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 flexibility to transform USDFL into Tether (USDT) or USD Coin (USDC) to extend one’s liquidity place on Uniswap make Freeliquid a pretty 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 buyers’ radar for a very long time. The usual methodology is yield farming — depositing LPs in a wise contract to earn tokens. Nonetheless, it has discredited itself after too many farming tokens collapsed as a consequence of hyperinflation.
A way more sustainable method is to use LP tokens as collateral to get loans for them. Some lending protocols have already applied this characteristic however in a restricted method. For example, Aave permits using just a few forms of Uni V1 tokens, and the Mortgage-to-Worth ratio is low. Different platforms require a better collateralization ratio than provided on Freeliquid or nonetheless entail a danger 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 (based mostly 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 the USA greenback.
- No danger of liquidation for stablecoin swimming pools supplied as collateral. In actual fact, the liquidation module has been utterly 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 might be added later by means of neighborhood voting.
- Borrowed USDFL can be utilized so as to add extra liquidity to Uniswap to generate further payment revenue.
- Alternatively, customers can lock their USDFL in Freeliquid Save to earn an everyday curiosity. No USDFL inflation will outcome from this.
Utilizing repeated USDFL borrowing to maximise revenue on Uniswap
Essentially the most engaging characteristic of Freeliquid is the potential of repeated locking and borrowing. As soon as a consumer borrows USDFL by means of Freeliquid Borrow, they will convert them into USDT or USDC and lock them on Uniswap once more. It will end in elevated revenue due to liquidity supplier charges — and extra Uniswap LP tokens. These LP tokens might be added as collateral on Freeliquid to get a brand new mortgage in USDFL, for instance — as many occasions because the consumer needs. Each iteration will enhance their buying and selling payment 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 present 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 present being distributed utilizing a Honest Launch mannequin to all of the customers who add liquidity to USDFL swimming pools on Uniswap.
Why select Freeliquid?
Whereas Freeliquid shouldn’t be 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 be an vital benefit, which permits Uniswap liquidity suppliers to extend their revenue from charges by a number of occasions. To affix the protocol and to get a mortgage in USDFL, go to https://freeliquid.io/.
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