Liquid Loans makes it possible for people in the crypto community to take out a 0% interest-free loan against their holdings. But the project is about so much more than that.
It also offers virtually anyone the ability to earn passive income while taking part in a community-led effort to benefit the decentralized landscape as a whole.
Here are six ways that you can make money with Liquid Loans.
One of the hallmarks of the Liquid Loans protocol is that the system state always overcollateralized, meaning there is more PLS value than USDL value at all times.
The Stability Pool is the first line of defense to ensure overcollateralization.
Holders of USDL are incentivized to be Stability Providers because they can earn yield in the form of PLS and LOAN.
When a user deposits USDL into the Stability Pool, they agree to allow the code to take a portion of their USDL and use it to pay off an undercollateralized vault.
Since the vault is liquidated under 110% but over 100% collateral ratio, the Stability Provider will earn more PLS value than the USDL value they lose.
Additionally, the Stability Providers earn LOAN token rewards. Importantly, the amount of LOAN tokens that Stability Providers receive is programmed to decrease over time. This is not dissimilar to Bitcoin’s halving process. It’s designed to incentivize and reward early adopters.
Another way to make money with Liquid Loans is to take part in the Staking Pool.
Anyone can earn passive income through this method by staking their LOAN tokens. These tokens can either be earned through the Stability Pool or purchased outright through various crypto exchanges.
In order to start staking, users simply deposit their desired amount of LOAN tokens into Liquid Loans’ transparent staking smart contract.
While you continue to stake, you will earn a pro rata share of all of the ecosystem’s borrowing and redemption fees. These rewards are calculated at the instant these fees are taken from other users, and are determined based on your stake in the network.
These rewards are then paid out in the form of both USDL and PLS, and users can withdraw their staked funds at any time.
Liquidity pools provide a crucial service to the decentralized community. In exchange for providing liquidity to these pools, users have the ability to earn passive income.
The act of liquidity providing is often referred to as yield farming. A great place to get started is through PulseX.
In order to start providing liquidity to a liquidity pool, you would need to temporarily deposit both assets in a trading pair. Some popular trading pairs that involve tokens from the Liquid Loans ecosystem include CST:USDL, LOAN:USDL, and PLS:LOAN.
When liquidity providing, you earn trading fees when people exchange tokens in the trading pair that you are providing liquidity for.
For the first 42 days of the network’s launch, Liquid Loans is offering a competitive way for participants to earn passive income.
By providing liquidity on PulseX for the USDL:PLS trading pair specifically, you will earn extra financial rewards.
These liquidity provider rewards arrive in the form of LOAN tokens, which are given to early adopters of the protocol who support the project in this way.
Through this offering, Liquid Loans is setting out to ensure widespread access to liquidity within the ecosystem.
As an algorithmic stablecoin, Liquid Loans uses a transparent and robust method of ensuring that USDL stays pegged at a 1:1 rate with the US dollar. In situations where its price slips, members of the community can easily earn money through a simple crypto arbitrage opportunity.
This is because USDL can instantly be redeemed for $1 USD worth of PLS at any given time.
If USDL were to trade at less than $1 on a market, users in the community could simply buy USDL and then redeem it for $1 worth of PLS.
This is a design feature of the Liquid Loans ecosystem, as the protocol has a built-in minimum collateral ratio of 110% and is redeemable for PulseChain (PLS) at any time.
As a result of this redemption mechanism, users can make money through arbitrage. At the same time, it ensures that USDL is able to maintain a hard peg with the value of the US dollar without having to rely on centralized assets or middlemen.
A sixth way to make money in the Liquid Loans ecosystem is to start data providing for Fetch.
Fetch is the name of the oracle that Liquid Loans uses. It allows the network to access off-chain data like price feeds without compromising its decentralization.
Users have the ability to report data to the Fetch oracle. In exchange for helping inform the network in this way, they are then paid tips for their service.
These tips are paid out in the form of Fetch’s native token.
This serves as an independent way for people to make money while still helping the Liquid Loans ecosystem.
With all of these money making methods being readily available to the community, one thing is clear: there is a lot more to do in the Liquid Loans ecosystem beyond accessing decentralized interest-free loans.
Regardless of the method that you use to earn income while taking part in Liquid Loans, you will be helping the network while doing so. The result is an ecosystem that is able to stay healthy and decentralized while paying people fairly for their contributions.
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Disclaimer:Please note that nothing on this website constitutes financial advice. Whilst every effort has been made to ensure that the information provided on this website is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we strongly recommend you consult a qualified professional who should take into account your specific investment objectives, financial situation and individual needs.
WaLLrus is the Global Head of Growth and Partnerships at Liquid Loans, and host of The Weigh In With Wallrus podcast series. He has been in the crypto space since 2015, and is widely recognized as a DeFi thought leader and strategist.