Written by: Leah_Par and Joe_King

Type of Stable Coin: Over Collateralized

Who’s behind the project: Robert Laulo and Rick Pardoe; Co-founders, Liquidity Protocol

Liquidity USD is a token that is pegged to the U.S. Dollar, runs on the Ethereum blockchain and is issued by the Liquidity protocol.

Liquity, a decentralized protocol, allows holders to borrow or lend interest-free loans (meaning your debt does not increase over time), by staking Ethereum, which is used as collateral. These loans are usually paid in LUSD, with a collateral ratio of 110% minimum, that allows you to borrow 90% (maximum) of what you put in. So, say you put in 110 dollars worth of ETH, you can borrow 100 dollars worth of LUSD.

In their aim to ensure things remain decentralized and the project accessible, the Liquidity protocol incentivizes anyone who builds a website that interacts with their smart contracts in LQTY tokens. As an investor, you can easily mint your LUSD stablecoin with your Ethereum at any of these websites, for a minimal fee which is added to your debt, one time. This way, you get to benefit from some of the liquidity on the website you choose to use, while the website gets to take the lion share.

However, as a way to strongly protect LUSD token from Ethereum frequent price drops, LUSD tokens are deposited into the stability pool. With this, the value of LUSD is not in any way determined by Ethereum.

Reserve / Peg Mechanism:

Liquidity USD is a U.S Dollar pegged stablecoin, which means it is relatively equal in value to the worth of USD. This gives holders the privilege to participate in a secured and interest-free loan within the cryptosystem, and exchange LUSD tokens for other fiat currencies, including token pairs like USDT. Liquidity also utilizes a support mechanism which helps holders to mint LUSD at $1, at all times.

Pinotio.com regarded LUSD as the simpler version of DAI and an improvement on Maker DAO. A good number of the DAI issued are backed by USDC, which makes it vulnerable to Circle. But unlike DAI, LUSD is only collateralized by Ethereum, and nothing else, which makes it simpler. https://daistats.com/#/

Moreso, LUSD is not supported on many protocols, and this is as a result of its incentive mechanism. Instead, it has a higher percentage of stablecoin being circulated within its own system. This Is why its trading supply is less than that of some stablecoins. However, LUSD has a single day trading volume of $22,725.69 USD and a maximum supply of 52,680,000 LUSD coins, according to Coinmarketcap.

Where can I buy LUSD

You can trade LUSD with other currencies, including stablecoins and fiat currency on exchanges like:

• Uniswap V3

• Curve.fi

• AscendEX

• Polonlex

• Gemini

Where can it be used:

The LUSD system has the same specifications as the ERC-20 tokens, meaning they run under the same blockchain and security protocol — the Ethereum network.

Places to borrow or lend: just list the top 2–3 to borrow and lend (https://defirate.com/)

Although interaction with the project is usually made on third-parties frontends like B-Protocol, freely.finance, Liquity.App, zerion and others, you can only borrow or lend LUSD against Ethereum on Liquidity. With a one-time small fee, you can get the most liquidity for your Ethereum with an interest rate of 0%.

Closing Comments:

Although it is barely over a year since its debut, LUSD has shown to have the best mechanism amongst overcollateralized stablecoins. Its lending protocol, Liquidity, is neither controlled by anyone nor mutable, which makes it totally safe from manipulation, and most importantly, it guarantees a stable and secured interest-free loan for users.