MakerDAO, which allows Uniswap liquidity providers to borrow up to 90% of the value of their LP tokens in USDFL stable currency. Zero settlement risk for stable currency pairs and the ability to convert USDFL to Tether (USDT) or currency in USD (USDC) to increase its liquidity position at Uniswap, make Freeliquid an attractive alternative to Compound and Aave.
The problem of idle Uniswap LP tokens
The issue of using Uniswap LP tokens more efficiently has been on the radar of DeFi investors for a long time. The standard method is productive farming – depositing LPs in a smart contract to earn tokens. However, it was discredited after many agricultural tokens collapsed due to hyperinflation.
A much more sustainable way is use LP tokens as collateral to obtain loans for them. Some loan protocols have already implemented this feature, but to a limited extent. For example, Aave allows the use of only a few types of Uni V1 tokens, and the relationship between the loan and the value is low. Other platforms require a higher guarantee rating than that offered on Freeliquid or even involve a settlement risk.
Freeliquid: the first loan protocol to offer 90% LTV on stablecoins under warranty on Uniswap LPs
Freeliquid is a MakerDAO fork launched in December 2020, designed to maximize the capital efficiency of Uniswap LP tokens. The protocol was approved in an audit by Beosin Blockchain Security and has several important advantages over other loan protocols:
- The Loan-to-Value index reaches 90% when using Uniswap LP tokens as collateral (based on the value of the underlying assets blocked in Uniswap);
- All loans are issued on the platform’s native ERC-20 stablecoin USDFL, pegged to the United States dollar.
- No liquidation risk for pools of establishment provided as collateral. In fact, the settlement module has been completely turned off for these pairs.
- Supports LP tokens for pairs consisting of Dai, USDT, USDC and Neutrino USD (USDN) pools on Uniswap. More pairs can be added later through community voting.
- The borrowed USDFL can be used to add more liquidity to Uniswap to generate additional fee income.
- Alternatively, users can block their USDFL on Freeliquid Save to earn regular interest. No USDFL inflation will result.
Using repeated USDFL loans to maximize revenue on Uniswap
The most attractive feature of Freeliquid is the possibility of repeated crashes and loans. After a user borrows the USDFL through Freeliquid Borrow, he can convert it to USDT or USDC and lock it on Uniswap again. This will result in higher revenue thanks to liquidity provider fees – and more Uniswap LP tokens. These LP tokens can be added as a guarantee on Freeliquid to obtain a new loan in USDFL, for example – as many times as the user wishes. Each iteration will increase your revenue from trading fees on Uniswap.
In the spring of 2021, Freeliquid is planning to add support for Curve LP tokens, opening up the same opportunities for liquidity providers at Curve Finance, which currently has more than $ 4 billion blocked in its pools.
Distribution of FL governance tokens
In addition to the USDFL stablecoin, Freeliquid also has its own governance token, FL, with a total supply of 1 million. There was no initial offer of coins or private sales. The entire supply of FL is currently being distributed using a fair release model to all users who add liquidity to USDFL pools on Uniswap.
Why choose Freeliquid?
Although Freeliquid is not the first to accept Uniswap LPs as collateral, it is the first to offer a 90% LTV on these loans, along with zero settlement risk. The blocking and repeated borrowing feature is also an important advantage, which allows Uniswap liquidity providers to increase their fee income several times. To join the protocol and get a USDFL loan, visit https://freeliquid.io/.
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