I sat down with Caps, Founder of Flaunch, to discuss his journey from professional poker to becoming a DeFi builder. Our conversation explored his path through crypto, the evolution of Flaunch, and how they're leveraging Uniswap v4 hooks to reshape trading dynamics and liquidity provision. His story illustrates how innovative thinking in DeFi can create more efficient and equitable systems that are also more fun.

What drew you into the crypto space initially?
My journey began in poker, where I saw firsthand how you could skip traditional banking systems. Around 2015, I discovered Ethereum after being a Bitcoin maximalist. What really caught my attention was Ethereum coming in with bigger ambitions, while Bitcoin was moving away from its original vision of peer to peer money. I ended up creating my own price tracking app in 2016, which grew to become one of the top websites in the US.

How did you transition from tracking prices to building DeFi protocols?
The real turning point came after DeFi summer in 2020 when I joined NFTX who were working on a DeFi x NFT liquidity protocol. I joined NFTX as Product Lead and led its transition into an NFT marketplace powered by liquid and fungible ERC20s. As DeFi Summer wound down and NFTs gained momentum, NFTX began driving hundreds of millions of dollars of volume in a nascent market of “NFT-Fi”.

What challenges did you encounter in DeFi that led to creating the concept for Flaunch?
After NFTX, we realized there was a significant coordination problem with NFT liquidity. Many NFT holders, even those with valuable collections like CryptoPunks, weren't familiar with yield generation. This led us to create FloorDAO, which successfully accumulated a treasury of blue chip NFTs with the goal of deploying them to NFTX and generating yield. With the announcement of Uniswap v4 we saw an opportunity to create a vastly improved system for fungible NFTs and worked on a whitepaper for a new product, “Flayer”.

While working on Flayer, the memecoin market began to take off, with massive margins being extracted from trading fees. This sparked an idea: what if we could use Uniswap v4 to improve token launches, distribution and price discovery while returning all of the trading fees to users—while generating yield in the process? That's how Flaunch was born.

Can you explain how Flaunch's internal swap pool innovates on traditional AMM design?
We solved a fundamental problem in liquidity provision where LPs typically receive both ETH and the token they're providing liquidity for but would prefer just ETH. Our internal swap pool (ISP) pays LPs in ETH, reduces sell pressure from LPs dumping token rewards, and improves execution prices for buyers. When a swap comes in, the token part of the fee waits in the ISP for the next buyer. When the next buy is made, it first checks the ISP for tokens (with zero price impact) before then hitting the AMM to fill any remaining order. This benefits traders by improving execution prices and reducing sell pressure, while ensuring the LPs get paid exclusively in ETH.

What makes Flaunch different, and what's next for you all?
One unique aspect of our platform is how we handle ETH liquidity across products. Through a v4 hook, we lend liquidity on Aave, creating a safe yield generation mechanism. This allows us to return 100% of fees to users while maintaining sustainability through yield from Aave. We're exploring exciting new frontiers, particularly at the intersection of AI, DAOs and hooks. We want to extend the launch, liquidity, market making and distribution of all assets via Flaunch. We're interested in developing AI systems for liquidity management, which could revolutionize how pools operate. We're also working on the Eliza framework and building on Farcaster.

What excited you most about Uniswap v4's capabilities, and what challenges did you face while building on it?
The donate method was a game-changer for us. While we can't eliminate impermanent loss (IL), we realized we could make LP strategies more profitable by generating exogenous fees through our protocol and donating them back to LPs to incentivize liquidity. This was a fundamental part of the Flayer design which would reduce IL and help solve the coordination problem I mentioned earlier.

The main challenge was the thin documentation early on, as we were building about a year ago. However, the community, especially Sauce from the Uniswap Foundation, was incredibly helpful with support and contract addresses. The Hookathon also provided community support during those early days when few were building on v4.

What do you want people to know about the future of DeFi and Uniswap v4?
I believe Uniswap v4 will trigger many "aha" moments in DeFi. One significant development will be the revival of incentivized liquidity through the donate function, enabling more sophisticated liquidity bootstrapping mechanisms similar to what we saw in 2020, but with more interesting variations.

We're seeing projects like Bunni building technically sophisticated solutions, creating new opportunities for profit generation and creator bootstrapping. It's an exciting time that reminds me of Ethereum's early days – there's so many ideas that are yet to be imagined and the design space is enormous, both for good and challenging use cases. The pace of innovation is accelerating, and I expect a lot of people are going to be very interested in Uniswap v4 when our products and others go live.

Note: The views expressed herein may not reflect the views of the Uniswap Foundation. This interview is provided for informational purposes only and does not constitute legal, financial, or professional advice.