Liqwid is an innovative, algorithmic, and non-custodial liquidity protocol designed to allow users to earn interest on their assets and borrow native Cardano assets. The protocol facilitates interactions with money markets implemented as smart contracts with pooled liquidity.
By supplying assets (thereby acting as a lender), users can call upon the market contract's to mint a type of Liquidity Token called qTokens. Alternatively, they can borrow against these supplied assets as Loan Collateral (thereby acting as a borrower) by invoking the borrow contract. The Liqwid DAO Token (LQ) grants users voting power in the protocol's decentralized governance, and when staked, serves as a reserve asset, generating dual yield for LQ stakers through liquidation profits and a percentage of total revenue.
As a lender, a user deposits assets into a Liqwid market contract, receiving qTokens in return that bear interest. These deposited assets, now available to borrowers, can be withdrawn by lenders at any time, provided sufficient liquidity is available.
On the other hand, a borrower can borrow assets from the protocol instantaneously if they have enough qToken collateral. Each asset has an established collateral factor — for example, ADA has a collateral factor of 80.9, meaning for every $100 worth of ADA supplied, users may borrow up to $80.90 in any asset from the protocol (for a maximum of over 5x leverage).
Notably, there is no maturity date for loans, and interest rates are adjusted each batching cycle based on supply and demand. Interest accrued from the borrowed amount adds to the principal balance, and to exit the market and reclaim the full collateral amount, the entire balance must be repaid.
Should a borrower's account liquidity turn negative before the loan is repaid, the system liquidates the loan and seizes the collateral, thereby protecting the Liqwid protocol from credit risks. Users also gain access to a global liquidity pool, offering the following advantages:
Liqwid is a non-custodial liquidity protocol built on Cardano’s Plutus smart contract language and eUTxO accounting model to deliver global liquidity pools for lending and borrowing Cardano tokens. The protocol has been live on mainnet since February 2, 2023.
The on-chain smart contract code completed a security audit conducted by independent third-party security researchers at Vacuumlabs prior to its mainnet launch. The full audit report is publicly available and can be accessed on Google Drive here.
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To leverage the Liqwid protocol, you initially supply your chosen Cardano native asset and specify the amount. Currently, only three markets - ADA, DJED, and SHEN - are supported on Liqwid's mainnet. Support for more Cardano native assets is forthcoming.
By supplying liquidity, you'll earn interest based on the market's borrowing demand. Moreover, supplying assets enables you to borrow by using your supplied assets as collateral. The interest you earn on your supplied assets reduces the interest rate you accrue on active loans.