In the evolving Cardano decentralized finance (DeFi) space, there is no upper limit on innovation. With Liqwid v1 money markets and pooled lending, we introduced access to instant liquidity for ADA holders with perpetual loans for the first time on Cardano, moving the space beyond the rudimentary peer-2-peer model with loan requests and fixed terms that existed before. For Liqwid v2, the Core Team is developing an exciting set of new features designed to harness the full potential of Cardanoâs eUTxO accounting model, combined with state-of-the-art development tooling to deliver a seamless experience for lending and borrowing any Cardano native token.
Today, we are thrilled to share the full set of new features and infrastructure optimizations that make up v2. Liqwid v2 features will be released on mainnet once they are fully tested in a rolling release approach, with some already live (in-app liquidations, multi-loans). Join us as we build the future of Cardano DeFi and usher in a new era of open access to financial infrastructure thatâs capital efficient, permissionless, and secure.
A key part of Liqwid v2âs new features is achieving parity with the new risk control features implemented in Aave v3. These include: Borrow Caps, Supply Caps, Efficiency Mode and Isolation Mode. Aave v3 is the largest lending protocol in all of DeFi, with $2.4B in TVL. These new features introduced in Aave v3 are designed to better manage risk for lenders across global liquidity pools where risk is shared while supporting a broader range of assets as collateral. For Liqwid, this means that any Cardano DeFi or DAO native token can be supported as collateral in the protocol.
So what do each of these Liqwid v2 features enable?
Borrow Caps: Enables a maximum amount of an asset that can be borrowed based on its total supplies which reduces liquidity risk for suppliers. The ADA and stablecoin liquidity pools will have borrow caps of 80% and 90% respectively (in line with Aave v3 borrow cap settings). These caps help ensure certain markets donât become overutilized which could expose the suppliers to a liquidity risk, where they could not withdraw their deposits as these assets are borrowed.
Supply Caps: Enables a maximum amount of an asset that can be supplied to Liqwid. This works to limit the protocolâs exposure to an asset in a given liquidity pool, specifically new Cardano DeFi or DAO governance tokens supported as collateral assets. New liquidity pools for DeFi and DAO tokens will be configured based on the assetâs on-chain DEX liquidity, centralized exchange volume and market capitalization. The ADA market and liquidity pools for stablecoins will have disabled supply caps.
*Borrow and Supply caps are configurable via on-chain DAO votes and Liqwid community governance.
Efficiency Mode: Designed to optimize capital efficiency when collateral and borrowed assets are correlated in price. In practice, Aave v3âs Efficiency Mode or âeMode'' feature allows for a unique configuration of risk parameters (LTV [Loan-to-value], Liquidation threshold [Liquidation LTV], Liquidation penalty) for strongly correlated assets. The first application of eMode in Liqwid v2 will be for Optim Bond Tokens as collateral in the ADA market. The 1 and 3 month Bond Tokens in the ADA market will have Liquidation LTVs of 93% and 90% respectively. Thanks to Optimâs functional smart contract design, each Bond Token (BT) can be redeemed at face value (100 ADA) upon maturity. This allows for BTs to be priced at the value of 100 ADA in Liqwid, and gives BT holders access to over 14x leverage on 1 month BTs and 10x leverage on 3 month BTs. As BTs are not correlated in price to non-ADA markets, they will have lower Liquidation LTVs in all other markets.
Isolation Mode: Enables specific assets to be listed as collateral only to borrow selected assets. Combined with the supply and borrow caps, this allows the protocol to segregate its risks in a customizable manner. Cardano DeFi and DAO native tokens will be initially supported as isolated collateral in the ADA market with debt ceilings that can be configured via an on-chain vote.
In addition to the risk controls, new Liqwid v2 features and improvements include:
Off-chain rewrite and integration of Aqueduct: An off-chain rewrite that targets data querying optimizations for Liqwid and Agora by combining Lucid, Oura, DB Sync and Blockfrost, while deprecating our usage of CTL (Cardano Transaction Library), Ogmios and Kupo. Dubbed Aqueduct this new featureâs ultimate goal is making the app significantly more performant and accurate in real-time. The off-chain rewrite and Aqueduct implementation has already begun for Agora. As we see the rise of DEX aggregators on Cardano, our Core Team is excited to complete Aqueduct and begin working with developers to integrate our liquidity pools into upcoming Yield aggregators for Cardano DeFi users to easily lend and borrow at the most competitive rates.
Catalyst voting: Enables ADA suppliers to participate in Cardano governance using their staked LQ to vote on Catalyst proposals. A Catalyst selection team will be formed as a Liqwid subDAO group to build and implement a framework for voting on Catalyst proposals the Liqwid community supports.
Agora Safety Pool incentives for LQ staking: To contribute to the safety of the Liqwid protocol, LQ holders can deposit their tokens into the Agora Safety Pool. In return, they earn LQ tokens and a part of the interests paid by borrowers (Fee Switch).
Currently, ~20,000 ADA worth of ADA and stablecoins have been collected since the activation of the Safety Poolâs fee switch incentives in late July following a successful DAO vote. The Safety Poolâs fee switch incentives represent real yield programmatically distributed to LQ stakers from borrower interest fees. Updates to Liqwidâs off-chain and the SundaeSwap rewards distribution platform have been completed to enable this distribution, which is set to begin shortly. The DAO will decide through a governance vote to continue distributing multiple assets from interest revenue generated across liquidity pools or instead consolidate assets into ADA.
In-app liquidations: The latest addition to the Liqwid app enables any user to earn liquidation profits from repaying unhealthy loans directly on the Loans page in the app (https://app.liqwid.finance/loans). This new feature helps further secure the protocol from unhealthy positions, and democratizes access to earning liquidation profits from the initial set of technical liquidation bot operators to any user on the app.
Multi-loan: Allows users to create multiple loans with the same collateral(s) and borrowed asset combination (users can create loans with varying health factors for the same collateral(s)-borrow asset pair). In addition, users can create multiple loans for different borrowed assets using the same collateral type. The multi-loan feature allows for a more flexible borrowing experience in contrast with the default global collateral selection available to users on Aave. This feature is already live on mainnet.
Language translations: The Liqwid app will be translated into multiple languages for our diverse community of users to access in their native language.
Multiple UI updates are slated for v2 including:
-Calculating interest earned for each supplied asset and displaying it in the âYour suppliesâ section on the Dashboard.
-Calculating the liquidation price for single collateral loans and displaying it in the âYour borrowsâ section on the Dashboard and on the Loans page.
-Calculating the LQ staking APRs for fee switch and LQ staking rewards and displaying these on the Staking page.
-Adding more refined Liqwid Analytics data.
-Overall Liqwid website UI updates.
The future of lending and borrowing on Cardano is bright.
Liqwid v2 is about so much more than enabling a smoother UI or improved app performance; itâs about enhancing the protocolâs core lending and risk engines to better support the widespread adoption of Cardano DeFi by developers and end users. As the leading lending protocol on the Cardano network, our Core Team takes great pride in building a more powerful, more efficient, and more secure lending product in Liqwid v2.
Stay tuned for new feature release dates as part of our rolling release schedule.
Join our community as we embark on this journey to define the future of lending and borrowing on Cardano. Your Liqwid v2 experience starts here.
https://discord.gg/PZ3GUWamY8
-Liqwid Core Team