{"id":30920,"date":"2022-01-25T08:47:15","date_gmt":"2022-01-25T08:47:15","guid":{"rendered":"https:\/\/makemoneyinlife.com\/?p=30920"},"modified":"2022-01-25T08:47:17","modified_gmt":"2022-01-25T08:47:17","slug":"4-important-facts-about-the-liqwid-token-whitepaper","status":"publish","type":"post","link":"https:\/\/makemoneyinlife.com\/4-important-facts-about-the-liqwid-token-whitepaper","title":{"rendered":"4 Important Facts about the Liqwid Token Whitepaper"},"content":{"rendered":"\n

Liqwid<\/a>\u00a0is a non-custodial and decentralized liquidity protocol for the Cardano platform. It will allow, like classic liquidity pools, creditors to lend their cryptocurrencies against interest, and borrowers to stock up on cryptocurrencies when they need them (often for trading).<\/p>\n\n\n\n

But Liqwid is a protocol that has several specifications, which we will go through together.<\/p>\n\n\n\n

The whitepaper is available here, for those who want all the details.<\/p>\n\n\n\n

<\/a>The Liqwid Protocol<\/strong><\/h2>\n\n\n\n

<\/a>Liqwid Application fields<\/strong><\/h3>\n\n\n\n

Liqwid defines its scope to native tokens of the Cardano platform. If one can not trade other platforms’ tokens on Liqwid, it’s more than likely that someone will one day play the game of token wrapping (such as wBTC on Ethereum, which represents Bitcoin with a ratio of 1 to 1). It is therefore not unlikely to see well-known tokens appear on the Liqwid platform after a while.<\/p>\n\n\n\n

<\/a>The qToken, liquidity pool token<\/strong><\/h3>\n\n\n\n

Liquidity providers will exchange their tokens for qTokens. These tokens work much like shares: you will receive them in proportion to what you send in the protocol.<\/p>\n\n\n\n

<\/a>The protocol generates profits over time (via borrowings and liquidations). You can exit the protocol by re-exchanging your qTokens. You will then get back what you put in the protocol, plus a fraction of the interest generated.<\/p>\n\n\n\n

<\/a>A loan with collateral<\/strong><\/h3>\n\n\n\n

As on other DeFI platforms, borrowers will need to inject collateral into the protocol to borrow. If the price of the collateral falls, you can sell some (or all) of it to ensure that the borrower remains solvent at all times.<\/p>\n\n\n\n

Accompanying the liquidation is a tax per protocol, to reward users, on the one hand, to remain solvent and to provide sufficient liquidity in the protocol, and to guarantee against the trading of Arbitrage (which seek to take advantage of momentary price divergences between price protocols).<\/p>\n\n\n\n

You can exchange collateral for qTokens, which will be exchangeable for other assets to be borrowed. Collaterals are not all created equal: some tokens are more volatile than others. Liqwid solves this problem with a collateral factor for each token, a number between 0 and 1, which will tell you how many qTokens you can receive by placing your token in the protocol. Tokens that have a low market cap (and therefore face a greater risk of illiquidity) will be subject to a lower collateral factor than more liquid tokens.<\/p>\n\n\n\n

<\/a>Liqwid\u2019s Custom interest rate<\/strong><\/h3>\n\n\n\n

If DeFI platforms provide a precisely calculated interest rate for each token, Liqwid goes further. Liqwid wants to consider the history of the borrower so that it can lower its cost of borrowing if it performs well (if it repays its loans well and avoids liquidations).<\/p>\n\n\n\n

As a bank would favor its good customers, Liqwid will reward good users with lower interest rates. This innovation could create a net competitive advantage for well-built DeFI projects based on Liqwid.<\/p>\n\n\n\n

<\/a>The actors of the Liqwid protocol<\/strong><\/h2>\n\n\n\n

There are 5 types of actors in the protocol:<\/p>\n\n\n\n