An open source and non-custodial liquidity protocol for interest rate curves based on lender supply and borrower demand of the underlying Cardano native asset.
Each Cardano native asset that is accepted by the protocol has its own liquidity pool, a.k.a market. Each of these markets has its own interest rate, and this is determined by the supply of the underlying asset along with the borrowing demand for the asset. If borrowing demand is low, and supplied liquidity is high, then interest rates are low; and vice versa.
When an LP supplies an asset to a pool they receive interest-bearing qTokens that represent 1:1 the amount of liquidity they deposited into the market. As interest accumulates in the liquidity pool these qTokens become redeemable for an increasing amount of the underlying asset. LPs can withdraw their supplied assets at any time with no reliance on loan maturity dates, assuming enough liquidity exists.
Each market has its own minimum collateral ratio, and borrowers must post qTokens as collateral. It is the total value of a user’s underlying token balances multiplied by the collateral factor for their supplied assets (e.g. 75) that equals a user’s borrowing capacity and calculates how much they can borrow from the market.
The protocol automates liquidations through a Safety Pool implemented as a smart contract LQ holders stake in and during liquidation events are rewarded with a liquidation incentive; a discounted rate applied on the borrower’s collateral that is being seized by the protocol and paid to liquidators for repaying a portion of their underwater loan and securing the protocol from default risk.
Developers can use the Liqwid SDK to integrate their dApp’s native asset balances directly into a Liqwid market to earn interest, allowing them to monetize this balance as a source of additional return and continuous yields by holding the balance in interest-bearing qTokens.