Today #stablecoins are the most important elements in the world of #DEFI and #Cryptocurency (before #Bitcoin of course).
Let's see how @LiquityProtocol offers a decentralized stablecoin, independent of bank reserves.
THREAD 🧵🧵🧵
Let's see how @LiquityProtocol offers a decentralized stablecoin, independent of bank reserves.
THREAD 🧵🧵🧵
I'm not saying that $LUSD is the best stablecoin, you have to understand that each #stablecoin has its advantages and disadvantages.
These advantages and disadvantages must therefore be dealt with according to the needs and the context.
These advantages and disadvantages must therefore be dealt with according to the needs and the context.
Given the current economic context, with banks dropping like flies, I think we should seriously consider decentralized #stablecoins that are not collateralized by money in the bank.
NO TRUST IN BANKS.
NO TRUST IN BANKS.
Summary :
1⃣ What is Liquity ?
2⃣ Advantages
3⃣ Borrowing
4⃣ Liquidations
5⃣ Stability Pool
6⃣ $LQTY and rewards
7⃣ Frontend
8⃣ Some metrics
9⃣ Disadvantages
1⃣ What is Liquity ?
2⃣ Advantages
3⃣ Borrowing
4⃣ Liquidations
5⃣ Stability Pool
6⃣ $LQTY and rewards
7⃣ Frontend
8⃣ Some metrics
9⃣ Disadvantages
1⃣
Liquity is a decentralized borrowing protocol that allows you to draw loans against $ETH used as collateral.
The Loans are the $LUSD which is a $USD pegged #stablecoin.
@LiquityProtocol as a protocol is non-custodial, immutable, and governance-free.
Liquity is a decentralized borrowing protocol that allows you to draw loans against $ETH used as collateral.
The Loans are the $LUSD which is a $USD pegged #stablecoin.
@LiquityProtocol as a protocol is non-custodial, immutable, and governance-free.
2⃣
Advantages :
- 0% interest rate: borrowers pay no borrowing fees
- A minimum collateral of 110% (value of $ETH deposited versus that borrowed)
- No governance
- Directly redeemable
- Fully decentralized
Advantages :
- 0% interest rate: borrowers pay no borrowing fees
- A minimum collateral of 110% (value of $ETH deposited versus that borrowed)
- No governance
- Directly redeemable
- Fully decentralized
3⃣
Borrowing $LUSD is very simple. All you have to do is deposit $ETH and then borrow $LUSD up to 90%. After that, a Trove is created.
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.
Borrowing $LUSD is very simple. All you have to do is deposit $ETH and then borrow $LUSD up to 90%. After that, a Trove is created.
A Trove is where you take out and maintain your loan. Each Trove is linked to an Ethereum address and each address can have just one Trove.
It's like Vaults on @TheDaoMaker.
To borrow, you pay a fee only once (between 0.5 and 5%) and then you no longer have to pay any fees.
To borrow, you pay a fee only once (between 0.5 and 5%) and then you no longer have to pay any fees.
4⃣
The level of collateralization must be maintained above 110%, otherwise you are liquidated.
The liquidation is total, all the collateral is returned to the Stability Pool.
The level of collateralization must be maintained above 110%, otherwise you are liquidated.
The liquidation is total, all the collateral is returned to the Stability Pool.
You can be liquidated if:
- The value of your collateral decreases ($ETH decreases)
- The value of your loan increases ($LUSD increases)
Since $LUSD is a stablecoin, you are more likely to lose your collateral, so watch $ETH.
- The value of your collateral decreases ($ETH decreases)
- The value of your loan increases ($LUSD increases)
Since $LUSD is a stablecoin, you are more likely to lose your collateral, so watch $ETH.
5⃣ Stability Pool
Since it is a completely decentralized protocol, you can also be on the other side and allow borrowing.
The Stability Pool is the first line of defense in maintaining system solvency.
Since it is a completely decentralized protocol, you can also be on the other side and allow borrowing.
The Stability Pool is the first line of defense in maintaining system solvency.
It achieves by acting as the source of liquidity to repay debt from liquidated Troves.
Ensuring that the total $LUSD supply always remains backed.
When liquidated, the debt of the Trove is canceled and absorbed by the Stability Pool and its collateral distributed to Providers.
Ensuring that the total $LUSD supply always remains backed.
When liquidated, the debt of the Trove is canceled and absorbed by the Stability Pool and its collateral distributed to Providers.
The owner of the Trove still keeps the full amount of $LUSD borrowed but loses ~10% which is absorbed by the Stability Pool.
The value of the Stability Pool is therefore supposed to increase over time, so the share you put in this Pool also increases.
The value of the Stability Pool is therefore supposed to increase over time, so the share you put in this Pool also increases.
6⃣ $LQTY and rewards
$LQTY is the secondary token issued by the Liquity protocol. It captures the fee revenue that is generated by the system and incentivizes early adopters and Frontend Operators.
$LQTY is the secondary token issued by the Liquity protocol. It captures the fee revenue that is generated by the system and incentivizes early adopters and Frontend Operators.
$LQTY is distributed to :
- Stability Pool suppliers
- Frontends creators
- Liquidity providers LUSD:ETH on Uniswap
$LQTY has a max supply of 100,000,000 tokens.
- Stability Pool suppliers
- Frontends creators
- Liquidity providers LUSD:ETH on Uniswap
$LQTY has a max supply of 100,000,000 tokens.
There is no governence so $LQTY is only an incentive to facilitate the interaction with the protocols and provide liquidity.
You can stake $LQTY to earn a pro rata share of the borrowing and redemption fees in $LUSD and $ETH. There is no lock-up period.
You can stake $LQTY to earn a pro rata share of the borrowing and redemption fees in $LUSD and $ETH. There is no lock-up period.
7⃣Frontend
Liquity is a set of smart contracts that allow the deployment of another set of smart contracts, they do not offer a Frontend.
Instead, they encourage setting up Frontends, the Frontend Operators.
Front Operators are rewarded in $LQTY based on frontend interaction.
Liquity is a set of smart contracts that allow the deployment of another set of smart contracts, they do not offer a Frontend.
Instead, they encourage setting up Frontends, the Frontend Operators.
Front Operators are rewarded in $LQTY based on frontend interaction.
8⃣ Metrics
Since the problem with $USDC and its depeg, $LQTY has seen its price multiplied by X2 in a few days.
Since the problem with $USDC and its depeg, $LQTY has seen its price multiplied by X2 in a few days.
We see that the number of Holders increases over time with a net increase since the $USDC problem.
This shows that it is a good alternative to centralized #stablecoins.
This shows that it is a good alternative to centralized #stablecoins.
9⃣ Inconvenients
The advantages of this stablecoin are many but for me there are 3 risks related to this stablecoin:
1- Scalability, as this stablecoin is only backed by $ETH this limits the number of $LUSD that can be minted. Especially if it is more profitable to stake $ETH
The advantages of this stablecoin are many but for me there are 3 risks related to this stablecoin:
1- Scalability, as this stablecoin is only backed by $ETH this limits the number of $LUSD that can be minted. Especially if it is more profitable to stake $ETH
2- Strong variation in the price of $ETH can destabilize the balance
- Risk related to the smart contract (attack)
- Risk related to the smart contract (attack)
I hope you enjoyed it, don't hesitate to let me know in the comments, without forgetting to like and RT the first tweet of the thread!
Be strong 💪
#Cryptocurency #USDC #LUSD #stablecoin #ETH #Tokenomics #blockchain #analytics #data #earning
Be strong 💪
#Cryptocurency #USDC #LUSD #stablecoin #ETH #Tokenomics #blockchain #analytics #data #earning
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