LUSD is backed purely by Ether and the protocol is governance-free with no centralized frontend.
This week on The Defiant Podcast we speak with Robert Lauko, founder & head of research at Liquity, an overcollateralized DeFi lending protocol and issuer of the LUSD stablecoin.
Following the fallout from CeFi services such as Voyager, BlockFi, and Celsius, the focus has shifted back to the core values of decentralization, which Liquity tries to apply to the fullest: LUSD is backed purely by Ether and Liquity is governance-free and has no centralized frontend.
What makes Liquity a unique lending protocol is that depositors earn interest from liquidations as opposed to borrowing fees that we usually see in other protocols, such as Maker. We discuss the incentive mechanisms Liquity employs to maintain this model.
In DeFi, the code that makes projects work is deployed on public blockchains that can’t be stopped or censored. This is a crucial component of decentralization. Conversely, the websites that provide an interface to the smart contracts are mostly centralized and only a handful of projects have decentralized frontends. Lauko explains why Liquity chose this route from the outset.
Crypto mixer Tornado Cash was recently sanctioned by the US Department of the Treasury together with addresses that interacted with the protocol. This prompted other DeFi protocols such as Aave and dYdX to blacklist those addresses in a bid to minimize legal risk. Robert discusses how DeFi projects can deal with censorship.
And in case you missed it, we covered Liquity in DeFi Alpha last month.
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