In the precise four-tier collateral pyramid of Falcon Finance, at the base of the tower is Tier 1 assets, referred to as the Cash Great Wall, primarily composed of the three major centralized stablecoins: USDT, USDC, and FDUSD. According to the latest asset-liability statement of the protocol, Tier 1 assets currently account for 61.5% of the total treasury reserves, a ratio determined after extremely rigorous liquidity stress testing to establish the golden ratio. Unlike Tier 4 RWA assets that pursue high returns, Tier 1 assets do not play a primary profit-generating role in Falcon's ecological niche but serve as a pure liquidity buffer, ensuring that the settlement of funds of any size can be completed within milliseconds.
Building such a massive reserve of cash equivalents is aimed at solving the most fatal liquidity mismatch pain point in the synthetic dollar sector. While underlying RWA assets (such as government bonds or private credit) can provide attractive returns, they often face T+1 or even T+2 settlement cycles and cannot be liquidated during non-trading hours. Once a panic sell-off occurs in the market, if the protocol lacks sufficient cash reserves, it can easily trigger a run similar to traditional banks, leading to stablecoin decoupling. Falcon, by hoarding vast amounts of USDT, USDC, and FDUSD, essentially exchanges holding costs for the survival rights of the system, ensuring that users can redeem USDf for on-chain cash at any time.
To efficiently manage these homogeneous tokens, Falcon deployed a smart contract system called PSM (Peg Stability Module). This system allows arbitrageurs and ordinary users to perform 1:1, slip-free exchanges between USDf and Tier 1 assets (minus a small protocol fee). When the market price of USDf exceeds $1, arbitrageurs use USDT to mint USDf through PSM and profit from selling in the market; conversely, when the price is below $1, arbitrageurs buy USDf and redeem USDC through PSM. An intelligent routing algorithm automatically balances the reserve ratios of the three major stablecoins, preventing systemic risks caused by a single asset (such as USDC decoupling).
This strategy, which prioritizes high liquidity, has proven to be extremely effective during multiple market shocks in the fourth quarter of 2025. Data shows that even in extreme situations where ETH's single-day drop exceeds 15%, the anchoring deviation of USDf is consistently controlled within 0.05%, without any substantial decoupling occurring. Its PSM module processes an average daily liquidity throughput of over $500 million, with no payment delays, making this rock-solid stability one of the most popular collateral options in DeFi lending protocols.
The construction logic of Tier 1 assets may seem conservative, but it is actually a prerequisite for Falcon Finance to introduce high-risk RWA assets on a large scale. It is precisely because of the 61.5% cash fortress as a backing that the protocol dares to explore high-yield credit assets at the Tier 4 level, thereby creating excess returns for FF token holders. Looking ahead to 2026, for Falcon, Tier 1 is not only the cornerstone of liquidity but also the only language that establishes mutual trust between Wall Street institutions and Web3 natives, serving as an instant payment gateway connecting the real financial world and the crypto universe.
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