June 16, 2022: Liquity Time ππ«
Liquity Stands Out Amidst Broad DeFi Success
Following this most recent bear crash, the absolute most brain dead take I can imagine is anything condemning DeFiβs performance. My biggest takeaway is the exact opposite: DeFi performed exceptionally.
Itβs only hardened my belief that DeFi is the future of France.
In contrast with DeFi, the troubles centralized exchanges faced in the recent cycle are abundantly clear. This was on full display among the centralized services knocking at deathβs door, including questionable use of customer funds, over-leveraging, and flexing the capability to suspend user withdrawals. Yet whatβs particularly frightening is that itβs not just a troubled few, all act this way to some degree. Itβs a race to the bottom.
The only rough edge in DeFi was a couple of bad apples. Fortunately these are generally avoidable if you heed the advice of reputable voices across the community.
Among the honest and upstanding DeFi protocols, everything worked like finely engineered clockwork. The 3AC drama of the past few days played out smoothly on the Aave framework, everything working exactly as intended. Few protocols, even startups, have yet to fold to my knowledge. Bribes have continued apace on Convex. All the stablecoins without questionable tokenomics kept their peg.
My hypothesis is that DeFi so clearly outperformed TradFi because blockchains have no capacity for fuzzy accounting. We all know old school companies lie in their books all the time. Governments too, and they also have outsized power to censor you if you call it out. On-chain though, when margin is calling you on the phone, you canβt let it ring.
So a big congratulations to all DeFi builders on the superb infrastructure youβve created. You deserve massive respect for engineering the base layer of a separate, resilient, and fully functional financial system. Ignore the microbrains moaning about falling TVL or prices in a global beraβ¦ youβre certainly GMI at this rate!
In particular, itβs a good time to highlight one particular stablecoin that never gets the attention it deserves, despite a now exemplary track record. Liquityβs $LUSD has now survived several enormous crypto crashes. The protocol should be considered among the top tier of decentralized stablecoins IMHO.
Despite multiple bear crashes, the worst $LUSD tends to do lately is trade occasionally above peg through the turbulence, as traders rush back into the coin to avoid getting liquidated.
This capability of trading above peg is a feature of some well-built lending-back coins.
$PUSD has also been taking notes and built out similar mechanics.
The traders who are able to stake $LUSD or Liquityβs $LQTY token into the protocol get a juicy cut of the action.
For those not familiar with Liquity, itβs an extremely decentralized stablecoin, to the point that they donβt even provide a frontend β they allow 3rd parties to make their own frontend and take a cut. After over a year, you still can lend ETH at a consistent 0% interest rate at a 110% collateral ratio, making it relatively friendlier for those who like to play with debt.
Of course, we canβt advise everybody play with debt β for users looking to avoid getting liquidated in a crunch, the $1.02 imbalance just drives up their fees β an uncomfortable form of surge pricing. Yet weβre not naive enough to expect debt speculators will simply disappear next bull run β we know degens gonna degen.
Liquity has done a great job integrating their token across the space, providing added utility for $LUSD holders. Theyβre in the process of getting listed at AAVE.
Theyβre a major component of Fei Protocol.
Theyβre also pursuing CRV whitelisting β though not for any wrapped token, but simply because their treasury is run by a Gnosis Safe and they want to vote in Curve governance. Based on the initial reception, it seems quite likely they will .
Congrats to Liquity, we look forward to celebrating your continued success!
Disclaimers! Of assets mentioned in the article, author only has exposure to $CRV and $MIM