Original article from 7upDAO author darkforest < LQTY deep user personal account: LUSD is the top DeFi stablecoin, but faces the pain of expansion >

The Luquity project token is $LQTY

🔸 Introduction

LUSD is the top stablecoin in DeFi. The only asset, ETH, is over-collateralized, the contract can never be changed, the protocol redeems ETH for $1, and it is censorship-resistant without running on the front end.

Comparing MakerDAO: Luqiity has a lower liquidation line, high capital utilization, and a one-time payment of Borrowing Fee. More suitable for people who never sell ETH but want to maintain a certain cash flow

Problem: No one uses it, lack of scenarios, $LUSD 60% has been in the project’s Stability Pool for a long time. Even if Chichen Bonds was once transferred through $bLUSD, no incremental funds were brought in according to the data, it was unprofitable, users redeemed, and the market premium was negative.

Pessimism: lack of external input, income coming from $LQTY, falling into a zero-sum game

Endgame: With the development of LSD, the opportunity cost of purely holding ETH is high, and the income is difficult to match ETH staking. Users will pay off their Liqudity positions to withdraw ETH and pledge it to other protocols.

Contradiction: Would love to see Liqudity introduce LSD assets, but would lose its censorship-resistant, most decentralized stablecoin features

🔸 Personal thoughts

In terms of investment, Liquidity’s subsequent performance is not optimistic.

Although there has been a small wave of gains recently on Binance, the name is Liqudity, but it has nothing to do with the LSD narrative.

The contract cannot be upgraded and does not run on the front end, making it an extremely decentralized protocol. Especially after the SEC banned Coinbase’s ETH staking business, the decentralization feature has become more and more important.

Paradoxically, this news is good for decentralization in some aspects, but it also promotes the LSD narrative. The opportunity cost of purely holding ETH is high

Luqudity TVL has continued to shrink to $500 million. Users exit, revenue decreases, $LUSD lacks scenarios, and has fallen into a certain degree of death loop.