Liquity Newsletter — May 2021

Hey everyone! Welcome to our monthly newsletter where we share updates regarding Liquity and our ecosystem on a regular cadence.

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Protocol Overview

Liquity’s second month live was quite the rollercoaster due to the “grey swan” event on 5/19, which led to ETH’s price dropping from ~$3,400 to ~$1,800 in a brief period. If you’re an active community member, this will be no surprise, but if you’re only loosely keeping up with Liquity — you’re in for some good news.

While the original cause of the price drop is unknown, what is known is that 5/19 was a massive deleveraging event that Liquity handled flawlessly:

As you can see in the chart above, the system quickly liquidated a number of Troves both under normal liquidation conditions and Recovery Mode conditions. All debt was made whole and all Stability Pool depositors were paid their ETH dues from the liquidated positions. While things went well, I won’t expand too much on the events of 5/19 since I’ve already done so in How Liquity Handled its First Big Stress Test.

Despite the events mentioned above, borrowers are starting to get more comfortable with market conditions and are continuing to borrow. Since 5/19, the LUSD supply has climbed from a monthly low of ~480M to ~733M. Meanwhile, the number of Troves has also grown from a monthly low of ~499 Troves to ~715 Troves. Heading into June, more LUSD has been minted than burned in the last week:

Last but not least, total protocol revenue passed $10M in May and has since climbed to >$12.3M:

Remember: All system revenue is generated from borrowing fees (paid in LUSD) and redemption fees (paid in ETH). That revenue is then passed on directly to LQTY stakers.

Integration Updates

AngelDAO launched Harp — a profit sharing Liquity frontend.
Proposal to add LUSD as a supported collateral currency to UMA Protocol was approved.
Fluity Finance forked Liquity on to Binance Smart Chain (BSC). LQTY holders shall receive 25% of the Fluity Token (FLTY) supply. Read our announcement / disclaimer about Fluity here.
Liquity is now supported on Token Terminal.
Pickle Finance launched a new LUSD Jar in collaboration with Yearn. Under the hood it uses the crvLUSD Yearn Vault and adds additional PICKLE rewards. More info here.
Users can now trade LUSD on Ethereum mobile-wallet Argent.
Liquity frontend, waterslide, is now running on DFINITY’s Internet Computer.
sCIP#39: Add a DAI/USDP/LUSD d3Pool passed the Curve governance signal vote. Next steps on launching the decentralized 3Pool are still TBD.
CIP-2: Gain revenue from Liquity’s Stability Pool Mechanism was proposed to Celer governance.

Content Updates

Founder Fireside Chat with Robert Lauko of Liquity: Robert participated in the DeFi Pulse series, Founder Fireside Chats, where he answered a few questions about Liquity and the crypto space more broadly.
AMA — Liquity & LUSD | Founder Robert Lauko: Robert joined the Bankless team for a live AMA. They discussed Liquity’s design, how it works, and more.
Our Network: Issue #72: I was a guest writer for Issue #72 of Our Network, where I covered Liquity’s growth since launch, revenue numbers, and Liquity’s performance on 5/19.
How to take out an interest free loan: I was a guest writer for the Bankless newsletter as well, where I wrote a tutorial on how to borrow using Liquity.
One of Liquity’s earliest investors, Tomahawk.VC, released a mini-series covering our launch. Watch episode 1 here and episode 2 here.
How Funds Flow in Liquity: Community moderator, Derrick, released a diagram illustrating how funds flow in Liquity’s Stability Pool and LQTY Staking Pool.
Derrick also wrote two tutorials this month: How to Earn Rewards using Curve Finance’s LUSD+3Pool and How to Earn Rewards using Yearn’s CrvLUSD Vault.
Liquity — LUSD — Explainer: DeFi content creator, Ceazor, created a beginner-friendly explainer describing Liquity and LUSD.

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