Liquity (LQTY) is a decentralised borrowing protocol that provides loans with no interest in exchange for ETH security. It strives to offer an accessible and more cheap alternative to conventional lending platforms, making it a desirable choice for both borrowers and lenders.
The development team behind Liquity set out to overcome some of the problems with conventional lending procedures when they established the platform. The high interest rates associated with borrowing against collateral was one of the key challenges they sought to address. Borrowers no longer pay interest because to a mechanism Liquity developed that employs a stability pool to support loans.
Liquity offers interest-free loans to users who submit collateral in the form of ETH in order to provide a decentralised alternative to conventional lending platforms. Users must mint Liquity stablecoins called LUSD, which can be used as collateral for loans, and deposit ETH into the system in order to borrow money.
Through the automatic liquidation of LUSD loans when the value of the underlying collateral drops below a predetermined level, Liquity's stability pool is intended to safeguard the system against under-collateralization. This guarantees that loans are always paid back and that the system remains financially stable.
For borrowers who may not be able to pay the high interest rates associated with typical lending platforms, Liquity's no-interest borrowing strategy makes it a desirable choice. Additionally, it gives lenders the chance to profit from their assets by adding to the stability pool.
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