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 various 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 technique is yield farming — depositing LPs in a wise contract to earn tokens. Nevertheless, it has discredited itself after too many farming tokens collapsed attributable to 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. As an illustration, Aave permits the usage of just a few varieties of Uni V1 tokens, and the Mortgage-to-Worth ratio is low. Different platforms require a better collateralization ratio than supplied 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 the US greenback.
- No threat of liquidation for stablecoin swimming pools offered as collateral. In reality, 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 may be added later by way of neighborhood voting.
- Borrowed USDFL can be utilized so as to add extra liquidity to Uniswap to generate further payment earnings.
- 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 earnings on Uniswap
Essentially the most engaging characteristic of Freeliquid is the potential for repeated locking and borrowing. As soon as a consumer borrows USDFL by way of Freeliquid Borrow, they will convert them into USDT or USDC and lock them on Uniswap once more. It will lead to elevated earnings because of liquidity supplier charges — and extra Uniswap LP tokens. These LP tokens may 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 payment earnings on Uniswap.
Within the spring of 2021, Freeliquid is planning so as to add assist for Curve LP tokens, opening up the identical alternatives for the liquidity suppliers on Curve Finance, which presently has over $4 billion locked in its swimming pools.
FL governance token distribution
Other than 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 non-public gross sales. The entire provide of FL is presently 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 isn’t 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 earnings 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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