Decentralized finance (DeFi) have become one of the defining sectors in the cryptocurrency industry in the last year. There is now more than $ 41 billion in total value locked on DeFi platforms, up from just over $ 600 million a year ago. Ethereum it still continues to dominate this market, but with Cardano now set to integrate smart contracts, this could change in 2021. Liqwid Finance is one of the most promising projects targeting DeFi in Cardano, and in a recent interview, the founder laid out what makes his project unique and why Cardano is superior to Ethereum in the power of DeFi.
Dewayne Cameron, the founder of Liqwid Finance joined Champaign Blockchain to delve into why your company has an advantage over its Ethereum-based rivals. He described Liqwid as an “open source liquidity system for making loans. We want to create a system that allows borrowers to enter at a very competitive interest rate because we have incentivized our supply of stablecoins, ADA and other native Cardano assets. "
Liqwid is made possible by the Alonzo hard fork in Cardano. This fork, which as reported Crypto report is scheduled for the end of April / May, it will finally bring smart contracts to Cardano.
Liqwid will provide suppliers with a positive return strategy with lower risk, Cameron said. With DeFi-on-Ethereum platforms like Aave and Compound, they first had to lock a large number of stablecoins on the chain and then match their competitive lending to this level of supply.
Why Cardano is better for DeFi than Ethereum
Ethereum has been extremely successful and is the reason why most cryptocurrency projects exist today. However, its inability to scale and very high transaction fees have drawn great criticism, even from its former founder Charles Hoskinson, who now runs Cardano.
Florian Volery, the Liqwid Finance product leader, pointed to fees as one of the project's advantages over Ethereum platforms. Cardano rates were observed to be 1/1000º Ethereum, making it the most suitable network for the DeFi-transaction intensive sector. Added:
Liqwid will be one of the first protocols to capture its own value and distribute the dividend to token holders, while also funding its own DAO (LiqwiDAO) to further develop the protocol itself and the wider ecosystem.
Cameron doubled down on the high fees charged by Ethereum, noting that it has made DeFi inaccessible to smaller investors.
Ethereum has been working to solve the gas challenge, but most solutions have yet to go mainstream. In its current state, getting a loan of $ 1,000 would be quite affordable on a DeFi platform, compared to traditional systems. However, the gas rates would be higher than the interest, which would make the loan much more expensive than it should be.
The LQ token
Liqwid will have a governance token, known as LQ, which will be used to determine the direction the project takes. Users can submit proposals or vote on the proposals of other users through their LQ tokens. They can also delegate their voting power to other users who can combine it with their own and have more voice in the governance of the platform.
The platform has been designed to incentivize the governance token by returning 80% of the profits to the token owners. A portion of the proceeds will also go to the Reserve, with the aim of developing the platform in the future. On what he hopes this fund can achieve in the future, Cameron stated:
A secondary product offering around identity and then the credit that follows shortly after that are things that interest us. Using DAO Treasury to fund some of those would be really cool.