously.

1. Completion of Pre-Seed Funding: Successfully raised $3 million (approx. 470 million JPY) in a pre-seed funding round led by the prominent crypto VC Electric Capital. This shows high evaluation and expectation for the project's initial idea, team, and technical approach.
2. Community Building: Focusing on acquiring an initial user base and activating the community through the waitlist program and the "Button Game."
3. Protocol Development and Security Audits: Smart contract development is actively progressing on GitHub. An audit competition was also held (or is being held) on the Cantina platform.

Conducting this audit competition strongly suggests that InfiniFI prioritizes security and is steadily preparing for its mainnet launch.

The Significant Meaning of the $3 Million Funding

This $3 million raised in the pre-seed round is a crucial step for InfiniFI to officially launch the project and bring its product to market.

Furthermore, companies and projects such as Baboon VC, Gearbox, Alchemix, KR, Jones, Kinto, and Frax are also listed as supporters. Some of these are already successful DeFi protocols, which means we can expect not only financial backing but also the sharing of technical knowledge, strategic advice, and future collaborations. This strong initial support system will be a major advantage in accelerating InfiniFI's growth.

What good things can investors and users expect from getting involved with InfiniFI?

A Chance to Aim for High Yields!

• High APY that could potentially exceed market averages: Aim for attractive annual percentage yields by depositing or locking stablecoins.
  • Staking with anytime withdrawal: Up to 13% APY (target value)
  • Locking option: Up to 31% APY (target value)
• Flexible options: Whether you want to invest for the short term or aim for large returns over the long term, you can choose the method that suits you.

Leave Complex DeFi Operations to Us!

• No expert knowledge required: InfiniFI aims to optimize and automatically execute complex investment strategies like researching numerous protocols, assessing risks, allocating funds, and rebalancing.
• Easily benefit from advanced yield strategies: Even if you're not a DeFi expert, you may be able to enjoy the potential returns from sophisticated operations.

Transparent Operations (Ideals and Challenges)

• Records verifiable on the blockchain: All transaction records and smart contract logic are public and can be verified by anyone (in theory).
• Expect clear information disclosure: Due to the complexity of the strategy, proactive and easy-to-understand information disclosure from the project (e.g., operational status, risks, breakdown of revenue sources) is essential to gain user trust.

Potential for Developers

If the project grows, it could also become an attractive platform for developers.

• Open-sourcing and ecosystem formation: If major contracts are made public, external developers could create new services and tools, potentially fostering an ecosystem.
• Composability of iUSD/iETH: If iUSD/iETH become widely accepted in the DeFi market, new lending, payment, and derivative products utilizing them could emerge. InfiniFI's modular design is well-suited for such external integrations and functional extensions.

While InfiniFI has not officially confirmed an airdrop, it has explicitly mentioned introducing a reward system for early supporters and community members, which strongly suggests the possibility of a future airdrop! For "CandyDrops" readers, this is likely the point you want to know most about.

Recommended Steps to Acquire the InfiniFI Airdrop:

Key Points of the Airdrop Strategy:

InfiniFI seems to value not just collecting many wallet addresses, but high-quality community members who are genuinely interested in the project and contribute actively. The "Button Game" and encouragement of Discord activity are manifestations of this. This is also thought to be an aim to select and reward more committed users who will be responsible for future protocol governance.

Therefore, not just completing tasks, but understanding the project's philosophy and technology and actively participating in the community will be the key to receiving more airdrop rewards!

Participating in and following the InfiniFI project offers not only financial benefits like an airdrop but also serves as an excellent learning opportunity for intermediate crypto users to deepen their knowledge.

• Learn advanced DeFi concepts practically:
  • The approach to the "duration gap" problem
  • The application of "reserve banking principles" to DeFi
  • Yield generation strategies through multi-protocol integration
  • The mechanism of receipt tokens (iUSD/iETH)
  • The intention behind token locking and the unwinding process
  • Community-led governance models
• Deepen understanding of the entire DeFi ecosystem:
  • Naturally learn about the features and roles of partner protocols like Aave, Pendle, and Ethena.
  • Gain insight into the interactions and connections within the entire DeFi ecosystem.
• Grasp the latest trends in the Web3 industry:
  • Composability
  • Emphasis on capital efficiency
  • Transition to decentralized governance

Following an innovative and complex project like InfiniFI becomes an exercise in "critical thinking"—prompting you to consider questions like, "Is this yield really sustainable?", "What are the risks?", and "What makes this project superior to others?". This is an essential skill for navigating the ever-evolving world of cryptocurrency, enabling you to make autonomous decisions without being swayed by information.

Due to its ambitious vision, InfiniFI is an ideal case study for users with a strong desire to learn. We can't take our eyes off its future developments!