#LUSD it’s a decentralized stablecoin capable of resisting all kinds of censorship.”
#LUSD is an inspiration for what DeFi should look like. Trustless, immutable and censorship-resistant.
#LUSD is one of the most exceptional DeFi projects in existence when it comes to its level of complete immutability.
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The Liquity Protocol is a decentralized borrowing platform that provides interest-free collateralized lending and DeFi borrowing.
Its outstanding performance in the DeFi lending market in 2021 has resulted in a significant increase in usage.
The innovative dual-token system, comprising the LUSD stablecoin and Liquity token (LQTY), is a key factor in this success.
Liquity is a decentralized finance (DeFi) protocol that facilitates interest-free collateralized borrowing.
Users can borrow the LUSD stablecoin by locking up Ethereum (ETH) with a 110% minimum collateral ratio. When doing this, users pay a one-off borrowing fee.
Furthermore, Liquity is a governance-free protocol that uses an innovative batching and instant liquidation model that has seen a surge in popularity.
Moreover, the total value locked (TVL) in Liquity Protocol went from $0 to $1 billion in just ten days!
How to take out an interest-free loan using Liquity?
Liquity Protocol offers up to 90% of your ETH value and pays you out in their own native stablecoin LUSD which is backed by Ethereum.
While many borrowing protocols will sell your ETH in return for your loan.
Liquity Protocol simply locks it up in return for their LUSD. This way users can maintain their exposure to ETH while borrowing.
Founded in 2020, Liquity is a decentralized borrowing protocol that allows borrowing LUSD against ETH entirely interest-free.
Liquity is backed by reputable investors and partners such as Polychain Capital, Pantera Capital, 1kx, Tomahawk VC, Robot Ventures, and more.
Liquity is governance-free to ensure that the protocol remains fully decentralized. Liquity’s front end is entirely decentralized by pretty much “outsourcing” it to third parties and creating a fully distributed ecosystem. They currently have 15+ front-ends!
Frontend operators are rewarded with a share of LQTY tokens generated by their users. “Kickback Rate” is the percentage of LQTY rewards that a frontend operator chooses to share with Stability Pool depositors using their frontend.
Liquity Mechanics: Troves are similar to vaults in MakerDAO, allowing users to take and manage their loans. Your Ethereum address will be linked to a Trove (1 Trove per address) and contains two balances: an asset balance in ETH and a debt balance in LUSD.
Like other borrowing platforms, your collateral ratio represents the % dollar value of collateral to debt.
This % changes by adding collateral or repaying debt, and ETH price fluctuations (assuming LUSD remains stable).
Some things to note when borrowing on Liquity:
– Min. The collateral ratio is 110% (150% in Recovery Mode);
– A borrowing fee of 0.5% – 5% based on demand;
– A liquidation reserve of $200 (like a deposit);
Stability Pools
Stability Pools are a source of liquidity that maintains system solvency in the event of Trove liquidations. It is funded by users transferring LUSD into it, known as Stability Providers.
When a Trove is liquidated, LUSD is burned from the Stability Pool’s balance to repay the debt, and the Trove’s collateral is transferred to the Stability Pool.
Stability Providers lose a pro-rata share of LUSD deposits but gain a pro-rata share of liquidated collateral.
Stability Providers earn from:
– Liquidation gains (theoretically, a proportional share of the 10% in excess collateral)
– LQTY rewards (based on pool share & front-end kickback rate)
Risks to note that may impact “liquidation gains”:
– Oracle failures
– Flash crashes!
Liquidations & Recovery Mode Troves below the min. the collateral ratio of 110% gets liquidated to ensure LUSD remains back.
The Trove’s debt is canceled and absorbed by the Stability Pool and its collateral is distributed among Stability Providers.
The $200 in Liquidation reserve/deposit mentioned earlier will go to the user that initiates the liquidation process to compensate for gas and as a reward (in addition to 0.5% of the Trove’s collateral).
Recovery Mode occurs when the Total Collateral Ratio (TCR) of the system falls below 150% (which can happen when ETH plummets) Troves with a collateral ratio <150% can be liquidated, and the system blocks borrower transactions that would further decrease the TCR.
Recovery Mode incentivizes borrowers to raise the TCR by>150% and incentivizes LUSD holders to replenish the Stability Pool. Liquidation losses are capped at 110%, and the remainder 40% is claimable by the borrower.
LUSD <> USD peg mechanism LUSD is pegged to USD through hard and soft peg mechanisms.
The hard peg mechanisms include a price floor at $1 (minus the redemption fee) and a price ceiling at $1.10 due to the min. the collateral ratio of 110%.
A soft peg mechanism treats LUSD=USD when determining the Trove collateral ratio, thus anchoring LUSD<>USD parity in the system.
A base rate formula determines the redemption fee, which starts at 0% and increases with every redemption, decaying to 0% if no redemptions occur.
Liquity expects arbitrageurs will prevent LUSD from reaching $1.10 and if it ever hits that ceiling, it will rebound very quickly.
LQTY token
Unlike most DeFi tokens, LQTY is a utility token. Typically, such tokens assume both governance and utility roles.
Nevertheless, because governance tokens impart voting rights on the protocol, and whales could hold most of them, the Liquity team opted not to include a governance function.
LQTY is the secondary token that captures fee revenue to incentivize early adopters and front-end operators.
It is not a governance token – Liquity has no governance.
Its max supply of 100M tokens is distributed as follows:
LQTY can be earnt by 1. LPing for the LUSD<>ETH Uniswap pool (1.33M LQTY allocated as rewards) 2. Becoming a Stability Provider or Frontend Operator (32M LQTY allocated as rewards.
LQTY can be staked to earn a proportional amount of borrowing and redemption fees in LUSD and ETH. The 7d avg. APR is 29.95%.
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Price Prediction
Based on our analysis by cryptocurrency experts regarding the price of LQTY, LQTY is expected to reach at least 150$ in the near future.
Article Summary:
Liquity Protocol and $LQTY Review and Price Prediction!
$LQTY- Price Potential: $150 (50x)
An overview of Project, Utility, Roadmap, Team, Community, Tokenomics, Partnerships, and Exchanges.
Project: Score – 8/10
Liquity is a decentralized finance (#DeFi) protocol that facilitates interest-free collateralized borrowing. Users can borrow the LUSD stablecoin by locking up Ethereum (#ETH) with a 110% min. collateral ratio!
Utility: Score – 10/10
LUSD is one of the most exceptional DeFi projects in existence when it comes to its level of complete immutability. #LUSD is an inspiration for what DeFi should look like. Trustless, immutable and censorship-resistant!
Roadmap Score – 8/10
Liquity’s long-term vision is to enable anyone to invest in high-yield assets — regardless of income. More info about RoadMap you can find on this video:
Team Score- 10/10
Liquity’s team is spread over nearly 10 countries!
Social Score – 9/10
Liquity Protocol has around 43.8K Followers on Twitter at this date!
Tokenomics: Score 10/10
LQTY is the secondary token that captures fee revenue to incentivize early adopters and front-end operators.
It is not a governance token – liquidity has no governance. LUSD Its the max supply of 100M tokens!
Partnerships Score – 10/10
Liquity is backed by reputable investors and partners such as Polychain Capital, Pantera Capital, 1kx, Tomahawk VC, Robot Ventures, and more.
Exchanges: LQTY is listed on most of the crypto exchanges such as Binance, Deepcoin, BTCEX, BingX, Bitrue etc!
Frequently Asked Questions
Is Liquity Protocol a good investment?
Whether a high-risk asset like Liquity Protocol is a suitable investment for you would depend on your risk tolerance, investing goals and timeframes, experience in cryptocurrency markets, and other personal circumstances. Always conduct your own due diligence before investing. And never invest money that you cannot afford to lose.
Will the LQTY price go up?
Based on our analysis by cryptocurrency experts regarding the price of LQTY, LQTY is expected to reach at least 150$ in the near future.
Should I invest in Liquity Protocol?
Whether Liquity Protocol is a suitable investment for you would depend on your risk tolerance, investing goals and timeframes, experience in cryptocurrency markets, and other personal circumstances. Always conduct your own due diligence before investing.
What is Liquity Protocol?
Liquity is a decentralized borrowing platform that permits 0% interest loans secured by Ether used as collateral. The loans are paid out in LUSD, a stablecoin pegged to the USD, and require a minimum collateral ratio of only 110%.
Apart from collateral, the loans are backed by a Stability Pool that contains LUSD and fellow borrowers who act as collective guarantors of last resort. Further information about these mechanisms is available under Liquidations.
Liquity operates as a non-custodial, immutable, and governance-free protocol.
How can I use Liquity Protocol?
You first need to choose a web interface (aka frontend) to access the system. The core team building the protocol will not operate a front end. Liquity is instead accessed by third-party front-end applications and integration services.
What are the key benefits of Liquity?
Liquidity offers the best borrowing conditions on the market with the main benefits being:
– 0% interest rate
– A collateral ratio of just 110%
– Governance free – all operations are algorithmic and fully automated
– Directly redeemable – LUSD can be redeemed at face value for the underlying collateral, always and at any time
– Censorship resistant – the protocol is controlled by nobody
What are the ways to make money with Liquity?
There are essentially two primary methods to generate earnings using Liquity:
-By depositing LUSD into the Stability Pool, one can earn rewards in the form of liquidation gains and LQTY tokens.
-By staking LQTY, one can receive revenue from issuance fees (in LUSD) and redemption fees (in ETH).
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