Think of yourself as a trader who wants to trade in a safe platform with transparency. Centralised exchanges (CEXs) may be safe but they are not transparent at all. On the other hand, decentralised exchanges (DEXs) are very costly. You have to pay a lot of fees to make any of your swaps on a DEX. Other than the high fees there are two other problems.

One is that if you are using Uniswap you can only trade or swap on the Ethereum or another platform only. Meaning that the token you want to swap must be on the platform you are using and have enough liquidity for you to trade the token.

Another problem is that you may be a ForEx trader and you want to trade USDJPY or XAUUSD (gold) or other commodities or indices. Neither Uniswap nor any other DEX supports indices and commodities unless they have been tokenised on the platform the DEX is launched on. And even in this situation, there might be not enough liquidity for you to trade on.

Linear Finance has made another approach and we are going to discuss how Linear solves the problems above, and dive deeply into the project and study it from the fundamental aspect.

• Linear Finance is a project to solve some problems in the financial world, specially high fees and usability of the exchanges.

• This project consists of five main products: Buildr, Exchange, Swap, Vault, LinearDAO.

• Buildr is where you can change your LINA to ℓUSD.

• Exchange is where you can buy, sell and invest on Liquids (assets available for trading), with your ℓUSD. Liquids like ADA, BTC, BNB, ETH, DOT, Gold, EUR, etc.

• Swap is the place to change your LINA between Ethereum and BNB Smart Chain.

• In Vault you can put your LP-tokens and get some more profit for liquidity providing.

• And lastly, LinearDAO is the place to come to agreements about the future of Linear Finance.

• Many audits for the codes but not to assuring. I give the audits a grade of 1.5 :)).

• The team, investors, and partners are mainly grade 2 and they are not that top in my opinion.

• The tokenomics is designed so that most of the tokens are in vesting contracts and will be given as the staking rewards. In my opinion, it is well designed.

• No roadmap has been found for this project which is a very bad point about the project.

Linear Finance (“Linear”) is a non-custodial, cross-chain compatible, delta-one asset protocol. Linear’s long term DeFi vision is to increase inclusiveness and democratise access to investment assets (digital and traditional). Tremendous value exists in the ability for investors to easily and quickly invest, save fees, and secure assets at fair market value. Linear combines substantial technical experience from numerous cryptocurrency projects with extensive financial experience in exotic and structured assets from traditional global asset management firms to bring to market one of the first DeFi projects built upon Ethereum with cross-chain compatibility. Linear will allow users to build and manage spot or portfolio exposures with a slew of innovative digital and traditional financial products. Linear is backed by our Ethereum-based Linear Token (LINA) with synthetic assets built on other EVM compatible chains first and other prominent blockchains in the long run, making the staking, investing, and redemption process easier, quicker and with substantially lower transaction fees whilst maintaining access to the Ethereum DeFi ecosystem.

Linear is a non-custodial cross-chain compatible DeFi protocol with unlimited liquidity and serves in the creation of synthetic assets (Liquids) with zero slippage. The backbone to Linear’s protocol is our collateralised debt pool, backed by our Linear token (LINA), and eventually other digital and real world assets.

Before diving into the project, let’s watch a video together that was made by the Linear Finance team:

Users who have provided collateralised assets to the debt pool are able to “build” Linear USD (ℓUSD) which can then be used to purchase synthetic assets (Liquids) on our exchange. The collateralised assets are subsequently pooled to enable instantaneous liquidity and serve as a counter-party. LINA will also be a governance token enabling holders to vote on distribution models, assets to be listed, oracle selection, pledge ratio etc. LINA holders within the debt pool will obtain pro-rata fees from the building of Liquids.

Linear exchange is an exchange build on Linear Finance project. The exchange is the main product of the Linear and its base functionality is to make everything easier for the traders.

Users who have gone to Buildr and already changed their LINA token to ℓUSD, can go to the exchange and start trading paired with ℓUSD. The exchange has many synthetic assets including ℓADA, ℓBNB, ℓBTC, ℓDOT, ℓETH, ℓSOL, ℓEUR, ℓJPY, ℓXAU, etc. All of these assets are provided by Linear to trade in spot and perpetual future. In the perpetual future platform you can have leverage up to 10,000 times. As it is seen, some of these assets are from different blockchains and some are not even cryptocurrencies. All these synthetic assets are tied to the real asset’s price but no real asset is going to be the back of these synthetic assets.

The issue that Linear exchange is trying to solve is that, when Alice wants to switch her exposure from CAC 40 index to Bitcoin, it would take her approximately two days to get the proceeds from her brokerage account because of T+2 settlement time frame and another 1 to 2 days for the broker to direct a transaction to Alice’s bank account. Afterwards, it would be another couple of days for Alice to wire money from her bank account to a cryptocurrency exchange before she can finally switch her exposure into Bitcoin, ultimately exposing her to a potential negative price movement.

Linear exchange can seamlessly solve the issue with the debt pool concept and unlimited liquidity. Any Liquids settlement time frame can be lowered into seconds with the help of blockchain technology (as compared to T+2 in traditional securities). Linear is now working with selected public blockchains with EVM compatibility to further lower the settlement time frame with block times as low as few seconds and instant finality. In this case Linear can combine the best of the both worlds: the most sought-after tooling and infrastructure of Ethereum and the high TPS of other public blockchains. In addition, when creating Liquids, as it will be on the other blockchains, the transaction fees will be minimal, compared to the high gas fees of Ethereum. The front-running problem of some existing platforms can also be very much alleviated as the oracle will be able to refresh prices in a much higher frequency at much lower fees.

One important point to notice and keep in mind is that the exchange is running on the BNB Smart Chain. This decision have been made long ago before blockchains like Avalanche have been launched. Back then, BNB Smart Chain was the lowest fee and the fastest EVM-compatible blockchain live. So, all these synthetic assets are made on the BNB Smart Chain and are not backed with real assts.

For the best user experience, the Liquids exchange smart contract suites will be on the EVM-compatible partner blockchain. To trade on Linear.Exchange, the counter-party is different from that of traditional Centralised Exchanges (CEX) or any order book based Decentralised Exchanges (DEX) where a user trades against another user. Instead, users are trading directly with Linear’s smart contracts backed by a debt pool with the price provided by oracle providers to supply price feed of underlying assets.

Linear will support Liquids pairing with respect to ℓUSD and other large cap coins such as ℓBTC and ℓETH in the future. Depending on the base pair, it will be first burned into ℓUSD form and a transaction fee of 0.25% will be deducted from the proceeds before the conversion. The total supply of the newly built Liquids will then be updated.

Linear swap is a product to swap your LINA token between the Ethereum blockchain and the BNB Smart Chain blockchain. It works as a bridge for the LINA token.

Linear vault is the product of yield farming. Given the current DeFi environment and yield farming trend, they realise the importance of appealing to yield farmers upon the launch of the project in order to help bootstrap the debt pool and have users experience the usability and ease of our protocol. As such, they view this as a cost of user acquisition and upon the launch of Linear, in addition to the proposed token distributions, which will be front loaded in the first two years, users who fully utilise the exchange will have token bonuses, allowing them to yield a larger portion of the reward pool. Whilst the LINA token and ℓUSD are ERC-20 tokens, Liquids are EVM compatible and hence, they can all be deposited by users in third party pools such as Balancer, Uniswap, and Curve to facilitate yield stacking.

In addition, Linear will also be leveraging the use of token rewards to also incentivise users to help stabilise the debt pool in certain instances. When the debt pool becomes unbalanced in exposures e.g. if a large number of users create Liquids against gold (Long), they will provide users who counterbalance this trade by creating a Liquid short against gold with additional token rewards, ultimately reducing the volatility and increasing the safety of the debt pool.

In order to effectively solve the high transaction fee and oracle front-running problem of existing DeFis on Ethereum, Linear is adopting a cross-chain approach by supporting both the Ethereum and EVM-compatible blockchains. From a user’s perspective, he would only need to initialise both an Ethereum-based wallet and the EVM-compatible wallet. Operation-wise it would be exactly the same as handling the wallets separately, while Linear will help pegging the two wallets and record the pegging on smart contracts. By separating the smart contract suite of Linear into 2 different blockchains, the following benefits can be achieved:

• As LinearDAO and Linear tokens (ERC-20) are deployed on Ethereum, we are able to maximise the support from the DeFi community (which is the largest on Ethereum so far) and cross-DeFi partnership with other protocols.

• For Buildr and Exchange the smart contract logic will be deployed on the EVM-compatible blockchains. The entire Liquids building and trading will be nearly free from gas fee, which greatly improves the user experience.

• Since the block time of our partnering EVM-compatible blockchains are much lower than that of Ethereum and the transaction fee is almost minimised as compared to the Ethereum side, Linear enables users to build Liquids with a more prompt oracle price update, making the window for front-running much lower. As such, stakers' tokens can be better protected and there will also be less concern on the debt inflation.

• The entire process will be optimised and automated in the near future to reduce any potential friction when cross-chain smart contracts are called.

All assets are supported by the decentralised debt pool of LINA tokens and other major/stable cryptocurrencies. Hence holders of LINA (and/or other major/stable cryptocurrencies) can use their balances to build Liquids using Buildr.

In order to reduce the gas fee required and improve the time required for building Liquids, Linear makes use of the best of both Ethereum and partner chain networks. This means that there will be a cross-chain operation when LINA tokens are pledged to build Liquids, utilising smart contracts on both chains so that from a user perspective they will not notice the difference. The only extra requirement is for users to have a partner chain-based wallet which will be pegged to their Ethereum wallet so that when LINA tokens / other cryptocurrencies are swapped to the partner chain, the Liquids will be built on the partner chain. Once the Liquids are built, an user can perform seamless transactions and adjust his exposure freely with much lower fees and faster confirmation time due to the high performance of the EVM-compatible blockchains. Users can also perform cross-chain actions to convert Liquids back to Ethereum for cross-chain composability and use.

Linear’s collateralised debt pool is the backbone of its protocol and is backed by the Linear token, LINA. Users who stake LINA can use Linear Buildr to build debt, which may take the form of ℓUSD or any of our synthetic Liquids that are purchased on Linear Exchange ℓUSD is also used to purchase synthetic assets (Liquids) on Linear exchange!

All stakers using Linear that build ℓUSD become a part of the Linear Debt Pool which serves as the counterparty to traders on the Linear Exchange. As such, when users build debt on Linear, each user’s debt position needs to be overcollateralised. The pledge ratio, or the collateralisation ratio that determines how much ℓUSD debt a user can build, is currently set at 500%.

Pledge Ratio = (The value of Staked + Locked LINA) / (Value of a user’s Debt Balance)

In reality, the debt pool constantly fluctuates in value due to price changes in tracked assets or when users repay or incur more debt. As such, a user’s debt proportion also continuously changes, and users are incentivised to maintain their p-ratio to ensure the stability of the system.

Each user is responsible for covering his/her pro-rata share of the Linear Debt Pool after building debt. For example, if the total debt pool increases in value and assumes the user’s debt proportion remains constant, the user’s debt will increase in value but his p-ratio will decrease. However, users with a p-ratio below 500% will be unable to claim their weekly rewards or build ℓUSD even if they have debt that is eligible for rewards. Thus, users will need to burn ℓUSD to repay their debt or stake additional LINA to bring their p-ratio back to 500%.

Let have an example to make everything clear:

One of Linear’s users (Oscar) has used Buildr to stake his $1000 worth of LINA to build $200 worth of ℓUSD with a P-Ratio of 500%. Upon building his 200 ℓUSD, this amount is allocated into the Linear Debt pool and his Debt is 200 ℓUSD. At the time of building his ℓUSD, three other users, Jenny, Bob, and Vanessa are in the Linear Debt Pool with $400 USD worth of Liquid BTC (ℓBTC), $400 USD worth of Liquid ETH (ℓETH) and 5000 ℓUSD respectively. The total in Linear’s Debt Pool is $6000 USD [Oscar’s $200 ℓUSD + Jenny’s $400 ℓBTC + Bob’s $400 ℓETH + 5000 ℓUSD]. So, Oscar’s share of the Linear Debt pool is Oscar’s 200 ℓUSD / (Oscar’s $200 ℓUSD + $400 ℓBTC + $400 ℓETH + 5000ℓUSD) = 3.33%. Thus, Oscar is responsible for 3.33% of the total debt in the system.

Scenario 1. Let’s assume that the following day, BTC increases by 25%. Linear’s Debt Pool will increase to $6100 USD [Oscar’s $200 ℓUSD + Jenny’s ($400 x 125% = $500 ℓBTC) + Bob’s $400 ℓETH + Vanessa’s $5000 ℓUSD]. As Oscar is responsible for 3.33% of the total debt, his debt now owed will be $203.3 USD even though he only built $200 ℓUSD and his P-Ratio would now be 492% [$1000 LINA / $203.3 Debt].

Scenario 2. Let’s assume that the next day, BTC decreases by 50%. Linear’s Debt Pool will decrease to $5800 USD [Oscar’s $200 ℓUSD + Jenny’s ($400 x 50% = $200 ℓBTC) + Bob’s $400 ℓETH + Vanessa’s 5000 ℓUSD]. As Oscar is responsible for 3.33% of the total debt, his debt now owed will be $193.3 USD and his P-Ratio would now be 517% [$1000 LINA / $193.3 Debt]. At this point, Oscar can either repay all his debt ($193.3) and have 6.70 ℓUSD in profit to spend or simply build an additional 6.70 ℓUSD to get his P-Ratio back to 500%.

You can access to their codes through this link. And there is also an audit in CertiK for this project which is not complete and there are no scores for it. Also, SlowMist have audited their work many times which you can find them in this link.

Kevin Tai is the co-founder and former CEO of the Linear Finance. Since Linear has become a DAO, Kevin is now a DAO member. Mr. Tai has been the head of private debt APAC in Mirae asset global investment. He has also been the vice president of Credit Suisse and BNP Paribas.

He educated as an MBA student in Harvard Business School. He was educating in University of California as a Business Administration student.

Other team members of Linear Finance are not known and I don’t have any data of them.

Linear Finance has partnered with 3Commas, Band Protocol, BitMax, Ellipti, Hex Trust, Moonbeam, SlowMist, and many others which makes its partners to be only grade 2.

Linear Finance has some grade 1 investors like Alameda Research, Huobi Globel, NGC Ventures, Hashed, and some grade 2 investors like Kenetic, MoonRock Capital, Black Edge Capital.

There will be 10,000,000,000 LINA tokens created at Genesis. This will be allocated in the following ways.

Also the tokens will be allocated in 5 years like the image below:

LINA token will be used for the following matters:

• LINA as the Base Collateral with other Digital Asset Options

• LINA Staking Rewards

  • Pro-rata Exchange Fee

  • Inflationary Reward

  • Yield Farming Campaign

  • Pledge Ratio

  • The Linear Pool

LINA tokens are the base collateral to create Liquids using Buildr, which is a decentralised application for collateral pool and Liquids management. The creation of Liquids will require a pledge ratio which is over 100%, i.e. over-pledged. Over-pledging is necessary to ensure the volatility of the pledged assets do not adversely affect the stability of the entire system. In the long run, the pledge ratio can gradually be optimised and this will be determined by the community-driven LinearDAO.

Compared to other competitors which are testing to accept cryptocurrency such as Ether (ETH) as collateral, Linear protocol will take a hybrid approach instead. As such, Buildr will accept a mixture of LINA tokens and other digital assets as collateral. There will be a threshold on the size of non-LINA tokens to be accepted in order to stabilise the LINA token economy. The threshold is subject to community adjustment with the inception of the LinearDAO.

Incentives are provided to LINA stakers in the following ways:

Pro-rata exchange fee

Transaction fees are generated whenever a user exchanges one type of Liquid to another using our Linear.Exchange platform. The initial transaction fee is set to be 0.25%. Stakers will obtain such rewards (in ℓUSD) weekly on a pro-rata basis given that their Pledge Ratio (P ratio) is above the threshold. The non LINA-type collateral part of the staking (if any) is only partially entitled to such reward.

Inflationary reward

Linear adopts an inflationary tokenomics with a decreasing rate until a terminal floor is reached. They share the same vision as Ethereum in the sense that the imminent inflation reward is important for the explosive growth of the platform while the long term terminal rate should help stabilising the total LINA supply in circulation. Currently the starting inflation is set as 60% (of the tokens designated for staking) and the inflation going forward depends on the circulating supply and the expected growth of the exchange volume. There will be a yearly review in the format of LinearDAO.

Stakers will obtain such reward weekly on a pro-rata basis given that their P ratio is above the threshold. The non LINA-type collateral part of the staking (if any) is only partially entitled to such reward.

Yield farming campaign

Given the current DeFi environment and yield farming trend, they realize the importance of appealing to yield farmers upon the launch of the project in order to help bootstrap the debt pool and have users experience the usability and ease of their protocol. As such, they view this as a cost of user acquisition and upon the launch of Linear, in addition to the proposed token distributions, which will be front loaded in the first two years, users who fully utilise the exchange will have token bonuses, allowing them to yield a larger portion of the reward pool. Whilst our LINA token and ℓUSD are ERC-20 tokens, Liquids are EVM compatible and hence, they can all be deposited by users in third party pools such as Balancer, Uniswap, and Curve to facilitate yield stacking.

In addition, they will also be leveraging the use of token rewards to also incentivise users to help stabilise the debt pool in certain instances. When the debt pool becomes unbalanced in exposures e.g. if a large number of users create Liquids against gold (Long), they will provide users who counterbalance this trade by creating a Liquid short against gold with additional token rewards, ultimately reducing the volatility and increasing the safety of the debt pool.

Pledge ratio

The starting ratio is initially set at an optimal rate of 500% and will be subject for further review by the LinearDAO. The initially high P ratio is essential for the long term growth of the platform amid black swan or volatile incidents. The P ratio varies with the price variation of LINA token. If the P ratio of a staker rises, the user can choose to build more Liquids as long as the P ratio is not below the threshold. On the other hand, if the P ratio of a staker drops below the threshold, the user is required to stake more LINA or burn part of the Liquids until the ratio is at least on par with the threshold in order for him to claim pro-rata platform transaction fees.

The Linear pool

The existence of the Linear Pool is the key to the overall platform as it acts as “an decentralised counter-party” to all Liquids exchanges, thus generating unlimited liquidity for platform users. For LINA stakers, they incur a debt whenever using Buildr to create a Liquid. The debt value varies with respect to all the Liquids in the system. For example, if all the Liquids on the platform are synthetic gold (ℓXAU), the price fluctuation of gold is insignificant as gold price increases the corresponding debt value of each ℓXAU holder increases the same amount, or vice versa.

For a conclusion about this project, please take a look at the TL; DR section.

Think of yourself as a trader who wants to trade in a safe platform with transparency. Centralised exchanges (CEXs) may be safe but they are not transparent at all. On the other hand, decentralised exchanges (DEXs) are very costly. You have to pay a lot of fees to make any of your swaps on a DEX. Other than the high fees there are two other problems.

One is that if you are using Uniswap you can only trade or swap on the Ethereum or another platform only. Meaning that the token you want to swap must be on the platform you are using and have enough liquidity for you to trade the token.

Another problem is that you may be a ForEx trader and you want to trade USDJPY or XAUUSD (gold) or other commodities or indices. Neither Uniswap nor any other DEX supports indices and commodities unless they have been tokenised on the platform the DEX is launched on. And even in this situation, there might be not enough liquidity for you to trade on.

Linear Finance has made another approach and we are going to discuss how Linear solves the problems above, and dive deeply into the project and study it from the fundamental aspect.

• Linear Finance is a project to solve some problems in the financial world, specially high fees and usability of the exchanges.

• This project consists of five main products: Buildr, Exchange, Swap, Vault, LinearDAO.

• Buildr is where you can change your LINA to ℓUSD.

• Exchange is where you can buy, sell and invest on Liquids (assets available for trading), with your ℓUSD. Liquids like ADA, BTC, BNB, ETH, DOT, Gold, EUR, etc.

• Swap is the place to change your LINA between Ethereum and BNB Smart Chain.

• In Vault you can put your LP-tokens and get some more profit for liquidity providing.

• And lastly, LinearDAO is the place to come to agreements about the future of Linear Finance.

• Many audits for the codes but not to assuring. I give the audits a grade of 1.5 :)).

• The team, investors, and partners are mainly grade 2 and they are not that top in my opinion.

• The tokenomics is designed so that most of the tokens are in vesting contracts and will be given as the staking rewards. In my opinion, it is well designed.

• No roadmap has been found for this project which is a very bad point about the project.

Linear Finance (“Linear”) is a non-custodial, cross-chain compatible, delta-one asset protocol. Linear’s long term DeFi vision is to increase inclusiveness and democratise access to investment assets (digital and traditional). Tremendous value exists in the ability for investors to easily and quickly invest, save fees, and secure assets at fair market value. Linear combines substantial technical experience from numerous cryptocurrency projects with extensive financial experience in exotic and structured assets from traditional global asset management firms to bring to market one of the first DeFi projects built upon Ethereum with cross-chain compatibility. Linear will allow users to build and manage spot or portfolio exposures with a slew of innovative digital and traditional financial products. Linear is backed by our Ethereum-based Linear Token (LINA) with synthetic assets built on other EVM compatible chains first and other prominent blockchains in the long run, making the staking, investing, and redemption process easier, quicker and with substantially lower transaction fees whilst maintaining access to the Ethereum DeFi ecosystem.

Linear is a non-custodial cross-chain compatible DeFi protocol with unlimited liquidity and serves in the creation of synthetic assets (Liquids) with zero slippage. The backbone to Linear’s protocol is our collateralised debt pool, backed by our Linear token (LINA), and eventually other digital and real world assets.

Before diving into the project, let’s watch a video together that was made by the Linear Finance team:

Users who have provided collateralised assets to the debt pool are able to “build” Linear USD (ℓUSD) which can then be used to purchase synthetic assets (Liquids) on our exchange. The collateralised assets are subsequently pooled to enable instantaneous liquidity and serve as a counter-party. LINA will also be a governance token enabling holders to vote on distribution models, assets to be listed, oracle selection, pledge ratio etc. LINA holders within the debt pool will obtain pro-rata fees from the building of Liquids.

Linear exchange is an exchange build on Linear Finance project. The exchange is the main product of the Linear and its base functionality is to make everything easier for the traders.

Users who have gone to Buildr and already changed their LINA token to ℓUSD, can go to the exchange and start trading paired with ℓUSD. The exchange has many synthetic assets including ℓADA, ℓBNB, ℓBTC, ℓDOT, ℓETH, ℓSOL, ℓEUR, ℓJPY, ℓXAU, etc. All of these assets are provided by Linear to trade in spot and perpetual future. In the perpetual future platform you can have leverage up to 10,000 times. As it is seen, some of these assets are from different blockchains and some are not even cryptocurrencies. All these synthetic assets are tied to the real asset’s price but no real asset is going to be the back of these synthetic assets.

The issue that Linear exchange is trying to solve is that, when Alice wants to switch her exposure from CAC 40 index to Bitcoin, it would take her approximately two days to get the proceeds from her brokerage account because of T+2 settlement time frame and another 1 to 2 days for the broker to direct a transaction to Alice’s bank account. Afterwards, it would be another couple of days for Alice to wire money from her bank account to a cryptocurrency exchange before she can finally switch her exposure into Bitcoin, ultimately exposing her to a potential negative price movement.

Linear exchange can seamlessly solve the issue with the debt pool concept and unlimited liquidity. Any Liquids settlement time frame can be lowered into seconds with the help of blockchain technology (as compared to T+2 in traditional securities). Linear is now working with selected public blockchains with EVM compatibility to further lower the settlement time frame with block times as low as few seconds and instant finality. In this case Linear can combine the best of the both worlds: the most sought-after tooling and infrastructure of Ethereum and the high TPS of other public blockchains. In addition, when creating Liquids, as it will be on the other blockchains, the transaction fees will be minimal, compared to the high gas fees of Ethereum. The front-running problem of some existing platforms can also be very much alleviated as the oracle will be able to refresh prices in a much higher frequency at much lower fees.

One important point to notice and keep in mind is that the exchange is running on the BNB Smart Chain. This decision have been made long ago before blockchains like Avalanche have been launched. Back then, BNB Smart Chain was the lowest fee and the fastest EVM-compatible blockchain live. So, all these synthetic assets are made on the BNB Smart Chain and are not backed with real assts.

For the best user experience, the Liquids exchange smart contract suites will be on the EVM-compatible partner blockchain. To trade on Linear.Exchange, the counter-party is different from that of traditional Centralised Exchanges (CEX) or any order book based Decentralised Exchanges (DEX) where a user trades against another user. Instead, users are trading directly with Linear’s smart contracts backed by a debt pool with the price provided by oracle providers to supply price feed of underlying assets.

Linear will support Liquids pairing with respect to ℓUSD and other large cap coins such as ℓBTC and ℓETH in the future. Depending on the base pair, it will be first burned into ℓUSD form and a transaction fee of 0.25% will be deducted from the proceeds before the conversion. The total supply of the newly built Liquids will then be updated.

Linear swap is a product to swap your LINA token between the Ethereum blockchain and the BNB Smart Chain blockchain. It works as a bridge for the LINA token.

Linear vault is the product of yield farming. Given the current DeFi environment and yield farming trend, they realise the importance of appealing to yield farmers upon the launch of the project in order to help bootstrap the debt pool and have users experience the usability and ease of our protocol. As such, they view this as a cost of user acquisition and upon the launch of Linear, in addition to the proposed token distributions, which will be front loaded in the first two years, users who fully utilise the exchange will have token bonuses, allowing them to yield a larger portion of the reward pool. Whilst the LINA token and ℓUSD are ERC-20 tokens, Liquids are EVM compatible and hence, they can all be deposited by users in third party pools such as Balancer, Uniswap, and Curve to facilitate yield stacking.

In addition, Linear will also be leveraging the use of token rewards to also incentivise users to help stabilise the debt pool in certain instances. When the debt pool becomes unbalanced in exposures e.g. if a large number of users create Liquids against gold (Long), they will provide users who counterbalance this trade by creating a Liquid short against gold with additional token rewards, ultimately reducing the volatility and increasing the safety of the debt pool.

In order to effectively solve the high transaction fee and oracle front-running problem of existing DeFis on Ethereum, Linear is adopting a cross-chain approach by supporting both the Ethereum and EVM-compatible blockchains. From a user’s perspective, he would only need to initialise both an Ethereum-based wallet and the EVM-compatible wallet. Operation-wise it would be exactly the same as handling the wallets separately, while Linear will help pegging the two wallets and record the pegging on smart contracts. By separating the smart contract suite of Linear into 2 different blockchains, the following benefits can be achieved:

• As LinearDAO and Linear tokens (ERC-20) are deployed on Ethereum, we are able to maximise the support from the DeFi community (which is the largest on Ethereum so far) and cross-DeFi partnership with other protocols.

• For Buildr and Exchange the smart contract logic will be deployed on the EVM-compatible blockchains. The entire Liquids building and trading will be nearly free from gas fee, which greatly improves the user experience.

• Since the block time of our partnering EVM-compatible blockchains are much lower than that of Ethereum and the transaction fee is almost minimised as compared to the Ethereum side, Linear enables users to build Liquids with a more prompt oracle price update, making the window for front-running much lower. As such, stakers' tokens can be better protected and there will also be less concern on the debt inflation.

• The entire process will be optimised and automated in the near future to reduce any potential friction when cross-chain smart contracts are called.

All assets are supported by the decentralised debt pool of LINA tokens and other major/stable cryptocurrencies. Hence holders of LINA (and/or other major/stable cryptocurrencies) can use their balances to build Liquids using Buildr.

In order to reduce the gas fee required and improve the time required for building Liquids, Linear makes use of the best of both Ethereum and partner chain networks. This means that there will be a cross-chain operation when LINA tokens are pledged to build Liquids, utilising smart contracts on both chains so that from a user perspective they will not notice the difference. The only extra requirement is for users to have a partner chain-based wallet which will be pegged to their Ethereum wallet so that when LINA tokens / other cryptocurrencies are swapped to the partner chain, the Liquids will be built on the partner chain. Once the Liquids are built, an user can perform seamless transactions and adjust his exposure freely with much lower fees and faster confirmation time due to the high performance of the EVM-compatible blockchains. Users can also perform cross-chain actions to convert Liquids back to Ethereum for cross-chain composability and use.

Linear’s collateralised debt pool is the backbone of its protocol and is backed by the Linear token, LINA. Users who stake LINA can use Linear Buildr to build debt, which may take the form of ℓUSD or any of our synthetic Liquids that are purchased on Linear Exchange ℓUSD is also used to purchase synthetic assets (Liquids) on Linear exchange!

All stakers using Linear that build ℓUSD become a part of the Linear Debt Pool which serves as the counterparty to traders on the Linear Exchange. As such, when users build debt on Linear, each user’s debt position needs to be overcollateralised. The pledge ratio, or the collateralisation ratio that determines how much ℓUSD debt a user can build, is currently set at 500%.

Pledge Ratio = (The value of Staked + Locked LINA) / (Value of a user’s Debt Balance)

In reality, the debt pool constantly fluctuates in value due to price changes in tracked assets or when users repay or incur more debt. As such, a user’s debt proportion also continuously changes, and users are incentivised to maintain their p-ratio to ensure the stability of the system.

Each user is responsible for covering his/her pro-rata share of the Linear Debt Pool after building debt. For example, if the total debt pool increases in value and assumes the user’s debt proportion remains constant, the user’s debt will increase in value but his p-ratio will decrease. However, users with a p-ratio below 500% will be unable to claim their weekly rewards or build ℓUSD even if they have debt that is eligible for rewards. Thus, users will need to burn ℓUSD to repay their debt or stake additional LINA to bring their p-ratio back to 500%.

Let have an example to make everything clear:

One of Linear’s users (Oscar) has used Buildr to stake his $1000 worth of LINA to build $200 worth of ℓUSD with a P-Ratio of 500%. Upon building his 200 ℓUSD, this amount is allocated into the Linear Debt pool and his Debt is 200 ℓUSD. At the time of building his ℓUSD, three other users, Jenny, Bob, and Vanessa are in the Linear Debt Pool with $400 USD worth of Liquid BTC (ℓBTC), $400 USD worth of Liquid ETH (ℓETH) and 5000 ℓUSD respectively. The total in Linear’s Debt Pool is $6000 USD [Oscar’s $200 ℓUSD + Jenny’s $400 ℓBTC + Bob’s $400 ℓETH + 5000 ℓUSD]. So, Oscar’s share of the Linear Debt pool is Oscar’s 200 ℓUSD / (Oscar’s $200 ℓUSD + $400 ℓBTC + $400 ℓETH + 5000ℓUSD) = 3.33%. Thus, Oscar is responsible for 3.33% of the total debt in the system.

Scenario 1. Let’s assume that the following day, BTC increases by 25%. Linear’s Debt Pool will increase to $6100 USD [Oscar’s $200 ℓUSD + Jenny’s ($400 x 125% = $500 ℓBTC) + Bob’s $400 ℓETH + Vanessa’s $5000 ℓUSD]. As Oscar is responsible for 3.33% of the total debt, his debt now owed will be $203.3 USD even though he only built $200 ℓUSD and his P-Ratio would now be 492% [$1000 LINA / $203.3 Debt].

Scenario 2. Let’s assume that the next day, BTC decreases by 50%. Linear’s Debt Pool will decrease to $5800 USD [Oscar’s $200 ℓUSD + Jenny’s ($400 x 50% = $200 ℓBTC) + Bob’s $400 ℓETH + Vanessa’s 5000 ℓUSD]. As Oscar is responsible for 3.33% of the total debt, his debt now owed will be $193.3 USD and his P-Ratio would now be 517% [$1000 LINA / $193.3 Debt]. At this point, Oscar can either repay all his debt ($193.3) and have 6.70 ℓUSD in profit to spend or simply build an additional 6.70 ℓUSD to get his P-Ratio back to 500%.

You can access to their codes through this link. And there is also an audit in CertiK for this project which is not complete and there are no scores for it. Also, SlowMist have audited their work many times which you can find them in this link.

Kevin Tai is the co-founder and former CEO of the Linear Finance. Since Linear has become a DAO, Kevin is now a DAO member. Mr. Tai has been the head of private debt APAC in Mirae asset global investment. He has also been the vice president of Credit Suisse and BNP Paribas.

He educated as an MBA student in Harvard Business School. He was educating in University of California as a Business Administration student.

Other team members of Linear Finance are not known and I don’t have any data of them.

Linear Finance has partnered with 3Commas, Band Protocol, BitMax, Ellipti, Hex Trust, Moonbeam, SlowMist, and many others which makes its partners to be only grade 2.

Linear Finance has some grade 1 investors like Alameda Research, Huobi Globel, NGC Ventures, Hashed, and some grade 2 investors like Kenetic, MoonRock Capital, Black Edge Capital.

There will be 10,000,000,000 LINA tokens created at Genesis. This will be allocated in the following ways.

Also the tokens will be allocated in 5 years like the image below:

LINA token will be used for the following matters:

• LINA as the Base Collateral with other Digital Asset Options

• LINA Staking Rewards

  • Pro-rata Exchange Fee

  • Inflationary Reward

  • Yield Farming Campaign

  • Pledge Ratio

  • The Linear Pool

LINA tokens are the base collateral to create Liquids using Buildr, which is a decentralised application for collateral pool and Liquids management. The creation of Liquids will require a pledge ratio which is over 100%, i.e. over-pledged. Over-pledging is necessary to ensure the volatility of the pledged assets do not adversely affect the stability of the entire system. In the long run, the pledge ratio can gradually be optimised and this will be determined by the community-driven LinearDAO.

Compared to other competitors which are testing to accept cryptocurrency such as Ether (ETH) as collateral, Linear protocol will take a hybrid approach instead. As such, Buildr will accept a mixture of LINA tokens and other digital assets as collateral. There will be a threshold on the size of non-LINA tokens to be accepted in order to stabilise the LINA token economy. The threshold is subject to community adjustment with the inception of the LinearDAO.

Incentives are provided to LINA stakers in the following ways:

Pro-rata exchange fee

Transaction fees are generated whenever a user exchanges one type of Liquid to another using our Linear.Exchange platform. The initial transaction fee is set to be 0.25%. Stakers will obtain such rewards (in ℓUSD) weekly on a pro-rata basis given that their Pledge Ratio (P ratio) is above the threshold. The non LINA-type collateral part of the staking (if any) is only partially entitled to such reward.

Inflationary reward

Linear adopts an inflationary tokenomics with a decreasing rate until a terminal floor is reached. They share the same vision as Ethereum in the sense that the imminent inflation reward is important for the explosive growth of the platform while the long term terminal rate should help stabilising the total LINA supply in circulation. Currently the starting inflation is set as 60% (of the tokens designated for staking) and the inflation going forward depends on the circulating supply and the expected growth of the exchange volume. There will be a yearly review in the format of LinearDAO.

Stakers will obtain such reward weekly on a pro-rata basis given that their P ratio is above the threshold. The non LINA-type collateral part of the staking (if any) is only partially entitled to such reward.

Yield farming campaign

Given the current DeFi environment and yield farming trend, they realize the importance of appealing to yield farmers upon the launch of the project in order to help bootstrap the debt pool and have users experience the usability and ease of their protocol. As such, they view this as a cost of user acquisition and upon the launch of Linear, in addition to the proposed token distributions, which will be front loaded in the first two years, users who fully utilise the exchange will have token bonuses, allowing them to yield a larger portion of the reward pool. Whilst our LINA token and ℓUSD are ERC-20 tokens, Liquids are EVM compatible and hence, they can all be deposited by users in third party pools such as Balancer, Uniswap, and Curve to facilitate yield stacking.

In addition, they will also be leveraging the use of token rewards to also incentivise users to help stabilise the debt pool in certain instances. When the debt pool becomes unbalanced in exposures e.g. if a large number of users create Liquids against gold (Long), they will provide users who counterbalance this trade by creating a Liquid short against gold with additional token rewards, ultimately reducing the volatility and increasing the safety of the debt pool.

Pledge ratio

The starting ratio is initially set at an optimal rate of 500% and will be subject for further review by the LinearDAO. The initially high P ratio is essential for the long term growth of the platform amid black swan or volatile incidents. The P ratio varies with the price variation of LINA token. If the P ratio of a staker rises, the user can choose to build more Liquids as long as the P ratio is not below the threshold. On the other hand, if the P ratio of a staker drops below the threshold, the user is required to stake more LINA or burn part of the Liquids until the ratio is at least on par with the threshold in order for him to claim pro-rata platform transaction fees.

The Linear pool

The existence of the Linear Pool is the key to the overall platform as it acts as “an decentralised counter-party” to all Liquids exchanges, thus generating unlimited liquidity for platform users. For LINA stakers, they incur a debt whenever using Buildr to create a Liquid. The debt value varies with respect to all the Liquids in the system. For example, if all the Liquids on the platform are synthetic gold (ℓXAU), the price fluctuation of gold is insignificant as gold price increases the corresponding debt value of each ℓXAU holder increases the same amount, or vice versa.

For a conclusion about this project, please take a look at the TL; DR section.