Fyde Liquid Vaults: Hands-Off Investment with AI & DeFi - Milk Road

Artificial Intelligence & DeFi in One

Fyde Treasury (Fyde) is a new protocol that combines the best of artificial intelligence and DeFi, for hands-off investment.

The platform aims to lower volatility, reduce risks, and boost overall returns for its users, through innovative, AI-driven “liquid vaults”. This involves a position token, $TRSY, and the soon-to-launch $FYDE governance token.

Let’s take a look at what Fyde has to offer, and how it all works.

The Problem with Crypto Investments

Crypto natives are all familiar with the wild volatility of this market. It’s also one of the reasons investors are here in the first place – it’s high risk, high reward.

On the other hand, high volatility also means it’s hard to make stable and predictable returns. Investors understand that a crypto portfolio is accompanied by a rollercoaster of emotions, in sync with the big swings in value. This can lead to poor, emotion-led decisions, which often cripple returns.

Even worse, managing the many positions required for a well-diversified portfolio can be a nightmare. In such a fast-paced sector, it's quite common for investors to miss key price levels for entries or exits, airdrop claims, or other opportunities. Not fun if you’re throwing away easy money. Worse if you get rugged without realizing!

Fyde Reduces Volatility and Improves Asset Management

To tackle volatility and asset management issues, Fyde offers a neat new tool: AI-powered liquid vaults.

These vaults make it super simple to manage the investment process – in fact, they do most of the work for you. The majority of tasks that make crypto complex and time-consuming are fully automated. On top of that, they’re designed to reduce volatility, be more easily tradable and transferable, and improve returns for depositors.

As a result, Fyde users save time and headaches from the rollercoaster of the crypto market, while still holding a basket of high-performing assets. They’ve just completed their first one which offers broad crypto market exposure, and are working on narrative-driven liquid vaults next. This involves categories such as meme tokens, RWAs, AI, DePin, and more. They’re also eyeing migrations to popular Layer 2s, such as Base or Arbitrum.

Fyde outlines two primary use cases for its vaults:

1. Investors wanting a hands-off experience

Fyde's vaults automatically spread investments across different tokens and narratives, using AI to increase profits, cut losses, and guard against market dangers.

2. Large holders seeking diversification

Fyde lets big investors diversify their crypto holdings while keeping voting rights for these tokens. They can deposit these large holdings into a vault that diversifies for them, instead of selling them on a market with insufficient liquidity.

AI is used to give the position token, $TRSY, increased liquidity, so large holders can trade the $TRSY token instead of their deposited token.

How Does Fyde Work?

Fyde’s platform is built around its AI liquid vaults. These vaults are smart contracts that manage user funds according to specific investment strategies, managed completely by AI.

The key goal? To help users’ holdings grow steadily, with fewer fluctuations and minimal action required on their part.

Capture Gains Through $TRSY

Currently, Fyde’s vaults will take more than 40 different tokens as deposits.

Investors who deposit one or more of these assets into Fyde’s liquid vault get $TRSY in return – tokens representing their ownership of a portion of the vault. $TRSY is issued in a 1-to-1 ratio to the value of the user’s deposits in the platform at the time of deposit and captures the performance of the entire vault.

This is similar to a liquid staking token issued when users deposit funds into a staking protocol, like Lido.

All funds deposited by vault users are pooled together and invested using a chosen strategy. By leaving it up to the vault to execute it all, users save time and transaction fees, while potentially increasing their returns.

Returns in the vault come not only from asset appreciation, but also yield earned by the vault’s use of the assets. This includes rewards for staking, liquidity provision, and more.

Overall, $TRSY represents part-ownership in a well-diversified crypto portfolio, providing artificially intelligent exposure to trading in the DeFi space.

It’s always fully backed by real assets held in the vault, and minimizes volatility for its holders.

Deposits Stay Balanced

Fyde uses algorithmic incentives to influence depositors’ behavior, to keep the vault’s contents in balance.

In other words, there’s a “guiding hand” that discourages too many deposits of a single asset, or too many withdrawals at a time. This keeps the vault’s asset weighting in check, to limit the risk for any single token.

A $FYDE Token is Coming

Fyde has also hinted at an upcoming release of a native governance token, $FYDE.

Alongside governance rights for voting, the $FYDE token will be used to reward users for maintaining the proper balance of the vault’s contents. According to Fyde, this rebalancing will be made possible by exploiting arbitrage loops. These bring $TRSY back in line with the value of its backing.

Fyde is currently running a points program for active participation in the ecosystem, which may be related to the $FYDE token launch.

The Role of Artificial Intelligence in Fyde

The specific role that AI plays in Fyde’s vaults all boils down to three primary goals. Assessing risk, managing asset allocations, and optimizing liquidity.

Unlike humans, the AI never sleeps – so it doesn’t miss a beat on the 24/7 crypto market.

Reducing Risk

Risk assessment is carried out by Fyde’s AI using Graph Machine Learning.

This technology maps out various wallets and associated transactions, in a way that it can work out the nature of the entity that controls each wallet. It can also predict the amount of funds that might flow into DEXes such as Uniswap.

This enables Fyde to spot potential issues like the risk of central control, suspicious trading patterns, and more.

Auto-Rebalancing Asset Allocations

Using results from the risk assessment, the AI can then take steps to manage those assets according to what it found.

That could involve keeping the asset’s allocation in the vault as-is, quarantining the asset. Alternatively, it could mean taking it out of the portfolio entirely.

For risks that might require immediate action, Fyde uses additional machine learning systems like Hypernative.

This detects suspicious activity that could imply an urgent threat like a security breach or fraudulent actions by a protocol’s governance system.

Optimizing Liquidity

When it comes to liquidity, Fyde uses simulations that mimic DeFi trader activity and a range of market conditions.

This models trader behavior and overall tendencies, as well as optimal amounts for arbitrage opportunities. Fyde then uses this data to maximize the liquidity of the tokens in its vault, for smooth entries and exits on all portfolio adjustments – an important detail in DeFi markets.

Conclusion

Fyde is a dynamic new platform that helps traders minimize the work of managing a crypto portfolio, as well as limit its volatility.

The platform gives users a transparent and hands-off experience through its AI-driven liquid vaults, which do most of the heavy lifting. This involves continuously rebalancing portfolios for them, automated risk management, and boosting liquidity.

By letting users deposit any one of 40+ selected assets in exchange for $TRSY, they can get instant exposure to a strong crypto portfolio. This is optimized to lower risk and volatility while boosting returns – all in a non-custodial way.

To learn more about how Fyde can elevate your crypto portfolio, visit their web app or follow them on social media for the latest updates.

DISCLAIMER: None of this is financial advice. This article is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.