LQTY is a secondary token issued by the Liquidity protocol, designed to capture the fee revenue generated by the system and incentivize early users and front-end operators. LQTY rewards are cumulatively distributed to stable providers, i.e. users who deposit LUSD into the stable pool, the front-ends that facilitate these deposits, and the liquidity providers of the LUSD:ETH Uniswap pool. As a technical reward, LQTY is issued based on the pre-programmed functionality of the protocol without any claim against Liquity AG or any third party.
Maximum supply of LQTY
The maximum supply of LQTY is 100,000,000 tokens. This amount is set to ensure the scarcity of the token, thereby helping to increase its value.
Is LQTY a governance token? No, LQTY is not a governance token because the Liquidity system has no governance. This means that users holding LQTY cannot participate in the decision-making process of the protocol by holding tokens.
How to earn LQTY? LQTY can be obtained in three ways:
Users who deposit LUSD into the stable pool
The front-end operators who facilitate these deposits
LUSD: Liquidity provider of ETH Uniswap pool
These methods ensure that LQTY’s rewards are distributed to those users who actively participate in and support the operation of the Liquity protocol.
What is LQTY used for?
LQTY holders can stake their tokens to earn fees generated from loan issuance and LUSD redemptions. This staking mechanism not only provides additional avenues for income, but also promotes long-term holding and value stability of tokens.
LQTY’s distribution schedule: LQTY’s community issuance (outside of LP incentives and community reserves) follows an annual halving schedule, described by the following function: 32,000,000*(1–0.5^year). The purpose of setting up this release curve is to strongly incentivize early adopters while maintaining some long-term incentives. This yearly halving mechanism is similar to how Bitcoin is issued, and is intended to ensure rewards for early participants while gradually reducing the supply of new tokens, thereby helping to control inflation.
LQTY’s genesis distribution: Information about LQTY’s genesis distribution can be found in Liquidity’s official documentation. Genesis distribution usually refers to a detailed plan of how tokens will be distributed to the founding team, investors, and community at the launch of a project.
Is there any LQTY airdrop? No. LQTY can only be earned through the above methods. This means that LQTY’s reward mechanism is based on user participation and contributions, rather than attracting short-term speculators by distributing tokens for free.
in conclusion
LQTY, as the secondary token of the Liquidity protocol, has a unique reward mechanism and purpose. Not only does it incentivize early users and front-end operators, it also provides multiple ways to earn tokens. Although LQTY is not a governance token, its staking mechanism and annual halving issuance curve ensure the long-term value of the token. For those users looking to participate in the decentralized finance (DeFi) ecosystem, LQTY offers an attractive option.
By gaining a deeper understanding of all aspects of LQTY, users can better participate in and potentially benefit from the Liquidity protocol. As DeFi continues to grow, tokens like LQTY will play an increasingly important role in the future.