Summary
Proposal to add gauge support for the pool WETH/LUSD/LQTY on Ethereum with a 10% emission cap.
- WETH 33.34%
- LUSD 33.33%
- LQTY 33.33%
References/Useful links:
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Protocol Description
Liquity is a decentralized borrowing protocol that allows you to draw 0% interest loans against Ether used as collateral. Loans are paid out in LUSD - a USD-pegged stablecoin and need to maintain a minimum collateral ratio of only 110%.
In addition to the collateral, the loans are secured by a Stability Pool containing LUSD and by fellow borrowers collectively acting as guarantors of last resort. User’s borrowing against their ETH use decentralized 3rd party front ends.
LUSD has proved its impeccable resilience in time by getting through severe market crashes untroubled.
LQTY is the secondary token issued by Liquity. It captures the fee revenue that is generated by the system.
Liquity is the only lending service available in DeFi that is unstoppable & likewise, LUSD is the only stablecoin capable of resisting all kinds of censorship. Liquity as a protocol is non-custodial, immutable, and governance-free. No person or group has any control over the protocol — it is “set in stone” in smart contract code and can never be changed.
Number 1 on DeFi Safety
Liquity is the DeFi product with the highest process quality in the space, according to DeFi Safety.
Motivation
To summarize, LUSD is the Liquity protocol stablecoin. It uses ETH only as collateral. And LQTY is the secondary token issued by Liquity, capturing the fee revenue. Furthermore, LQTY stakers earn ETH and LUSD as rewards. And LUSD Stability pool depositors that earn LQTY and ETH.
So there is already an established demand for the WETH/LUSD/LQTY pool. And even during the bear current market, the demand for Liquity has not diminished. On the contrary, since the mid-June market crash:
- $LUSD market cap went up from $150M to $185M (23%+ increase)
- Troves went up from 473 to 852 (80%+ increase)
- The number of $LQTY and $LUSD holders is also steadily growing in time
- Liquity is now no. 14 in TVL for DeFi protocols on Ethereum
There are two main reasons behind the growing demand. The first one is the recent events with collapsing centralized lending entities that have lost users’ funds and trust. An increasing number of them now choose Liquity, which offers no counterparty risk.
The recently introduced Chicken Bonds are the second main reason for the increased interest in Liquity. LUSD Chicken Bonds offer an amplified yield-earning and trading opportunity for LUSD holders while helping to reduce the stablecoin premium and improve its liquidity. It has attracted 50m+ TVL in its first 50 days.
In conclusion, the WETH/LUSD/LQTY pool should attract significant interest in the Balancer community. Besides, the recent release of LUSD Chicken Bonds further increased the demand for such a pool.
Specifications
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Governance: Liquity has no governance. It is built to maximize trustlessness and decentralization.
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Oracles: Chainlink is Liquity’s primary oracle. They are the largest player in the oracle space, have an excellent track record, are sufficiently decentralized, and are constantly improving their systems.
Tellor is Liquity’s secondary (fallback) oracle. They’re fully decentralized — price data is requested, with a “tip” attached — and miners compete to push accurate data and win the tip. Inaccurate data is disputed, and the threat of stake-slashing incentivizes honest price reporting
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Audits: Multiple security audits have been conducted by various auditors. All relevant documents are available in the documentation. Additionally, Liquity runs a bug bounty program with Hats Finance.
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Centralization vectors: There are no centralization vectors. Liquity is built to have maximized resilience.
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Market History: Over the last months, we have observed a premium on LUSD results from a structural unbalance between offer and demand. It was further aggravated by recent events leading more and more users to worry about the censorability of centralized stablecoins (like USDC or USDT) and decentralized stablecoins primarily backed by centralized ones (like DAI or FRAX).
The situation led to a considerable demand surge for censorship-resistant stablecoins that only LUSD can answer since there is no other alternative with a significant TVL. Thus, we have seen LUSD trading at a premium and slightly above the peg, partially caused by the increased demand for LUSD. Nevertheless, hard peg mechanisms are built into the system between $1 and $1.10, and soft peg incentives in between. Further, Chicken Bonds are already helping to reduce the stablecoin premium, and this effect will strengthen as the protocol grows.
You can check here the historical data of LUSD and LQTY
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Value: There is a proven in-time demand for WETH/LUSD/LQTY and the pool will be stable and beneficial for the Balancer community.
Link to the pool: https://app.balancer.fi/#/ethereum/pool/0x5512a4bbe7b3051f92324bacf25c02b9000c4a500001000000000000000003d7
The gauge was deployed using the capped gauge factory
Link to gauge w/10% emissions cap: 0x63E3951212cCCAFE3eDC7588FD4D20Ee5e7Ad73f