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Edited by Samiksha at 26-12-2023 01:12 PM
Liquity is a decentralized protocol that allows ETH holders to gain maximum liquidity without paying interest. Users lock ETH in smart contracts as collateral and create a personal position called a "Trove." They can then obtain immediate liquidity by minting the stablecoin LUSD, which is pegged to the US dollar.
Each Trove must be collateralized at a minimum of 110%. Any LUSD holder can redeem LUSD for ETH at any time. The protocol ensures that the stablecoin's value remains at $1 through a redemption mechanism and algorithmically adjusted fees.
Liquity has several significant features compared to other overcollateralized stablecoins:
1. Liquity only supports $ETH as collateral and currently operates on the Ethereum network.
2. While Liquity's borrowing interest rates are variable, the borrowing costs (interest) are paid off in one lump sum when a user borrows.
3. Liquity operates independently, supported solely by algorithms and contracts. Once deployed, the protocol cannot be modified, and the development team has no authority to make changes. |
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Post time 23-10-2023 12:26:45
