April 19, 2021: Frax + Liquity Deep Dive 🤿🏊

Taking a swim in Curve's two newest pools

Let’s go swimming! Today we’ll take a deeper dive into the two newest Curve pools, Frax and Liquity. (BUSD also launched a v2 at the same time, so that’s old news).

Frax

Frax is a partially algorithmic stablepool. We took a deeper dive into Frax when it first was proposed, and we’re pleased to see it’s held its peg very nicely in the intervening time.

DeFi Dave🍦 @davesaidthat_

Name a tighter peg in crypto. Pro-tip. You can't. #FXSto100

As much as we’d like to quip about what may be tighter, we’ll keep this newsletter family friendly for any younger couches who may be reading.

We’ll instead note that in the past few months, we’ve observed several other “stablecoins” depegged.

CoinGecko @coingecko

7/ Now let’s talk about ALGORITHMIC STABLECOINS. Everyone loves algo... rrrriighttt? For real though, @terra_money ( $UST ), @fraxfinance ( $FRAX ), and @synthetix_io ( $sUSD ) are the known algo-stablecoins to successfully maintain their $1-peg. Others... 💸

Founder Sam Kazemian has posted lengthy and thoughtful Twitter threads on the subject of algorithmic stablecoins, including details on capital efficiency…

Sam Kazemian ¤ @samkazemian

A 🧵 on algorithmic stablecoins & capital efficiency A lot of algo stablecoin critics continue to feel vindicated when a new project feils. But skeptics misunderstand nuances in how the space is evolving. Let me tell you why your life will be ruled by algo stables soon 🙃

…as well as how Frax survived the recent downturn…

Sam Kazemian ¤ @samkazemian

🧵 on how well @fraxfinance has handled the huge crypto downturn so far. Important to note for algostables: Lindy effect is perhaps the most important secondary effect after the mechanism design itself. Lindy is a scarce resource that's earned through blood, sweat, and tears 👇

On Curve, the new Frax pool is off to a good start. Since launch it’s jumped to $14MM in reserves. With $114MM total value locked in Frax, that’s a fairly good chunk of total supply sitting on Curve, currently earning LPs a 4% APY at the moment.

Rob Gryn @Rob_Gryn

@defipulse @fraxfinance All roads lead to @fraxfinance 🙏🏼

Liquity

Liquity launched earlier in April and has already locked a whopping $2.5 Billion.

About $1B of this seems to have spilled over from the Tron universe

Igor Igamberdiev @FrankResearcher

.@justinsuntron trivially put about a $1B into @LiquityProtocol. Another $2B are in @Ellipsisfi on BSC. The rich get richer, right?

Whale Alert @whale_alert

🚨 🚨 🚨 🚨 🚨 🚨 🚨 🚨 🚨 🚨 440,000 #ETH (938,057,953 USD) transferred from unknown wallet to unknown wallet https://t.co/uiT8dLVCK7

So what is Liquity doing that got it so wet and wild?

At the moment, they lend LUSD for ETH with 0% interest (minus a one time borrowing fee). Accounts have a minimum collateral ratio of 110%, which allows for up to ~11x leverage on investments. Most borrowers are in the 150% - 250% range.

Liquity @LiquityProtocol

Safety first! Most borrowers are keeping their collateral ratios in a comfortable 150-250% range:

Liquity maintains a Stability Pool to cover liquidation events. In the event the stability pool falls short, then collateral and debt are distributed proportionally to active borrowers.

The system has been working to date. Their biggest problem until last week is that they needed that special Curve magic.

𝕯𝖆𝖓𝖌𝖊𝖗 @safetyth1rd

Liquity's current biggest adoption problem - besides "few understand" LUSD is currently in a Uniswap pool - terrible slippage. A Curve pool is currently being voted on, and makes much more sense. If you have CRV please help:

gov.curve.fisCIP#35 - Add a [LUSD, [3Pool]] MetapoolSummary: This proposal would see the addition of the [LUSD, [3Pool]] Metapool to the Curve UI. Abstract: LUSD is a fully decentralized stablecoin backed by ETH as collateral. It is generated when users open a Trove in the Liquity system and borrow against their ETH (akin to MakerDAO). All Trov…

Now that they have a shiny new Curve pool, though, it’s been surprisingly quiet. Just over $500K in reserves in the pool at the moment.

mariano.eth 🦇🔊 @nanexcool

@intocryptoast @cyounessi1 @PopcornKirby @LiquityProtocol Would like to see more liquidity on that Curve pool. Only 500k at the moment. Are you in Liquity Discord? Good discussions there

curve.fiCurve.fiCurve is an exchange liquidity pool on Ethereum designed for: extremely efficient stablecoin trading, low risk, supplemental fee income for liquidity providers, without an opportunity cost.

It’s not clear why it’s so sleepy at the moment, but the prospect of a gauge vote and $LQTY rewards could change things. This screenshot implies that CRV rewards are soon.

DefiMoon @DefiMoon

Keep your👀on the $LUSD Curve pool. If @LiquityProtocol decides to go with $LQTY rewards, very interesting things will begin to happen (No-interest LUSD minting with $ETH = LUSD on Curve🚀📈🌝 to farm LQTY + $CRV). Liquity also surpassed #Synthetix & #Bancor today in TVL@ $2.4b🤯

Cointelegraph @Cointelegraph

The Swiss-based ‘interest free’ borrowing protocol has attracted $1 billion in locked-up value since its launch on April 5. https://t.co/UA9zIfl5JU

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