Liquity

Stablecoin

Liquity is a decentralized borrowing protocol that lets users borrow the LUSD stablecoin in exchange for depositing ETH as collateral.

Risk Rating
Best
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Liquity is a decentralized borrowing protocol that is governance-free with fully immutable smart contracts. Loans are paid out in the LUSD stablecoin which is purely backed by ETH collateral with no centralization aspects.
What we like less
The borrowing platform is backed by a volatile asset, ETH, and exposed to low collateralized positions as users can borrow with a minimum collateral ratio of 110%.
What it means for you
Offers you an amazing way to borrow one of the most decentralized stablecoins in a highly capital efficient manner and with zero interest rate (only charges a small one-time fee).
Information
Exploit/Hacks
None
Info
  • Website
  • Token: LQTY
  • Tags: Stablecoin
Key Metrics
  • TVL: $841.4M (Rank #24)
  • TVL Ranking by Stablecoin: #0
  • Blockchain: Ethereum
  • Chain TVL
    • Ethereum: $841.35M
Risk Assessment
Best
Protocol Code Quality
  • Code reviewed by several experienced auditors including Trail of Bits and CertiK
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • 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
Protocol Design
  • 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
Things to know about Liquity

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.