Liqwid x Optim
Liqwid Labs is thrilled to officially announce our latest collaboration with Optim Finance, builders of innovative yield products and aggregation infrastructure for Cardano DeFi. With Optim’s structured ADA staking products and upcoming yield aggregator strategies this team is building a suite of innovative DeFi products.
With Cardano’s approaching Hard Fork Combinator event, Optim Finance is well positioned to be one of the first protocols to take advantage of long awaited Vasil features, Plutus and ledger improvements. Furthermore, Optim’s Liquidity Bond product launching on mainnet soon is designed with incentives that lead to greater stake distribution levels, this benefits the entire Cardano ecosystem.
Liqwid Finance is a decentralized peer-to-pool lending and borrowing protocol on Cardano. Algorithmic money markets are critical infrastructure in every healthy blockchain ecosystem, our core team at Liqwid has been hard at work for the past year building this critical DeFi primitive to bring more powerful and complex capabilities on-chain. We are also the builders of Agora, an open source library of Plutus contracts that deliver on-chain governance features to power Cardano DAOs. Submit proposals (with programmable execution), vote, create community-managed DAO treasuries, stake, delegate voting power, use timelock on successful proposals or even transform a DeFi DAO into an insurance pool, all functionality Agora delivers to Cardano DAO developers today.
Supported Collateral Assets
Liqwid and Optim are working together to onboard Liquidity Bonds as collateral in Liqwid money markets. Users will be able to borrow against their active bond positions in the ADA lending market (represented on-chain as Bond Cardano Native Tokens, CNTs). This will enable greater capital efficiency in the Cardano DeFi ecosystem as well as greater liquidity for Optim’s Bond purchasers.
For Liqwid, Bond collateral will create stronger demand for ADA borrowing within the Liqwid protocol. Given that the collateral and borrowed assets are essentially the same, as all Bonds are always redeemable for 100 ADA face value, liquidation risks stemming from price movements are mitigated, although there is still interest rate risk.
Optim’s Liquidity Bond market is nearing completion and will soon be live on mainnet
Simply put, Liquidity Bonds allow for anyone to lend and borrow ADA staking rights. To learn more check out this Optim article.
It is important to note that all bonds, at their core, are the same. Every Bond Token has a face value of 100 ADA. Meaning every Bond Token can be redeemed for 100 ADA + accrued interest within a predefined time window in the future. The 100 ADA of each bond token represents the 100 ADA of staking rights that have been lent to a borrower.
Different ‘types’ of bonds — SPO, IBO, ISO, etc. — all simply refer to different borrowers (use cases) and the likely duration, interest type, and interest rate a lender will see from these borrowers.
At launch, SPO Liquidity Bonds will allow small Stake Pool Operators to borrow 1 million ADA of stake delegation to grow their pools. At the same time, anyone with at least 100 ADA can participate in these bonds as a lender, earning an interest on your ADA and being able to use the Bond Tokens obtained as collateral on Liqwid. This will enable consistent block production to provide competitive staking rewards and prove operational proficiency. This reduces barriers to organically growing delegation, a problem that has plagued the ecosystem with growing numbers of small stake pools retiring due to being unable to jump-start delegation.
Vaults
Optim’s vaults, their second product after liquidity bonds, can be leveraged to abstract away the complexity and reduce the barriers to entry for the average user in Cardano DeFi. Optim’s Strategy Vaults will allow users to subscribe to specific trading or yield accruing strategies to be executed by depositing their funds into respective vaults and letting the smart contracts automate interactions.
There are a number of Vault designs being explored for integration with Liqwid that will result in optimized yield for users and improved functionality of the Liqwid protocol. Vault strategies being explored include pooled capital used to benefit from performing loan liquidations on Liqwid (e.g. Keepers Vault) and using Liqwid Markets to obtain the highest returns for lending ADA or Stablecoins.
Agora Integration
We are also pleased to announce Optim Finance is exploring Agora for their on-chain governance requirements. We share the belief that DeFi protocols must allow their users to determine the direction and vision of the protocol using on-chain voting. The power of open source development is best observed by the level of Agora DAO infrastructure (especially wrt to off-chain code written by non-Liqwid Labs developers) that’s been built to supplement the on-chain codebase. When we started work on Agora we were focused on Liqwid specific features (e.g. timelock, economic parameter updates) but quickly realized many other DAO, DeFi and NFT communities on Cardano have similar on-chain governance needs to uphold human coordination rules. Thus the goals of Agora grew far beyond Liqwid, to enable all decentralized communities on Cardano self-sufficiently organize around project decisions (proposal voting process) with minimal human input and external resources required. With Agora being the current leader in DAO infrastructure, Optim is exploring it for adoption of its DAO needs.