Add $LQ market to the Liqwid Protocol

New Market listing : LQ token

Summary
This proposal aims to establish a new liquidity market to support the Liqwid token (LQ) on the Liqwid protocol, where this token will exclusively serve as collateral.

Project and Token Overview
The Liqwid protocol has been live since February 2023 and has established itself as the leading borrowing and lending protocol on Cardano. The Liqwid application has been battle-tested through various high volatility market movements, and the team has consistently delivered over time.

LQ token is a Cardano native token and is traded across DEX platforms and Bitrue (CEX).

Market Reasoning
The LQ token is listed on various DEX in addition of Bitrue (CEX), and numerous external parties engage in arbitrage between these platforms. This suggests that in the event LQ tokens are sold on a DEX as part of a liquidation process following a defaulting loan where LQ serves as collateral, we are confident that liquidators would encounter sufficient liquidity and experience low slippage due to these arbitrageurs. Therefore, we propose to add the LQ token as eligible collateral on Liqwid.

Risk Considerations
The Liqwid project leverages the entire Cardano ecosystem, with trade volume depending on the number of quality tokens available. As the Cardano ecosystem grows, it generates more interest and increases the value of LQ tokens.

Given that the Cardano ecosystem is still in its infancy, a conservative approach has been taken regarding the maximum authorized collateral factor.

We acknowledge that the deployment and approval of this proposal are contingent upon creating a Protocol-Owned Liquidity (POL) position before listing the LQ token on Liqwid.

Suggested Market Parameters
The proposed LQ token risk parameters are:

  • Collateral factor (maxLTV): 39.95%
  • Liquidation threshold: 40%
  • Liquidation discount: 15%

The supply cap for LQ will be set to $2.00M and a corresponding number of tokens will be calculated at the Liqwid’s listing date to match this value. LQ token borrow cap will be set to 0% of the total LQ supplied, forbidding any borrowing.
The LQ tokens would be used as collateral to borrow any assets of the Liqwid protocol.

Specifications
Liqwid Labs developers have already fulfilled the technical requirements for listing any tokens. Following this assessment, the team will proceed with the preparation work for listing LQ, which includes: 1) testing the proposed interest rate model, 2) finalizing off-chain updates to support loans with multiple collateral assets, and 3) configuring the oracle price feed.

Conclusion
The Core Team recommends the adoption of this proposal and to add LQ as collateral only on Liqwid with the proposed market parameters.

Do you support the listing of the LQ token with the proposed parameters?

  • Yes, I support the listing of LQ token.
  • No, I do not support the listing of LQ token.
0 voters

This is a good starting point for a LQ market. :+1:

1 Like

Would this proposal allow ‘staked LQ’ to be used as collateral ?

No, it won’t be available.