Liqwid Fee-Switch Activated
LQ stakers now earn 10% of the protocol's revenue generated from borrower activity.
The Liqwid fee switch activation represents one of the most anticipated features in the protocol. In May 2023 a community-driven proposal was submitted to activate the Liqwid fee switch for each money market in the Liqwid v1 protocol. A temperature check passed and a Liqwid community on-chain governance proposal also passed voting.
The programmatic distribution of revenue generated from borrower activity to LQ stakers enables Liqwid users who receive LQ from protocol usage to earn another source of real yield from an additional revenue stream. This completes the fully native 6x yield streams available to ADA suppliers in the Liqwid protocol which are all live on mainnet: 1. ADA staking rewards via liquid staking, 2. ADA Supply APY, 3. LQ user incentives, 4. LQ staking rewards, 5. protocol revenue to LQ stakers (fee-switch), 6. Supply APY on assets earned from the fee-switch. Fully native means ADA suppliers can earn these 6x yield streams by utilizing only Liqwid protocol features: users who provide liquidity on DEX’s or utilize assets earned from the fee-switch distribution in other Cardano DeFi protocols can tap into additional yield streams.
The on-chain vote for the fee-switch launch was passed on May 20, 2023. The full proposal and vote can be seen here. At Liqwid v1 launch the income parameters were set to suppliers (80%), the DAO treasury (10%), and the market reserve (10%) across all markets, with no revenue accruing to LQ stakers via the fee-switch. With the proposal 7 vote passed and now the activation of the fee-switch the community has elected to redirect the 10% paid out to the DAO treasury to now accrue to LQ stakers. Important to note this does not affect Liqwid protocol suppliers at all: 80% of protocol revenue in each market is still paid out to the suppliers (qToken holders) in that market. Turning on the fee switch will also not affect the interest borrowers pay when using the protocol to open loans across markets. It will simply redirect the portion of what is currently being paid out to the Liqwid DAO Treasury to now accrue to LQ stakers.
The fee-switch distributions will be managed via the Liqwid rewards distribution app similar to how LQ staking rewards and user incentives are distributed currently. Regular interval distributions of the fee switch will be dispersed to LQ stakers starting with a monthly cadence, and moving to a weekly cadence as the process becomes more automated. In addition a revenue dashboard screen will be built into the app to display the accrual of protocol revenue in real-time for users to track.
The overwhelming community support and involvement leading up to the fee-switch activation signals a bright future for Liqwid community governance. This is truly just the start and we encourage more members of the Cardano and Liqwid ecosystems to begin participating in the governance process. Anyone can create a proposal for initiatives they think will benefit the Liqwid protocol and everyone is welcome to share their thoughts on the governance forum: https://gov.liqwid.finance/.
About Liqwid Finance
Liqwid is an algorithmic liquidity market protocol built on Cardano. Users can securely earn interest on deposits and borrow assets with ease while earning yield on ADA from liquid staking, interest and additional revenue streams.