MakerDAO that lets Uniswap liquidity suppliers borrow as much as 90% of their LP tokens’ worth in USDFL stablecoins. The zero dangers of liquidation for stablecoin pairs and the power to transform USDFL into Tether (USDT) or USD Coin (USDC) to extend one’s liquidity place on Uniswap make Freeliquid a beautiful different to Compound and Aave.
The issue of idle Uniswap LP tokens
The problem of utilizing Uniswap LP tokens extra effectively has been on DeFi traders’ radar for a very long time. The usual technique is yield farming — depositing LPs in a wise contract to earn tokens. Nevertheless, it has discredited itself after too many farming tokens collapsed on account of hyperinflation.
A way more sustainable approach is to use LP tokens as collateral to get loans for them. Some lending protocols have already carried out this characteristic however in a restricted approach. For example, Aave permits using only some sorts of Uni V1 tokens, and the Mortgage-to-Worth ratio is low. Different platforms require the next collateralization ratio than provided on Freeliquid or nonetheless entail a threat of liquidation.
Freeliquid: the primary lending protocol to supply 90% LTV in stablecoins on collateral in Uniswap LPs
Freeliquid is a MakerDAO fork launched in December 2020, designed to maximise the capital effectivity of Uniswap LP tokens. The protocol has efficiently handed an audit by Beosin Blockchain Safety and has a number of main benefits over different lending protocols:
- Mortgage-to-Worth ratio reaches 90% when utilizing Uniswap LP tokens as collateral (primarily based on the worth of the underlying property locked on Uniswap);
- All loans are issued within the platform’s native ERC-20 stablecoin USDFL, soft-pegged to america greenback.
- No threat of liquidation for stablecoin swimming pools supplied as collateral. In truth, the liquidation module has been fully switched off for these pairs.
- Helps LP tokens for pairs consisting of Dai, USDT, USDC and Neutrino USD (USDN) swimming pools on Uniswap. Extra pairs will be added later by means of neighborhood voting.
- Borrowed USDFL can be utilized so as to add extra liquidity to Uniswap to generate extra charge revenue.
- Alternatively, customers can lock their USDFL in Freeliquid Save to earn a daily curiosity. No USDFL inflation will consequence from this.
Utilizing repeated USDFL borrowing to maximise revenue on Uniswap
Essentially the most enticing characteristic of Freeliquid is the potential of repeated locking and borrowing. As soon as a consumer borrows USDFL by means of Freeliquid Borrow, they’ll convert them into USDT or USDC and lock them on Uniswap once more. This may lead to elevated revenue due to liquidity supplier charges — and extra Uniswap LP tokens. These LP tokens will be added as collateral on Freeliquid to get a brand new mortgage in USDFL, for instance — as many instances because the consumer needs. Each iteration will improve their buying and selling charge revenue on Uniswap.
Within the spring of 2021, Freeliquid is planning so as to add help for Curve LP tokens, opening up the identical alternatives for the liquidity suppliers on Curve Finance, which at the moment has over $4 billion locked in its swimming pools.
FL governance token distribution
Aside from the USDFL stablecoin, Freeliquid additionally has its personal governance token, FL, with a complete provide of 1 million. There was no preliminary coin providing or personal gross sales. The entire provide of FL is at the moment being distributed using a Fair Launch model to all of the customers who add liquidity to USDFL swimming pools on Uniswap.
Why select Freeliquid?
Whereas Freeliquid is just not the primary to simply accept Uniswap LPs as collateral, it’s the first to supply a 90% LTV on such loans along with zero dangers of liquidation. The repeated locking and borrowing characteristic can also be an necessary benefit, which permits Uniswap liquidity suppliers to extend their revenue from charges by a number of instances. To hitch the protocol and to get a mortgage in USDFL, go to https://freeliquid.io/.
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