Liquity USD (LUSD)

Borrowing

Liquity USD is mainly used as a stablecoin you can borrow by putting up Ether (ETH) or liquid staking tokens (LSTs) as collateral. This lets users get USD-pegged loans without paying interest, only a small one-time fee.

Stability Pool

Users can deposit Liquity USD into the Stability Pool, which helps keep the system stable by providing liquidity to cover liquidated loans. Depositors earn rewards in the protocol’s native token for supporting system solvency.

Staking and Rewards

Holders of Liquity USD-related tokens can stake them to earn protocol revenues and additional rewards, creating incentives to support the network and maintain liquidity.

Redemption

Liquity USD can be redeemed at any time for ETH at a 1:1 USD value, allowing users to convert their stablecoins back into collateral quickly and easily.

Use in DeFi

Liquity USD is integrated into other DeFi projects and Layer 2 solutions, enabling more complex financial activities like using it as collateral or for trading on platforms such as Optimism and Arbitrum.

Pros

• Liquity USD is a fully decentralized stablecoin pegged 1:1 to the US dollar, backed by Ethereum collateral.
• It offers interest-free loans with only a one-time borrowing fee, making borrowing cheaper compared to platforms with ongoing interest.
• The minimum collateral ratio is low at 110%, allowing more capital-efficient borrowing.
• The protocol is governed by immutable smart contracts with no admin keys, providing predictability and no risk of sudden rule changes.
• Users retain full control over their assets and borrowing costs, with the ability to fix and adjust fees.
• Liquity USD can be redeemed for ETH at face value, helping maintain its price peg.
• The system uses algorithmic fees and a Stability Pool to keep the stablecoin stable and secure.
• It supports multiple decentralized frontends, enhancing censorship resistance.
• The protocol has a record of no hacks and regular smart contract audits.

Cons

• The peg is maintained by algorithmic mechanisms and market incentives, which may not guarantee absolute price stability at all times.
• Liquidation can occur if the ETH collateral value falls below the required 110% ratio.
• The one-time borrowing fee can increase during periods of high demand or frequent withdrawals, potentially raising costs.
• Liquity USD’s market cap and trading volume are smaller compared to major stablecoins, which may affect liquidity.
• The system depends on external price oracles (like Chainlink) for ETH/USD price feeds, which introduces some reliance on third-party data.
• No traditional governance means users cannot vote on protocol changes, which may limit community influence.

For more details, visit the official website: https://www.liquity.org

Founders

Liquity USD was founded by Robert Lauko and Rick Pardoe.

Roles

Robert Lauko is the founder and Head of Research. Rick Pardoe is the co-founder and Lead Engineer.

Additional Team

Michael Svoboda is the current CEO of Liquity.

These founders have backgrounds in law, physics, economics, and computer science, contributing to the development of the Liquity protocol.

Investors in Liquity USD

• Venture Capital Firms: Pantera Capital is a notable lead investor in Liquity, participating in funding rounds including a $6 million Series A round.
• Angel Investors and Investment Groups: AngelDAO and other private investors have contributed to Liquity’s funding.
• Funding Rounds: Liquity has raised a total of about $8.4 million over two funding rounds.
• Founders: Robert Lauko (CEO) and Richard Pardoe are the founders and key figures behind Liquity.

These investors support Liquity’s decentralized borrowing protocol, which offers interest-free loans collateralized by Ethereum and issues the stablecoin Liquity USD (LUSD).

Halal Status

Yes, Liquity USD is generally considered halal because it is part of a decentralized protocol that offers interest-free loans backed by Ethereum collateral. This structure avoids interest (riba), which is a key factor in Islamic finance compliance.

Reasoning

The protocol’s design focuses on interest-free borrowing and over-collateralization, which aligns with halal principles by not involving interest payments or speculative elements commonly found in other financial products.

Summary

• Decentralized stablecoin pegged to USD
• Interest-free loans against ETH collateral
• No involvement of interest (riba)
• Over-collateralized and transparent system

For more details, you can visit the official Liquity website or trusted Islamic finance resources.