🧵 Protocol of the Day: @LiquityProtocol
Liquity is a decentralized lending protocol that lets users mint LUSD, one of the most censorship-resistant stablecoins, by posting ETH as collateral with zero interest and minimal fees.
âś… Pros:
• Governance-free and fully immutable smart contracts eliminate upgrade risk
• LUSD is 100% backed by ETH, no custodial assets or off-chain dependencies
• Ultra capital-efficient with a low 110% collateralization ratio
• Interest-free borrowing model, only one-time fees charged
⚠️ Risks:
• ETH collateral – High volatility in ETH can trigger liquidations, especially near the 110% ratio
• Liquidation risk – Troves near the minimum ratio can be liquidated aggressively in volatile markets
• Stability pool exposure – Depositors risk losses if ETH price drops significantly post-liquidation
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