What is Liquity (LQTY) and How Does It Work in 2024?

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We understand your curiosity about the question “What is Liquity?” Rest assured, you’ll soon acquire the answer you seek.

This comprehensive guide will delve into Liquity and its underlying LQTY token, elucidating its purpose, technological workings, and evaluating its potential as a viable long-term investment.

Liquity is a decentralized borrowing protocol that facilitates interest-free loans using Ethereum as collateral. At the heart of the Liquity system are two tokens – LUSD, a USD-pegged stablecoin, and LQTY, the governance token.

In this article, we’ll take a deep dive into what Liquity is, how it works, and the purpose of the LQTY coin.

What is Liquity?

What Is Liquity Coin

LQTY is the native cryptocurrency of the Liquity protocol. It serves three main purposes within the ecosystem:

Governance: While Liquity is governed algorithmically rather than through voting, LQTY still governs parts of the protocol like fee amounts.

Incentives: Holding LQTY tokens allows users to earn rewards from protocol revenue. Tokens can be staked to earn a portion of borrowing/redemption fees.

Coordination: LQTY brings together all participants and coordinators their joint efforts. It allows the community to organize and take the protocol forward collectively.

How does Liquity (LQTY) work?

Now that we’ve obtained the answer to ‘What is Liquity?’ let’s delve into its functionality.

At the core of Liquity are two smart contracts – one for loans and one for the stablecoin LUSD. Here’s a brief overview of how it works:

  • Users deposit ETH as collateral into a “Trove”, which acts as a collateralized debt position (CDP).
  • They can then borrow LUSD stablecoins against their ETH, with the loan only requiring 110% collateralization.
  • If the value of a user’s ETH drops below the liquidation threshold, their Trove gets liquidated and the ETH collateral is used to repay the LUSD loan.
  • The stability of LUSD is maintained through an incentive mechanism called the “Stability Pool“. Users who deposit LUSD can earn rewards if troves are liquidated.
  • LQTY tokens are distributed as rewards to stability pool providers and other users who contribute to the protocol.

Does Liquity (LQTY) have a future?

What Is Liquity coin and future

Liquity shows great potential to be a dominant stablecoin and lending protocol going forward:

  • It offers significantly better borrowing terms than competitors like MakerDAO with 0% interest rates and a 110% collateral ratio.
  • LUSD has grown to $600M+ in circulating supply, demonstrating strong user growth.
  • As decentralized finance continues to expand, Liquity is well-positioned to gain more users and TVL (total value locked).
  • Continuous product improvements like Liquity v2 should help solve challenges around scalability and usability.

Provided it can overcome present limitations of Ethereum, many see Liquity becoming the top lending protocol in the long run. As that happens, LQTY will also rise in value as the token fueling this growing DeFi engine.

When Liquity (LQTY) launched?

Liquity launched on Ethereum mainnet in September 2020 after a successful bug bounty period.

The LQTY token also launched at this time, though some allocations like team/advisor tokens are released over time based on a vesting schedule.

Is Liquity (LQTY) a scam?

Liquity LQTY scam

Definitely not. Liquity is an open-source project built on Ethereum without a company or founders extracting profits. The protocol has stood the test of time since 2020 and funds are fully backed by real collateral.

Additionally, Liquity has a strong community of developers constantly auditing the code. So users can be confident it is not a scam.

Is it safe to invest in Liquity (LQTY)?

As with any cryptocurrency, there are risks involved with investing in LQTY. However, if you do your research and only invest what you can afford to lose, then it can be considered a reasonably safe investment:

  • The protocol has operated smoothly for over 3 years with no security breaches.
  • Funds are cryptographically secured in smart contracts without the risk of a bank run.
  • As DeFi continues to grow, Liquity’s prospects look promising due to its strong model and diverse use cases.
  • LQTY value depends on future success, but demand is backed by real utility unlike many speculative crypto assets.
  • Liquity appears to be one of the more substantively valuable DeFi projects. But as always, do your own research before investing.

Is Liquity (LQTY) worth it? LQTY Price 2024

Liquity LQTY coin price 2024

Only time will tell if LQTY proves a worthwhile investment, but there are positives suggesting it may appreciate in the mid-term:

  • As one of the few “blue chip” DeFi protocols, adoption should continue growing which pumps the price.
  • Product upgrades like Liquity v2 in 2023 aim to reduce gas costs and improve the user experience.
  • Mainnet launch of LQTY staking pool in late 2022 brings new revenue streams to bootstrap the tokenomics.
  • With continuous development, Liquity aims to capture a large portion of the growing decentralized lending market.

Given these potential catalysts, a mid-2024 price of $5-10 per LQTY token seems reasonable if usage increases as expected. But remember, cryptocurrency investing involves risk – do extensive research before committing funds.

And with EXEcrypto, you can track all crypto news at lightning speed, just like we explained the question “What is Liquity?”

Where to buy Liquity (LQTY)?

Some popular centralized and decentralized exchanges where LQTY can currently be purchased with fiat or other digital currencies include:

  • OKX
  • KuCoin
  • Binance
  • Uniswap
  • 1inch
  • Sushiswap
  • Balancer

When selecting an exchange, consider factors like fees, available payment methods and jurisdictions, user reviews, and overall exchange reputation and security protocols.

Hardware wallets are also recommended for safely storing LQTY tokens long-term.

How to sell Liquity (LQTY)?

The process for selling LQTY is largely the same as buying, just in reverse. Head to the exchange of your choice, go through any required identity verification, transfer your LQTY tokens to the exchange from your personal wallet, and place a sell order.

You can then choose to sell for a stablecoin, another cryptocurrency, or withdraw funds back to your linked bank account depending on the exchange’s payment options. Be aware of network traffic and exchange fees, both of which can eat into your proceeds.

How to stake Liquity (LQTY) coin?

Liquity LQTY token stake

Staking LQTY enables users to earn rewards from protocol revenues including borrowing fees and LUSD redemption fees. Here are the basic steps:

  • Deposit your LQTY tokens into the LQTY staking contract on Ethereum.
  • Staked tokens cannot be transferred or used for other activities.
  • Stakers earn a portion of borrowing fees proportional to their stake, distributed monthly in LUSD and ETH.
  • Rewards are automatically deposited into the staker’s wallet – no need to claim.
  • LQTY can be withdrawn from staking at any time, along with any accrued pending rewards.

Staking helps secure the Liquity network while generating additional yield for token holders. It’s one of the best ways to maximize returns from investing in LQTY.

How to mine Liquity (LQTY)?

It is not possible to directly mine Liquity tokens as all 100 million LQTY coins were created at genesis. However, new LQTY enters circulation over time as rewards for:

  • Providing stability to LUSD through LUSD deposits
  • Staking LQTY tokens
  • Facilitating LUSD deposits as frontend operators
  • Previously, liquidity provision on decentralized exchanges

Essentially LQTY is “mined” by supporting the protocol and earning reward distributions. But the total supply is fixed rather than being minted through computational mining as with protocols like Bitcoin.

We sought to address the query ‘What is Liquity?’ and accomplished our goal. Should you seek further insights beyond our article on the topic, feel free to comment or reach out to us.

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