The Freeliquid Protocol
- Freeliquid is a new decentralized lending platform, which offers USD stablecoin loans for providing liquidity pools (e.g., from Uniswap) as collaterals.
- Users can lock their liquidity tokens on Freeliquid Borrow to immediately get funding up to 90% of the collateral while keeping the passive income from liquidity provider fees. The received funds can be for any purposes, for example, to create more liquidity pools or for trading.
- At the first stage, following liquidity pairs will be supported as collateral: USDT/USDC, USDT/DAI, USDT/USDN, USDC/DAI.
- There are two native tokens of the Freeliquid platform: the governance token $FL and the US dollar stablecoin $USDFL. Please make sure you always use the correct contract addresses for FL and USDFL!
- To prevent the centralization of voting power, all generated FL tokens will be distributed as rewards for using the platform and providing liquidity for native Freeliquid tokens. No tokens will be distributed to the team or early investors. There will be no ICO.
- Freeliquid is governed by the decentralized community of its users, which can create proposals and vote on them using FL tokens.
We are proud to announce that the launch of Freeliquid will take place on Monday, 21.12.2020. Freeliquid is a new decentralized lending platform, which provides financial instruments such as loans and savings program for every person, completely anonymous, and without the need of third parties. The platform will be accessible by simply connecting an ERC-20 compatible wallet to the interface at https://freeliquid.io/.
There are two native tokens of the Freeliquid Protocol: the governance token FL and the USDFL stablecoin, which utility is described in the subsequent chapters. New users should pay particular to the distribution program of FL tokens, which will take place in the first months after the platform’s launch.
This article gives a brief overview of the Freeliquid Protocol’s services and functionality. For a more detailed information about Freeliquid, please read the white paper or refer to our tutorial.
One of the unique features of Freeliquid is the ability to use liquidity pools as collaterals for borrowing USD stablecoins. This is unprecedented in the crypto industry, especially considering the attractive terms that Freeliquid is offering. Liquidity providers (“LP” for short) can lock their liquidity tokens on Freeliquid Borrow and receive up to 90% of the pool’s total value in USDFL — a native stablecoin of Freeliquid, soft-pegged to the US dollar.
The loan is paid out instantly and can be closed at any time by simply covering the outstanding amount of USDFL tokens. There is no due date before which users must return borrowed funds — the loans are issued for an unlimited period of time.
For a better illustration how liquidity providers can get an easy funding using Freeliquid Borrow, consider the following example from our white paper:
- Assume there is a liquidity provider (“the LP”) who has a USDT/USDC pool on Uniswap. The pool earns him a passive income in the form of liquidity provider fees.
- The LP’s position has the total value of both tokens locked. Let us take this value to be equal to $100,000 as an example.
- By using Freeliquid Borrow, the LP can lock his liquidity tokens as collateral and receive up to 90% of the pool’s total value in the USDFL stablecoin. In our example, that would be approx. 90,000 USDFL, which could be immediately issued for the borrower.
- Now, the LP can trade USDFL for stablecoins or any other tokens on decentralized exchanges. For example, he can get around $90,000 in USDC and use it for trading or any other purposes. In the end, the LP will still hold his liquidity pool, which, together with the obtained funds, make approximately $190,000 value in total.
- Alternatively, the LP can stake USDFL in Freeliquid Save program and earn an interest on his investment. In any scenario, the LP keeps his passive earnings from the original Uniswap pool, while receiving additional funds for further use.
Initially, Freeliquid Borrow will support liquidity pairs that consist of the following stablecoins: USDT/USDC, USDT/DAI, USDT/USDN, USDC/DAI. Since the volatility of stablecoins is extremely low, the liquidation mechanism for the respective pairs will be completely turned off.
Potentially, users will be charged an interest (‘Stability Fees’) on the loan. To facilitate the early growth of Freeliquid Borrow, the Stability Fees will be initially set to zero, which implies no costs of borrowing at all. The interest rate can be changed later through community voting to fund the Freeliquid savings program (see the next section).
The USDFL Savings Rate (USDFLSR) provides Freeliquid users an opportunity to lock USDFL tokens and receive passive income in the form of interest earnings. The profits are being constantly accrued to users’ balance and can be claimed for the whole past period at once. The USDFL tokens can be locked and unlocked in Savings Rate without any penalty, at any time.
The funds for paying the Savings Rate yields come from Stability Fees earnings of Freeliquid Borrow. Since Stability Fees are not charged at the early stage of Freeliquid, the Savings Rate will be initially set to zero as well. The interest rate of USDFLSR can be adjusted only after the community voting.
The developers of the Freeliquid Protocol firmly believe in the main principles of peer-to-peer networks, such as decentralization, anonymity, and relying on cryptography algorithms instead of trust. The governance of the Freeliquid Protocol will thus be carried out by the community through the on-chain voting by using the FL governance token. Every holder of FL tokens is eligible to submit and vote on proposals by sending his FLs to Freeliquid Governance. The tokens are returned to the holder after the vote is closed.
To prevent the centralization of FL tokens, and thus the voting power, the Freeliquid team has chosen to implement the Fair Launch model of the FL token distribution, which is presented in the next section.
FL token distribution
The Fair Launch model, as opposed to the initial coin offering (ICO), implies that the FL tokens will be distributed for free and proportional to the users’ involvement in the project. During the launch, there will be 1,000,000 (one million) FL tokens generated and gradually distributed through the following programs:
- Day 1 to 10, an allocation of 100,000 FL. In the first 10 days, 100,000 FL will be distributed to users that will lock their liquidity pools with any pair consisting of the following stablecoins: USDT, USDC, DAI, USDN. The rewards will be calculated based on the user’s share in the total value of assets locked on Freeliquid Borrow. Moreover, to prevent the accumulation of FL tokens by few large holders, the maximum overall investment value for every single wallet will be set to $50,000 during the first two days.
- Day 11 to 100, an allocation of 400,000 FL. To support the liquidity of the FL governance token, daily rewards will be distributed to users providing liquidity for the FL/USDFL token pair. Note that FL/USDFL pools can not be used as collaterals on Freeliquid Borrow. UPDATE 18.01.2021: After the first community vote, four more pairs have been added to the 2nd reward program: FL/USDT, FL/USDC, FL/DAI, FL/USDN. Moreover, these pairs (but not the FL/USDFL), receive an x2 boost to their locked pool value, resulting in a larger share. Please, read this article for more info.
- Day 11 to 381, an allocation of 450,000 FL. After the first 10 days and for the next 371 days, Freeliquid will reward liquidity providers for creating pools with USDFL pairs. Users will receive FL tokens in proportion to the value of their locked pools with USDFL in the token pair.
- Day 1 to 712, an allocation of 50,000 FL. Additionally, during the first 712 days, FL tokens are reserved to incentivize ‘transaction initiators’ to use Oracles for the price updates of the crypto assets used on Freeliquid (please refer to the Chapter 2.2 of the Freeliquid’s white paper for the details).
Freeliquid has been developed with a major aim to make liquidity pools work as a source of additional funds for its owners. As of December 2020, there are around 1.5 billion of total USD value locked in liquidity pools on Uniswap alone. Despite their holders enjoy earning fees, the funds in liquidity pools are frozen and can not be used for other purposes. Even if pools remain at the approximately same value in USD (as with stablecoin pairs), no platform so far has been accepting them as security for providing loans — until now.
With the launch of Freeliquid, liquidity providers receive an instrument that enables them to turn liquidity pools into a source of funds, allowing to re-invest the original assets multiple times.
The developer team has a lot of things planned for further growth of Freeliquid, including more collateral types and support of pools from other platforms like Curve Finance. As always, we will only propose those changes to the community governance and carefully implement them only if the vote succeeds.
We welcome everyone to join Freeliquid and enjoy the early users rewards. For any questions and suggestions, please feel free to contact us and our community via the links provided below.