Liquity can be defined as a decentralized borrowing protocol built on Ethereum, utilizing LQTY, a stablecoin pegged to the USD. Ethereum holders can take out loans in the form of LQTY with algorithmically adjusted borrowing fees.
What is Liquity (LQTY)?
Liquity offers a collateral-debt ratio of 110% against ETH collateral, with the loan itself being issued as the LUSD stablecoin. Compared to other DeFi lending platforms, the 110% ratio is considered relatively low because Liquity uses an “instant liquidation mechanism” to make capital flow more efficiently.
Liquidity providers (LPs) solidify Liquity lending by holding LUSD stablecoins and depositing them into Stability Pools. LPs also earn additional incentives through Liquity’s LQTY token.
Like other lending dApps, Liquity relies on the power of smart contracts to offer three key variations to traditional finance:
- No need for credit history or even identity verification, as all parties interact with self-regulating smart contracts.
- Smart contracts pool liquidity to make loans borrowable.
- Smart contracts automatically liquidate loan collateral.
So, where does the incentive come from if Liquity offers zero-interest loans? Typically, in lending dApps, liquidity providers lock their deposits in smart contracts for others to borrow. In return, they receive an annual percentage yield (APY), allowing projects to mimic the role of a bank.
This is where Liquity’s stablecoin LUSD comes into play. When borrowers want to take out a loan from Liquity, they need to deposit collateral in ETH, the native cryptocurrency of the Ethereum blockchain. This ETH collateral deposit is then exchanged for an LUSD stablecoin.
The incentive arises from a one-time fee paid by borrowers when this collateral is locked for the loan. Another source of incentive comes from Liquity’s LQTY token.
LQTY tokens are rewarded to Stability Pool liquidity providers to protect the system against debt liquidations. However, LQTY has other roles as well:
- Encouraging frontend operators to build web interfaces leveraging Liquity Protocol while using Liquity’s smart contracts.
- LQTY token holders can stake them without any lock-up period to earn a portion of the fees paid for lending and redeeming LUSD stablecoins.
Unlike most DeFi tokens, LQTY is a utility token. Typically, such tokens serve both governance and service roles. However, since governance tokens grant voting rights over the protocol and whales can hold most of them, the Liquity team chose not to add a governance function.
How to Buy LQTY Coin?
LQTY Coin can be purchased quickly and securely via Binance, the world’s largest cryptocurrency exchange platform by trading volume.
To buy LQTY Coin, you must first sign up for Binance and then transfer fiat currency. After transferring a fiat currency such as USD, you can execute a purchase in the LQTY trading pair with Bitcoin (BTC) or Tether (USDT).
Additionally, on Binance, users can place purchase orders not only at market value but also at lower values, allowing them to buy at their desired price. To do this, you need to use the Limit tab and enter the amount you want to buy and the price you want to pay.
