Liquity
Liquity is a decentralized borrowing protocol that lets users borrow the LUSD stablecoin in exchange for depositing ETH as collateral.
- Documentation
- Auditors
- Please see our FAQ on experienced auditors
- Website
- Token: LQTY
- Tags: CDP
- TVL: $638.8M (Rank #15)
- TVL Ranking by CDP: #3
- Blockchain: Ethereum
- Chain TVL
- Ethereum: $638.8M
- Code reviewed by several experienced auditors including Trail of Bits and CertiK
- Public team promotes accountability
- No documented protocol hacks since launch
- Core protocol launched in 2021; maturity over one year minimizes technical risk as smart contracts are well battle-tested
- Top 5% by total value locked reduces risk
- Core contracts are fully immutable
- No governance token and/or contracts are fully immutable
- No death spiral concerns
- Robust controls to mitigate oracle price manipulation
- Isolated markets enable asset risks to be contained to each individual pool without impacting the entire protocol
- Robust controls in place to prevent risky borrowing
- Solid mechanisms in place to ensure healthy liquidations
- Robust methods to accrue protocol reserves
- Liquity is a Maker-like protocol that offers interest-free loans paid out in LUSD stablecoin with ETH the only accepted collateral asset; borrowers need to maintain a minimum collateral ratio of 110% to avoid liquidation
How Liquity works
Liquity is a decentralized borrowing protocol that allows borrowers to draw interest-free loans against ETH as collateral. Loans are paid out in LUSD, a USD pegged stablecoin with a minimum collateralization ratio of only 110%. The loans are further secured by a stability pool that contains a portion of the total LUSD supply and by fellow borrowers collectively acting as guarantors of last resort. The stability pool serves as the first line of defense in maintaining system solvency as it is used to liquidate the debt in low-collateralized vaults (Troves). For depositors into the stability pool. it allows them to commit capital in advance to buy liquidated ETH at a discount. In general, stability pool depositors will receive more ETH (in USD terms) than the amount of LUSD burned. This is not without risks as it is still possible for ETH to drop significantly after a liquidation such that it is worth less than the amount of LUSD removed.
How Liquity makes money
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.
How you make money on Liquity
You can generate revenue via two different ways on Liquity. First, you can deposit LUSD to the stability pool to earn liquidation gains (in ETH) and LQTY emission rewards. Second, you can stake the LQTY utility token and earn LUSD and ETH revenue from borrowing and redemption fees.
