Liquity is an interest-free, collateralized borrowing protocol and stablecoin with novel batched and instant liquidations. It is governance-free, completely immutable, and has a minimum collateral ratio of 110%.
Users lock ETH as collateral and issue the LUSD stablecoin against it, only paying a one-time borrowing fee. Their collateralized debt position is known as a “Trove”.
Any LUSD holder is free to deposit to the Stability Pool, where their LUSD will be used to soak up debt from liquidated troves. In return, LUSD depositors receive a share of the liquidated ETH collateral, and can expect a net gain as the value of liquidated collateral is nearly always greater than the debt.
The LUSD token is fully redeemable, and 1 LUSD may always be redeemed for $1 worth of ETH with the system at any time, subject to a redemption fee.
LQTY is the Liquity system token. It is issued continuously as a reward to Stability Pool depositors, and can be staked in order to earn a share of the borrowing and redemption fees.
How to use Liquity?
Users may access the Liquity protocol through any third-party front end. Liquity.org hosts a list of active front end operators. Front ends compete on UX, trust, and their chosen “kickback rate” which determines the fraction of LQTY rewards their depositors earn.
A user opens a Trove by depositing ETH collateral, and withdraws LUSD - they may then deposit their LUSD to earn LQTY and ETH over time, and stake their LQTY to earn a share of system fees.