- Liquid Finance, with a scheduled launch date of June 2021, is an open-source liquidity lending system.
- Ethereum lacks the scalability and its added high transaction fees renders DeFi inaccessible to the smaller investors.
- Liquid will introduce its own governance token LQ, which will help determine the project’s performance
The past few years, Decentralized Finance (DeFi) has been one of the major defining sectors in the cryptocurrency industry. Presently, DeFi platforms have over $41 billion in total value locked (TVL) which is a startling increase from just over $600 million in the previous year. Ethereum has and still makes loads of contributions to the industry and thus dominates this market, however the recent announcement of Cardano to integrate smart contracts might prove to be a gamechanger.
Cardano in DeFi: Liqwid Finance
Cardano‘s first DeFi app Liqwid Finance is said to be one of their most promising projects. The founder of Liqwid Finance Dewayne Cameron, in his recent interview revealed his plans for his project and what makes Cardano superior to Ethereum in ruling DeFi.
As per Cameron’s description, Liquid is an open-source liquidity lending system, which supposedly will lend borrowers the amount at a competitive interest rate, ensuring the suppliers with a lower risk positive yield strategy. The Alonzo hard fork on Cardano, with a scheduled launch date same as Liqwid of June 2021, will initiate smart contracts on Cardano and thus make the DeFi project possible. On the other hand Ethereum DeFi platforms namely Aave and Compound, had to go through the whole process of first locking loads of stablecoins on-chain, and then get the competitive loans to match the level of supply.
Where did Ethereum go Wrong?
Ethereum, despite its great success rate and massive contributions in the crypto-verse, lacks the ability to scale; adding to that the high transaction fees, the platform has been rejected by many, including Charles Hoskinson, former founder of Ethereum, now leading Cardano.
How is Liqwid Finance Different?
The Liqwid Finance product lead Florian Volery, highlighted their reasonable charges, claiming Cardano’s fees is 1/1000th of Ethereum. He then added, Liqwid will be one of the first protocols that captures its own value and then distributes the dividend to the token holders, while also providing its own DAO (LiqwiDAO) to further develop the protocol itself. Cameron further argued that Ethereum’s expensive fees rendered DeFi inaccessible to the smaller investors.
Today, getting a $1,000 loan would be much easier on DeFi platforms than following the traditional approach; but the gas fees will cost much more than the loan itself. Not to mention Ethereum too has been looking for ways to solve the fee-issues, however any and all plans to eliminate such is still in its testing period.
Introducing LQ Tokens
Liquid will also introduce its own governance token LQ, which will help determine the project’s performance. Users get to make proposals or vote on others’ proposals or transfer their voting rights to others, all by means of their LQ tokens.
The DeFi platform is designed to incentivize the LQ by distributing 80% of the profit made, directly to the token owners. And to ensure the future development of the platform, a part of the income will go to the Reserve. Cameron foresees, in the near future, the DAO Treasury being used to fund a secondary product offering shortly followed by credit.
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