Liquid Collective: Unlocking Liquidity in DeFi Space

03/08/2023 20:08 • AI Insights • 93 views

It is reported that Liquid Collective, an enterprise-level liquidity pledge agreement, has been launched on Coinbase Prime and Bitcoin Suisse. This solution allows institutional customers to pledge ETH in exchange for the liquidity mortgage token LsETH, thus releasing liquidity for use in other DeFi agreements, while still obtaining mortgage rewards. （Theblock）

Liquidity pledge agreement Liquid Collective launched on Coinbase Prime and Bitcoin Suisse

Analysis based on this information:

The decentralized finance (DeFi) space has been growing leaps and bounds over the past year, and one issue that this ecosystem faces is liquidity. Liquidity is the amount of cryptocurrency available for trading in an open market. The availability of liquidity has a direct impact on the market depth, which in turn impacts the efficiency of price discovery mechanisms in the market. In simple terms, more liquidity leads to better market efficiency, and vice versa.

To address this liquidity issue, Liquid Collective, an enterprise-level liquidity pledge agreement, has been launched on Coinbase Prime and Bitcoin Suisse. The solution offers institutional customers the opportunity to collateralize their ETH holdings to obtain the liquidity mortgage token LsETH. Once they have acquired LsETH, they can unlock liquidity to use in other DeFi agreements while still obtaining mortgage rewards.

The working of the Liquid Collective model is quite simple. Institutional customers must first pledge their ETH holdings as collateral. Once collateralization is complete, a corresponding amount of LsETH tokens will be created on the Ethereum blockchain, representing the collateralized ETH. Institutional customers can then use these LsETH tokens as a medium of exchange or enter other DeFi protocols with them. As soon as they leave the DeFi protocol, liquidation of LsETH takes place automatically, returning the collateralized ETH to the institutional customers.

The best part about this solution is that lenders can earn mortgage rewards while unlocking liquidity. They can earn mortgage interest for their LsETH tokens in the range of 3% to 5% per annum, which is paid out in ETH. This helps institutional customers earn rewards while still retaining the ability to utilize their capital efficiently in other DeFi agreements.

Liquid Collective is gaining traction in the DeFi space and offers many benefits to institutional customers, including higher interest rates, quicker borrowing and lending, and reducing the overall counterparty risk of the DeFi ecosystem. The solution aims to rectify the liquidity issues in DeFi and unlock the potential of the space to contribute to the larger cryptocurrency ecosystem.

In conclusion, Liquid Collective is an innovative solution to unlock liquidity in the DeFi space. It enables institutional customers to collateralize their holdings in a safe and secure manner while unlocking potential returns and utilizing that capital in other DeFi agreements. With rising competition in the DeFi space, liquidity will be a critical component to support the growth of these protocols, and Liquid Collective could be a game-changer.

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