The new Ethereum-based stablecoin protocol, Liquity, would soon get <a href="https://www.liquity.org/" target="_blank" rel="noopener">introduced</a> in the market. According to its developer, Robert Lauko, the strategy used by the protocol for maintaining consistency with the US dollar would make the system more capital-efficient and less risky.

The creator of Liquity, Robert Lauko, who earlier was the blockchain researcher at Dfinity, is now the CEO of the new startup.
<h2>Liquity Issues Its Stablecoin LQTY</h2>
LQTY is the stablecoin of this protocol and while issuing it the borrowers would not have to deposit a huge amount of security as they do for the existing systems like MakerDAO.

The MakerDAO protocol allows consumers to use their security deposit, which is entitled to cryptocurrency, for taking out loans denominated in the US dollar-pegged stablecoins.

This protocol accepts ETH, BAT and wBTC as its collateral and requests its users to overcollateralize its stablecoin, DAI by 150 percent. In the case of USDC, the platform demands collateralization in 125 percent ratio. But if the value of the loan is collapsed and went below the required threshold, then it generates a liquidity process.

The security earned from the liquidated loan would then be sold at a minimum 3 percent discount in an auction to increase the value of DAI and also to cover the outstanding debt.

Maker’s even applies a 10 percent liquidation penalty to incentivize the debtors as it helps to maintain a healthy collateralization ratio.
<h2>LQTY Deposited In Stability Pool</h2>
Lauko believes that auction is not the option to increase the value of stablecoin as it takes too much time. During the mid-March crisis, these shortcomings of the protocols were highlighted.

While explaining the Liquity protocol, Lauko mentions that it is an automatic and instant liquidation process. During this process, the protocol would initially cover all the debts with the stability pool, a fund where LQTY can be deposited.

As soon as the loan is liquidated  LQTY tokens deposited in the pool could be burned for clearing the debts.

The users who would have deposited their tokens in stability pool would be rewarded with a portion of the collateral from the liquidated position.

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Former Blockchain Analyst At Dfnity To Launch Liquity

The new Ethereum-based stablecoin protocol, Liquity, which is being developed by Robert Lauko, would soon get introduced in the market.

Jyoti is a graduate from GGSIPU and has done her PG Diploma in English Journalism from IIMC. Presently, she is working as a content writer with Agio Support Solution Pvt. Ltd. Her aim is to provide informative content about cryptocurrency and blockchain, to the tech-enthusiasts.

Former Blockchain Analyst At Dfnity To Launch Liquity

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