LIQUIDv2 Preview (1): Lending and Flash Loan using the Price Floor
LIQUID (https://www.kittenswap.org/) has a ever-rising price floor, which means LIQUID holders will be able to lock LIQUID for risk-free ETH when our LIQUID lending contract is ready.
This lending contract will be available for all current LIQUID holders. There’s no need to do any migration.
1. Benefits for LIQUID: Less Selling, Easier Buying
For simplicity, assume the current LIQUID price is fixed at 0.2 ETH, and the price floor is fixed at 0.11 ETH.
If you buy 10 LIQUID using 10*0.2=2 ETH, then you will be able to immediately lock it for 10*0.11=1.1 ETH.
This is great for LIQUID holders, because now you can get risk-free extra capital for trading other tokens:
- BEFORE: spot a new token -> sell LIQUID for some ETH to ape in
- AFTER: spot a new token -> lock LIQUID for some ETH to ape in
If every LIQUID holder locks it after purchasing, then apparently the price can only go one way.
Another benefit is, it will be simpler than ever to buy LIQUID.
In the scenario here, you just need to provide 0.9 ETH to obtain 10 LIQUID, because you can:
- Provide 0.9 ETH.
- Flash-borrow 1.1 ETH.
- Buy 10 LIQUID using 2 ETH.
- Lock 10 LIQUID for 1.1 ETH.
- Payback 1.1 ETH.
This is liquidation-free leveraged trading. Your position will never be liquidated because the LIQUID price will never go below the price floor.
Our lending contract will make this process a single button-click and very gas efficient.
2. Benefits for Lender: Risk-free High Yields
Our LIQUID lending contract is using an ETH pool, while being much more gas efficient than COMP or AAVE etc.
The ETH flows:
The four major functions:
- Lock ETH to mint KittenETH, which are yield-bearing.
- Send KittenETH back to contract, and receive ETH+profit.
- Lock x LIQUID and receive x * price_floor ETH.
- Send x * price_floor_new ETH back to contract, and receive x LIQUID.
Because the LIQUID price floor is ever-increasing, x * price_floor_new > x * price_floor, and this creates risk-free high yields for ETH lenders.
Moreover ETH lenders can enjoy flash loan interests when the fifth and sixth functions are called:
5. A trader does not have enough ETH to buy LIQUID. However the trader can flash-borrow some ETH, buy LIQUID, and lock LIQUID to payback the flash-loan. This is the case we mentioned in the previous section.
6. A trader does not have enough ETH to unlock LIQUID. However the trader can flash-borrow some ETH, unlock LIQUID, and sell some LIQUID to payback the flash-loan.
3. Road towards LIQUIDv2
In LIQUIDv2, we will be able to directly utilize the ETH in the LIQUIDv2 contract, so all LIQUIDv2 holders automatically become ETH lenders with all the benefits here.