LQTY is the fee-capture token of Liquity, the immutable, governance-free borrowing protocol that lets users borrow LUSD (Liquity’s stablecoin) at 0% interest against ETH collateral. There are no recurring interest rates and no governance votes — the protocol operates by algorithms alone. LQTY stakers receive 100% of borrowing fees paid in ETH and redemption fees paid in LUSD, making it a straightforward claim on protocol revenue rather than a governance instrument. Liquity V1 is intentionally non-upgradeable.
| Stat | Value |
|---|---|
| Ticker | LQTY |
| Price | $0.29 |
| Market Cap | $28.16M |
| 24h Change | +2.8% |
| Circulating Supply | 98.67M LQTY |
| Max Supply | 100.00M LQTY |
| All-Time High | $146.94 |
| Contract (Ethereum) | 0x6dea...c54d |
| Contract (Arbitrum One) | 0xfb9e...1449 |
How It Works
Liquity has no interest rates. Instead, borrowers pay a one-time borrowing fee when they open a “Trove” (collateralized debt position):
Trove mechanics:
- Deposit ETH as collateral
- Borrow LUSD with a minimum 110% collateralization ratio (much lower than MakerDAO’s 150%)
- Pay a one-time fee (0.5%–5% depending on recent redemption activity)
- No annual interest — borrow for as long as you want at no cost beyond the initial fee
Redemption mechanism (LUSD stability):
- Anyone can redeem LUSD for ETH at face value ($1 of LUSD = $1 of ETH)
- Redemptions target the lowest-collateralized Troves first
- This creates an arbitrage floor: LUSD never trades far below $1 for long
Stability Pool:
- LUSD holders deposit into the Stability Pool to earn ETH from liquidations
- Stability Pool depositors also earn LQTY as an additional reward
LQTY staking:
- Stake LQTY to earn ETH (from borrowing fees) and LUSD (from redemption fees)
- No lock-up required — pure revenue sharing
Tokenomics
| Allocation | Amount | Notes |
|---|---|---|
| Community issuance (Stability Pool) | 32,000,000 LQTY | Distributed to Stability Pool depositors |
| Team | 23,333,334 LQTY | 4-year vesting |
| Liquity AG (company) | 23,333,334 LQTY | 4-year vesting |
| Investors/advisors | 11,111,111 LQTY | Vesting |
| Endowment | 10,222,221 LQTY | Long-term protocol funding |
Max supply: 100,000,000 LQTY (fixed, no inflation after initial distribution). LQTY is not governance — Liquity V1 has no governance mechanism at all.
Use Cases
- Fee revenue — LQTY stakers earn a share of all LUSD borrowing fees (paid in ETH) and LUSD redemption fees
- Stability Pool reward — LQTY is distributed to LUSD depositors in Liquity’s Stability Pool
- Speculation on Liquity activity — LQTY price reflects expectations of LUSD borrow/redemption volume
- DeFi primitive — LUSD, the stablecoin LQTY helps stabilize, is used across DeFi as a highly decentralized stablecoin alternative to USDC
History
- Apr 2021 — Liquity launches on Ethereum mainnet; rapidly attracts $1B+ TVL as ETH holders borrow LUSD interest-free
- 2021 — LUSD gains traction as one of the most decentralized stablecoins; only ETH as collateral, no admin keys
- 2022 — During Terra’s UST collapse, LUSD maintains its peg while algorithmic stablecoins fail; Liquity V1’s simplicity viewed favorably
- 2023 — Liquity publishes V2 design: multi-collateral support (including LSTs like stETH), user-set interest rates, remaining decentralized
- 2024 — Liquity V2 launches on Ethereum mainnet with bold (user-set) borrowing rates; V1 continues operating alongside it
Common Misconceptions
“LQTY gives governance power.” Liquity V1 has zero governance — no admin keys, no upgrades possible. LQTY is purely a fee-capture token, not a governance instrument. This is intentional design, not an oversight.
“110% collateral ratio is risky.” The 110% minimum is the liquidation threshold, not the recommended ratio. The redemption mechanism provides a second layer of LUSD price support independent of liquidations. In practice, most Troves maintain 200%+ collateral.