Curvance x Liquity: Integrating LUSD in Curvance Testnet
Welcome to a new article in the Spotlight series, highlighting the individual integrations that Curvance will support during Testnet.
Each piece dives deeper into the significance of the integration and how it benefits the Curvance protocol.
Today, we’re pleased to announce an integration with Liquity, the protocol behind the pioneering decentralized stablecoin LUSD, which many other protocols have forked.
Through this integration, the Curvance protocol aims to strengthen the roster of yield-bearing assets supported to incentivize strong adoption after launch, making Curvance an all-encompassing protocol for users looking to maximize their cross-chain yields.
In this regard, the vision is to abstract away the complexity of the current yield landscape, which is increasingly fragmented, and provide a single place to manage yields seamlessly within DeFi.
Let’s now introduce the integration with Liquity, including practical details on how the integration will work: what Liquity users can expect from a Curvance integration and how Curvance’s users can harness the power of Liquity via LUSD.
The Significance of Curvance x Liquity
Liquity is a borrowing protocol that allows users to take interest-free decentralized loans against their ETH collateral. These loans need a minimum collateral of 110% and are paid out in LUSD, Liquity’s USD-pegged stablecoin.
Currently, there are 133m $LUSD tokens, with a TVL of over $850m of $ETH.
What Makes LUSD Different
The following characteristics of $LUSD make it different from its competitors:
- Immutable smart contracts: parameters around interest rates, collateralization, or collateral cannot be changed.
- Governance Free: as contracts are immutable, no governance model is in place for $LUSD.
- No interest charged: Liquity, as a protocol, does not charge an interest rate to borrow against your $ETH. Instead, they charge a dynamic fee between 0.5% and 5% for borrowing and collateral redemption (ensuring predictability and protocol stability).
- Collateral Options: Liquity users can only borrow using $ETH as collateral.
- Decentralized Collateral: The “automated monetary policy” implemented by the Liquity protocol ensures that it is not dependent on off-chain risks (e.g., by not using $USDC, Liquity was not affected by its depeg or possible censorship problems).
This makes $LUSD completely trustless and decentralized, without dependence on counterparties — not even a DAO.
On Liquity, liquidations work as follows: when the price of $ETH falls, the protocol liquidates loans by selling the $ETH collateral to a pool of $LUSD, which users deposit. This stability pool currently has over 51% of the total $LUSD deposited.
Within Liquity, there are two ways in which a user can generate yield:
- Earning protocol revenue from liquidations and additional $LQTY rewards by depositing $LUSD into the Stability Pool
- Earning $LUSD and $ETH generated from borrowing and redemption fees. This is done by staking $LQTY, the native revenue token, to the Liquity Protocol.
The particular aspect of Liquity is its relevance for real-life utility, as a trustless protocol where users can borrow against their yield for everyday purchases. This includes an example of a user in Guatemala managing to borrow assets with their ETH and buy a car using the Liquity protocol.
How will the integration work?
The LUSD stablecoin will be supported as a lending asset within Curvance.
All users will be able to:
-Deposit LUSD on Curvance and borrow assets.
-Deposit collateral and borrow LUSD.
-Loop LUSD for boosted yields.
This integration serves a dual purpose. On the one hand, it adds an additional layer of rewards and opens up new use cases for LUSD token holders. On the other hand, the Liquity protocol benefits from deeper liquidity for LUSD, which becomes more composable within the DeFi ecosystem.
Supporting Liquity assets for lending/borrowing allows users to leverage their assets and gives the community extra utility for their tokens.
This integration will be integral to the development roadmap, with more Liquity assets queued for integration post-mainnet deployment.
The modular Curvance protocol ensures an entirely customizable user experience according to specific risk profiles and preferences by showcasing a wide choice of assets.
All in one place, users can seamlessly experience the yield opportunities, which are usually sparse cross-chain, and deploy their capital across multiple networks with minimal clicks.
What’s next?
The integration of $LUSD into the protocol is another addition to Curvance’s suite of LST-backed collateral options, with more to be added soon.
Furthermore, integrating with Liquity is a unique opportunity to grow the utility of trustless stablecoins and contribute to decentralizing collateral across DeFi.
In the quest to provide the best user experience for navigating yields across DeFi, leveraging different forms of collateral allows Curvance users to have a much more comprehensive range of options for using their assets, all accessible from the Curvance front-end user interface.
You can expect more on integrations like this in the upcoming days,
Make sure to follow along and take part in the incentivized Testnet.
More information on the launch, Curvance, and Liquity can be found at:
Curvance
Twitter: https://twitter.com/Curvance
Discord: https://discord.gg/curvance
Website: https://www.curvance.com/
Docs: https://docs.curvance.com/
Liquity
Twitter: https://twitter.com/liquityprotocol
Discord: https://discord.com/invite/2up5U32
Website: https://www.liquity.org/
Docs: https://docs.liquity.org/
