FOLLO – The First Structured Fund Protocol Open for Any Token

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As reflected in the recent launch of the new Bitcoin Futures ETF in the US, a number of products are about to be introduced to meet the ever increasing user demand for futures products and products designed around leverage.

Follo is the first of its kind: a structured fund protocol that aims to create a robust USD-denominated bond and a leveraged token based on the spot price of the token.

While this model is somewhat technical, much like Follo’s protocol, the underlying ideas are easy to understand.

Tranches

At Follo’s core comes the implementation of two different tranches for their users:

1. Senior tranche: a  USD-denominated bond which guarantees principal and interest to the user.
2. Subordinate tranche: a leveraged token which can be traded anywhere with variable leverage at any time.

The underlying assets [Senior tranche] are used across the protocol and in combination with Automated Market Makers (AMMs) to provide the necessary leverage available to those participating in the subordinated tranche.

By automating this process through the Follo ​P​rotocol, users will rest assured that their funds and leveraged trades are secured on-chain regardless of tranche.

To make this work, the protocol locks the underlying asset at several times the market value of the leveraged tokens. This ensures that the protocol is robust and ensures user security while creating a cryptographically secure float across the  Follo network.

Rebalance Mechanism

The crypto market can be highly volatile, so Follo addressed this volatility with an automatic rebalancing mechanism. Follo’s first-of-a-kind rebalancing mechanism frequently runs in order to maintain a fixed leverage ratio for our users.

The rebalance occurs for leveraged tokens with a fixed ratio when the leveraged ratio begins to deviate from the target ratio. Rebalancing is an important mechanism because it reduces the leverage multiple and adjusts the unsold shares of Senior and Subordinated funds. Conversely, this mechanism will increase leverage if the price of a token goes up.

Follo’s rebalancing does all of this while ensuring that the value of funds that our users hold in Senior and Subordinated Funds remain unchanged. The purpose of the rebalance, there is twofold:

• To avoid liquidation
• To ensure that leverage is stable

Token

FOLLO token is utility token of Follo Protocol. The token allows users to pay for fees, receive platform network dividends, vote on protocol decisions (similarly to a DAO), and much more.

Recently, Follo Protocol has opened its second round fundraising for product development and global marketing. Follo v1 is currently available on KOVAN testnet here.

​For more information, please visit Follo Protocol Community: Telegram, Twitter.

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Disclaimer: This publication is sponsored. Coinspeaker does not endorse or assume responsibility for the content, accuracy, quality, advertising, products, or other materials on this web page. Readers are advised to conduct their own research before engaging with any company mentioned. Please note that the featured information is not intended as, and shall not be understood or construed as legal, tax, investment, financial, or other advice. Nothing contained on this web page constitutes a solicitation, recommendation, endorsement, or offer by Coinspeaker or any third party service provider to buy or sell any cryptoassets or other financial instruments. Crypto assets are a high-risk investment. You should consider whether you understand the possibility of losing money due to leverage. None of the material should be considered as investment advice. Coinspeaker shall not be held liable, directly or indirectly, for any damages or losses arising from the use or reliance on any content, goods, or services featured on this web page.