Liqwid Finance moving closer to challenging Aave and Compound, but on Cardano

  • Liqwid Finance has been building its Cardano-based platform in recent months, seeking to provide an alternative to the expensive lending platforms built on Ethereum such as Aave and Compound.
  • The platform is betting on the very low fees on Cardano and a rethink of the protocol governance – including an incentivized native governance token – to lure users from the Ethereum ecosystem.

Decentralized finance (DeFi) has become one of the defining sectors in the cryptocurrency industry in the past year. There’s now over $41 billion in total value locked in DeFi platforms, up from just over $600 million a year ago. Ethereum 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 on Cardano, and in a recent interview, the founder laid out what makes his project unique and why Cardano is superior to Ethereum in powering DeFi.

Dewayne Cameron, the founder of Liqwid Finance joined Champaign Blockchain to delve into why his company has an edge over its Ethereum-based rivals. He described Liqwid as an “open-source liquidity system for lending. We want to create a system that allows borrowers to enter at a very competitive interest rate because we’ve incentivized our supply of stablecoins, ADA and other native Cardano assets.”

Liqwid is made possible by the Alonzo hard fork on Cardano. This hard fork, which as CNF reported is scheduled for July/August, will finally bring smart contracts to Cardano.

Liqwid will give suppliers a positive yield strategy at a lower risk, Cameron pointed out. With Ethereum DeFi platforms like Aave and Compound, they had to first lock up a lot of stablecoins on-chain and then have their competitive loans match this level of supply.

Why Cardano is better for DeFi than Ethereum

Ethereum has been massively successful and is the reason most cryptocurrency projects exist today. However, its inability to scale and very high transaction fees have attracted great criticism, including from its former founder Charles Hoskinson, who is now leading Cardano.

Florian Volery, the Liqwid Finance product lead pointed to the fees as one of the project’s advantages over Ethereum platforms. He observed that Cardano’s fees are 1/1000th of Ethereum, making it the more suitable network for the transaction-intensive DeFi sector. He added:

Liqwid will be one of the first protocols to capture its own value and to distribute the dividend to the token holders while also financing its own DAO (LiqwiDAO) in order to further develop the protocol itself and the ecosystem in general.

Cameron doubled down on the high fees Ethereum charges, pointing out that it has made DeFi inaccessible to the smaller investors.

Ethereum has been working to solve the gas challenge, but most solutions are yet to gain widespread usage. In its current state, taking out a $1,000 loan would be quite affordable in a DeFi platform, compared to the traditional systems. However, the gas fees would be higher than the interest, making 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 other users’ proposals through their LQ tokens. They can also delegate their voting power to other users who can combine it with their own and have a bigger say on the governance of the platform.

The platform has been designed to incentivize the governance token by ploughing back 80% of the profits to the token owners. A portion of the income will also go to the Reserve, with the goal being the future development of the platform. On what he hopes this fund will be able to achieve in the future, Cameron stated:

A secondary product offering around identity and then credit following shortly after that, are things we’re interested in. Using the DAO Treasury to fund some of those would be really interesting.


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