LUSD Stablecoin (Ethereum)

LUSD

LUSD is an overcollateralized stablecoin issued by the Liquity protocol.

Risk Rating
Best
$1.01
0.90%
Summary
What we like
Offers a fully decentralized method to gain exposure to a non-volatile store of value that is backed purely by ETH.
What we like less
LUSD is backed by a volatile asset, ETH, and exposed to low collateralized positions as users must only maintain a minimum collateral ratio of 110%.
What it means for you
LUSD is a great way to hedge your ETH exposure in volatile market conditions with zero interest payments.
Information
Blockchain
  • Ethereum
Key Metrics
  • Market Cap: $111.9M
  • Fully Diluted Valluation: $111.9M
  • FDV / MC: 1
  • Ranking inside Exponential (among stables): #14
  • Circulating Supply: 112,154,525
  • Total Supply: 112,154,525
  • Volume (24H): $4.9M
  • ATH: $1.16 (04/05/2021)
  • ATL: $0.90 (01/27/2022)
Risk Assessment
Best
Asset Strength

LUSD is a low-cap, fully collateralized asset. This asset is exposed to the underlying risks of Liquity, a protocol rated as Good.

LUSD is a stablecoin that trades within 100bps of its peg to USD, making it a somewhat volatile store of value.

Asset Tokenomics

LUSD has an uncapped supply but has inflation control or burn mechanisms in place. A fraction of the entire LUSD supply is always deposited inside the stability pool. Liquity uses the stability pool as a liquidity reserve to help mitigate liquidity crises in case of black swan events impacting the price of ETH. This also serves as a price stability mechanism as LUSD depositors withdraw their stability deposits and sell in the open market.

Asset Volatility

LUSD is a stablecoin that trades within 100bps of its peg to USD, making it a somewhat volatile store of value. A fraction of the entire LUSD supply is always deposited inside the stability pool. Liquity uses the stability pool as a liquidity reserve to help mitigate liquidity crises in case of black swan events impacting the price of ETH. This also serves as a price stability mechanism as LUSD depositors withdraw their stability deposits and sell in the open market.

Dependencies

Liquity

Things to know about LUSD

How is LUSD created?

LUSD is minted when users deposit ETH as collateral into the protocol. Liquity requires users maintain a minimum collateral ratio of only 110%, which means users can borrow up to ~90% of the value of their deposited ETH. Liquity charges a one-time fee whenever users borrow and redeem LUSD. Borrowers incur a fee on loans as a percentage of the total amount (in LUSD) and redeemers incur a fee on the amount paid to users by the system (in ETH) when exchanging LUSD for ETH.

What is LUSD used for?

LUSD is a price-stable asset that is mostly used as a hedge against volatility as it maintains a stable value of around 1 USD. Users need an alternative store of value and medium of exchange to navigate the highly volatile crypto markets. LUSD addresses this problem for crypto native users, as well as enables a wide range of financial activities including hedging during periods of high market volatility, market making against a stable asset, and payment as a medium of exchange.

How is the price of LUSD kept stable?

Vault owners play an important role in maintaining the peg by minting LUSD when spikes in demand push its price above 1 USD, and conversely purchasing LUSD to pay down their debt at a discount when it trades below 1 USD. Arbitragers also contribute to maintaining the LUSD peg by taking advantage of price differences across various market makers. Liquity further enables any LUSD holder to redeem the underlying collateral held by borrowers. This means every LUSD holder can redeem for ETH at face value. During redemptions, the system uses the LUSD to pay down the riskiest vault (Trove) with the lowest collateral ratio, and transfers the respective amount of ETH from the impacted position to the redeemer. Lastly, a fraction of the entire LUSD supply is always deposited inside the stability pool. Liquity uses the stability pool as a liquidity reserve to help mitigate liquidity crises in case of black swan events impacting the price of ETH. This also serves as a price stability mechanism as LUSD depositors withdraw their stability deposits and sell in the open market when LUSD is trading at a premium. Depositors into the stability pool experience a net gain whenever a Trove is liquidated. As the Stability Pool's LUSD is used to pay down the Trove's debt, depositors receive discounted ETH in return.

LUSD Pools
Aura USD Market Making
0%
Yield
~
TVL
Risk
C
Protocol
Aura
Chain
Ethereum
Aave USD Lending
7.7%
Yield
$1M
TVL
Risk
A
Protocol
Aave V3
Chain
Ethereum