Liquity is a decentralized borrowing protocol offering interest-free liquidity against collateral in Ether. By utilizing a novel liquidation mechanism and leveraging an algorithmic monetary policy it can offer unprecedented benefits for borrowers.
Users can draw the stablecoin LUSD interest-free against their Ether used as collateral. They can thus obtain liquidity for free without any recurring costs.
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. Frontend operation is provided exclusively by third parties which make the system decentralized and resistant to censorship
Liquity protocol allows for an unprecedented minimum collateral ratio of 110%, which corresponds to a loan-to-value ratio of 90.09%. This makes borrowing highly capital efficient and allows for up to 11x leverage on investments.
Borrowers need to ensure that their collateral ratio does not fall below 110%, otherwise their positions (“Troves”) become vulnerable to liquidation. The protocol’s efficient, instantaneous liquidation mechanism allows for such a low collateralization ratio, while maintaining a high level of robustness.