We’re thrilled to announce the launch of the ZeroLiquid protocol, bringing self repaying, 0% interest, non-liquidation loans to the liquid staked derivative (LSD) market, which is currently worth over $20bn. You can find the dApp at app.zeroliquid.xyz.
Read on to learn more about ZeroLiquid, the problems it solves and its use cases.
In proof-of-stake (PoS) chains such as Ethereum, you can stake the native token to earn rewards in exchange for verifying transactions. However, while the tokens are staked they cannot be transacted, traded, or used as collateral — they are illiquid.
LSD tokens (Liquid Staking Derivatives) solve this illiquidity problem. They allow stakers to earn yield without losing the liquidity of their staked assets. These tokens can be traded or used in Defi applications just like regular ETH, or sold.
But when you sell these tokens, you stop earning yield….
ZeroLiquid is a new DeFi protocol that enables users to obtain self-repaying, 0% interest loans against their LSD tokens without any liquidation risk.
In practice, this enables instant, permissionless access to capital without being forced to sell assets and forgo staking yield, and without having to worry about repayments or liquidations.
How It Works
When a user deposits LSD tokens into ZeroLiquid, they will be issued a synthetic token (zETH) that can be traded on the market to provide instant liquidity. This allows the user to obtain money now without selling their Ether.
The LSD tokens they deposited will continue to earn staking yield, and the protocol will use this yield to repay the loan. At maturity, the user’s entire collateral is unlocked. Users can also unstake early at any time by simply paying off the remaining debt.
As both the collateral and the loan are denominated in Ether, there is never any liquidation risk, no matter what happens to the price of Ether. This means the user does not need to monitor their position and worry about liquidations.
A key use case of ZeroLiquid is the ability to obtain capital on demand without having to sell assets.
For example, if you have a large, one-off expense, regular monthly payments or even want to buy a new altcoin, you can use ZeroLiquid to cover all of these without selling your assets and forgoing yield.
This also enables users to maintain their exposure to the crypto markets. If for example you believe that the price of Ether will be significantly higher in a couple of years from now, you can use ZeroLiquid to access money today rather than selling your Ether.
Later this week we will be launching an exciting growth initiative called Zero Gravity. If you’ve been following our Twitter, you will have seen teasers for this already. It will be a fun way for the community and influencers to collaborate to drive rapid growth of the protocol.
Separately, the zETH liquidity mining scheme will be announced tomorrow, while ZERO staking will also launch soon.
Further ahead, we will be building additional functionality on top of ZeroLiquid and expanding to more networks such as Arbitrum. Stay tuned for more.
The ZERO Token
The ZERO token is the governance token of the ZeroLiquid protocol. That’s not all though, as it can also be staked to earn a share of protocol revenue.
The initial maximum supply of ZERO was 100 million. However, following the community’s approval of a burn program, 69.420% of the total supply will be burned. Burns will occur quarterly as tokens unlock from the vesting contract, bringing the total supply down to 30.6m.