Key Terms From This Episode
0% Interest:
A key feature of Liquid Loans – there is no ongoing interest charge on your USDL debt. You only pay a one-time borrowing fee when opening your Vault.
Borrower:
Any user who locks ETH collateral in a Vault and mints USDL tokens. Borrowers are taking out 0% interest loans against their ETH holdings.
Collateral:
An asset pledged as security for a loan. In Liquid Loans, ETH serves as the collateral that backs USDL loans.
Decentralized Finance (DeFi):
A financial system built on blockchain technology that operates without intermediaries like banks. DeFi applications use smart contracts to provide financial services in a permissionless and transparent manner.
ETH (Ethereum):
The native cryptocurrency of the Ethereum blockchain, also used on Base and other Ethereum Layer 2 networks. In Liquid Loans, ETH serves as the collateral asset that backs USDL loans.
LOAN Token:
The secondary token of the Liquid Loans protocol. LOAN captures fee revenue from the system and can be staked to earn USDL and ETH from borrowing and redemption fees.
Over-collateralization:
A system where the value of collateral exceeds the value of debt. Liquid Loans requires at least 110% overcollateralization, meaning every $1 of USDL is backed by at least $1.10 worth of ETH.
Stability Provider:
A user who deposits USDL into the Stability Pool. Stability Providers earn ETH when liquidations occur and receive LOAN tokens as time-based rewards.
Timeless Repayment Schedule:
A unique feature of Liquid Loans – there are no deadlines for repaying your USDL loan. You can keep your Vault open indefinitely as long as you maintain the minimum collateral ratio.
USDL:
The native stablecoin of the Liquid Loans protocol. USDL is designed to maintain a 1:1 peg with the US dollar and is fully backed by overcollateralized ETH. USDL can always be redeemed for $1 worth of ETH.
Vault:
The core smart contract in Liquid Loans where you deposit ETH collateral and mint USDL. Each Base address can have one Vault, which you fully control.
The LL Librarian
Your Genius Liquid Loans Knowledge Assistant