Liquity is a decentralized protocol that allows Ether holders to obtain maximum liquidity against their collateral without paying interest. It is a borrowing protocol built on Ethereum that uses a USD-pegged stablecoin called LUSD that allows Ethereum holders to draw loans in the form of LUSD.
Liquity was created to address issues that users were having with other DeFi lending and borrowing platforms, such as volatility, high interest rates, and centralized policies that favored lenders rather than borrowers.
On Liquity, loans are paid out in LUSD, and there is a need to maintain a minimum collateral ratio of only 110%. In addition to the collateral, the loans are secured by a stability pool containing LUSD and by fellow borrowers collectively acting as guarantors of last resort. Hence, liquity as a protocol is non-custodial, immutable, and governance-free. LQTY is an Ethereum token that powers the Liquity protocol, a decentralized borrowing platform for 0% interest loans using ETH as collateral.
The Liquity protocol offers interest-free loans and is more capital efficient than other borrowing systems (i.e., less collateral is needed for the same loan). Instead of selling Ether to have liquid funds, you can use the protocol to lock up your Ether, borrow against the collateral to withdraw LUSD, and then repay your loan at a future date. For example, borrowers speculating on future Ether price increases can use the protocol to leverage their Ether positions up to 11 times, increasing their exposure to price changes. This is possible because LUSD can be borrowed against Ether, and sold on the open market to purchase more Ether — rinse and repeat.
The protocol charges one-time borrowing and redemption fees that are algorithmically adjusted based on the last redemption time. While other systems (e.g., MakerDAO) require variable interest rates to make borrowing more or less favorable, Liquity instead opts for a fully decentralized and direct feedback mechanism via one-off fees.
A Trove is where you take out and maintain your loan. Each Trove is linked to an Ethereum address, and each address can have just one Trove. Troves are similar to vaults and CDP. Troves maintains two balances: one is an asset (ETH) acting as collateral and the other is a debt denominated in LUSD. Trove allows you to change the amount of each by adding collateral or repaying debt, and this makes the balance change.
Who are the founders of Liquity (LQTY)?
The founder of liquity is Robert Lauko. He studied microengineering at EPFL but then switched to law at UZH. Robert worked for several years as a lawyer before pivoting to blockchain research. He worked as a researcher at DFNITY for 2 years before creating his venture. He divulged into the building of a decentralized protocol to revolutionize collateralized borrowing. He worked on consensus algorithms, fair incentive schemes, network monitoring, and scalability issues, among other things.
Alongside the CEO is Michael Svoboda, who works as COO and has a degree in computer science and economics.
What is Liquity (LQTY) used for?
Liquity allows users to borrow LUSD against ETH by opening a Trove
Users can secure Liquity by providing LUSD to the Stability Pool in exchange for rewards
Liquity users can stake LQTY to earn the fee revenue paid for borrowing or redeeming LUSD.
With liquity, users redeem 1 LUSD for 1 USD worth of ETH when the LUSD peg falls below $1.
Liquity provides liquidity without charging borrowers interest or recurring fees. ETH holders can obtain liquidity against their collateral for free.
Hard price floor
Liquity follows a maximally expansive monetary policy by providing free liquidity at zero issuance costs by default. On the other hand, the issued LUSD tokens are fully redeemable against the collateral.
Governance-free algorithmic monetary policy
Unlike competing platforms, Liquity does not rely on a governance mechanism to vote on monetary interventions like changing an interest rate.
Liquity is a protocol rather than a platform. There is no administrator with special privileges that could interfere with, alter, or halt the operation of the protocol in any way.
Governance token holders are required to manage the economic parameters of their systems (e.g., set the fee rate) in the best interest of the protocol.
How is Liquity (LQTY) unique?
Liquity had two unique tokens: LUSD and LQTY. LUSD is the USD-pegged stablecoin used to pay out loans on the Liquity protocol. At any time, it can be redeemed against the underlying at face value. LQTY is the secondary token issued by Liquity. It captures the fee revenue that is generated by the system and incentivizes early adopters and frontends. The total LQTY supply is capped at 100,000,000 tokens.
In liquity, funds are paid out in LUSD (USD-pegged stablecoin), and users need to maintain a minimum collateral ratio of just 110%. The protocol generates revenue via fees and 100% of it is distributed among $LQTY stakers. Liquity is governance-free, immutable, and maximally decentralized.
How many Liquity (LQTY) coins are in circulation?
Liquity has a circulating supply of 78,898,079 LQTY coins and a max. supply of 100,000,000 LQTY coins.
How is the Liquity network secured?
Liquity achieves security and stability via economically-driven user interactions and arbitrage, rather than active governance of monetary interventions. The protocol has built-in incentives that encourage both early adoption and the operation of multiple front ends, enhancing decentralization.
How do I buy Liquity (LQTY)?
The LQTY token can be used for a wide range of uses, like staking.
Tokens can be easily purchased by following the steps below.
* Open an account with the crypto trading platform.
* Transfer the specific amount of your fiat currency to your account.
* Wait for your deposit to be confirmed and buy LQTY through your trading account.
Which Cryptocurrency Wallet Supports Liquity (LQTY)?
The PTPWallet platform supports many cryptocurrencies simultaneously, such as Liquity (LQTY). Because of its vast use case, it has grown to become one of the most used platforms, as it serves as an exchange and an engine to discover other cryptocurrencies. Users can easily use PTPWallet as their LQTY wallet because it offers a simple interactive interface, making it easy for people to navigate its system.