Falcon AMA Recap: What Makes a Winning Synthetic Dollar？

We recently hosted our first Chinese-language Twitter Space AM, featuring our partner Lingling (also a partner at DWF Labs), alongside well-known Chinese crypto experts such as 加密韋馱, 土澳大狮兄, 子时, and Yuyue. The conversation covered the rise of synthetic dollars, yield generation across market cycles, and how Falcon differentiates itself through diversified strategies, multi-asset collateral support, and on-chain transparency.

Here’s a recap of the key points discussed.

From traditional finance to crypto: meet Lingling

Lingling shared her journey from options trading in traditional finance to joining DWF Labs three years ago. She’s seen the evolution of Falcon Finance from inception to where it is today:

• USDf is overcollateralized, and can be staked for yield
• Supports blue-chip and long-tail assets
• USDf circulating supply surpassed $250M in under three months
• Built for scalability and security

“Stablecoins and synthetic dollars are the most intuitive bridge to bring Web2 and TradFi users into Web3.” – Lingling

The stablecoin and synthetic dollar landscape is evolving

Lingling highlighted the evolving shift from traditional USD-backed stablecoins toward newer models, such as those backed by other currencies, treasury bills, and real-world assets (RWAs). Citibank projects the stablecoin market could exceed $3.7 trillion in the future.

The 5 yield strategies powering Falcon

Falcon currently offers a competitive ~12% APY through a mix of five dynamic strategies:

1. Positive funding arbitrage – Buy spot, short perp to capture positive funding rates
2. Negative funding arbitrage – Sell spot, long perp when markets are bearish
3. Cross-exchange arbitrage – Profit from price discrepancies across CEXs
4. Native staking – Stake blue chip tokens like ETH or SOL to earn base yield
5. DEX LP + on-chain arbitrage – Provide liquidity and arbitrage inefficiencies across DeFi markets

“We don't rely on just one model. We mix different strategies to stay competitive across market cycles.”

Long-tail collateral: why Falcon supports smaller caps

Unlike most protocols that only accept USDT, USDC, ETH, or BTC, Falcon supports a broader range of collateral, including altcoins like APT, SOL, XRP, TRX and others. As long as there’s sufficient liquidity and depth, we’re open to more assets. 

With BTC and ETH funding strategies getting increasingly crowded and less profitable, expanding to smaller altcoins helps Falcon stay competitive and sustain yields.

To mitigate potential risks, we’ve implemented the following safeguards:

• Strict mint caps are set for each token
• Falcon allows minting parameters, such as liquidation price or overcollaterization ratio based on our risk management estimates which takes into considerations market cap, open interest, funding rates, and daily volumes.
• Market risks are hedged through derivatives, loans or collaterals.

“Market exposure is always hedged. If the token price drops, your redeemable USDf value remains protected.”

Understanding the APY behind sUSDf

Falcon’s attractive ~12% APY has sparked interest, with some community members asking how it's calculated. Lingling explained:

• The APY is based on the trailing 7-day average of daily protocol returns, distributed to the staking rewards contract
• This figure is divided by the average daily staked sUSDf balance and annualized with weekly compounding
• The displayed APY is an estimate, not a guaranteed rate, and may fluctuate 
• Yield is distributed daily and viewable on-chain
• The team is also considering switching to an APR-style display for easier comparisons

Boosted yields & Miles rewards

Falcon Miles is designed to reward our supportive and loyal community. By engaging with the USDf ecosystem, whether you're minting, staking, or helping spread the word, you earn Miles points for every activity. 

It's our way of recognizing your support as we continue to grow the Falcon ecosystem together:

• Minting USDf (with 8x rewards for non-stablecoins) 
• Staking & Restaking USDf (with boosted yield and rewards multiplier) 
• Social activities
• Referrals (coming soon)
• Partner campaigns (e.g., Pendle, Morpho – coming soon)

Miles are distributed either per action or daily, depending on the activity. Our leaderboard is coming soon too, so jump in early and start stacking those Miles!

Proof of reserves and audit partners

Protocol security and proof of reserves remain top concerns for many in crypto and rightly so.

As Lingling shared during the AMA, we’ve released a transparency page where everyone can track our proof of reserves. It includes our balances across custodians and exchanges. We're also working with a European third-party audit firm, Harris & Trotter LLP, who will publish quarterly reserve attestations to strengthen asset transparency.

On TVL growth and sustainable yield

With TVL now above $270M, some community members have asked whether yields might decline as more capital enters the system. Lingling addressed this during the AMA:

• TVL has grown rapidly, and not all yield strategies have been fully deployed yet
• This may result in a short-term dip in APY, but yields are expected to gradually rise as more capital is put to work
• The APY displayed reflects the realized 7-day average and is updated regularly

“Since launch, our APY has generally remained above 10%, and we expect it to pick up again as more strategies come online.”

Closing reflections

This AMA offered a deep dive into Falcon’s strategy, vision, and risk-managed approach to sustainable yield. It’s a diversified yield layer designed to scale with the evolving needs of Web3.

We’re just getting started. Join us as we build the next generation of synthetic dollars! 

Get started here.