Liquity
Crypto Overview
Project Overview
Liquity is a decentralized borrowing protocol that allows users to draw interest-free loans against Ether (ETH) used as collateral. Loans are paid out in LUSD (a USD-pegged stablecoin) and need to maintain a minimum collateral ratio of 110%.
Intended Utility
The LQTY token serves as the protocol's governance and utility token. Token holders can stake LQTY to earn a share of protocol revenue, which comes from borrowing fees and liquidation revenue. The protocol generates revenue through one-time borrowing fees (0.5%) and liquidation fees (0.5%).
Actual Utility Assessment
The protocol demonstrates significant real-world adoption with over $400 million in Total Value Locked (TVL) as of 2024. The development activity is consistent, with regular updates and improvements to the protocol. The actual usage aligns well with its intended purpose, showing legitimate utility in decentralized finance.
Founder Enrichment Analysis
The token distribution shows a relatively fair model with no pre-mine for the team. The founders and early contributors received 32.5% of the supply, which is locked in a vesting schedule over 1 year. The project maintains a strong focus on development over marketing, with continuous technical improvements and security updates.
Technical Architecture
The protocol operates through smart contracts on the Ethereum blockchain. The system uses algorithmic monetary policy to maintain the LUSD peg and includes multiple stability mechanisms. The revenue model is based on protocol fees rather than interest, which is a significant consideration for Sharia compliance.
Crypto Impact
To assign a comfort level investing in Liquity from a halal perspective we need to determine whether it has a net positive or negative impact.
Towards this end, the table below is used to tally all the positive and negative considerations our members can think of related to Liquity.
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