Liquidify.io: Introducing the World’s First Liquidity Accelerator
Abstract
Liquidify is a decentralized protocol that improves the liquidity and growth potential in long-tail crypto assets (assets with low liquidity, low trading volume, and low market capitalization). Long-tail crypto asset holders can collateralize their assets through the Liquidify asset pool, called the “liquidity accelerator”. The liquidity accelerator synthesizes all assets placed into the Liquidify asset pool into a fixed total amount of tokens, Liquidity Accelerator Tokens (LAT) and Liquidify Tokens (LFY). In contrast, LAT holders can also use the liquidity accelerator to convert LATs back into the corresponding long-tail assets with real-time prices, and long-tail assets can also be swapped among one another.
Background
Among the 8,549 crypto assets listed on Coinmarketcap, over 60% exhibit zero or close to zero trading volume, making those assets non-liquid, thus significantly lowering their utility. There are many reasons for such low volumes for crypto assets, including high listing fees on centralized exchanges (which generally have the highest liquidity) as well as insufficient funds for development and operations. However, a failure to attract capital does not necessarily mean that a project lacks practicality or feasibility. It may simply be due to the fact that it does not garner sufficient profit margins for investors within a certain period of time. Liquidify.io was established to solve the crypto market’s problem of long-tail assets that cripples the development of the crypto industry by locking up users’ funds in illiquid assets.
Long-tail Assets & the Purpose of the Liquidify Protocol
In Liquidify, we refer to these types of assets with a low trading volume, low liquidity, and low market capitalization as long-tail crypto assets (or long-tail coins). Thousands of cryptocurrencies currently exist, but only a relatively few can make it into the influential Coinmarketcap top 100 based on market capitalization.
Liquidify’s goal is to help rediscover the value inherent in these long-tail crypto assets and improve their liquidity through a liquidity accelerator, so that consolidated long-tail assets can be recirculated and reactivated. This will generate new cash flows and manifest new investment opportunities for investors. In addition, by combining long-tail coins into a single contract and using them as the underlying assets to create a synthetic asset in the form of Liquidify protocol tokens with higher liquidity potential, the rapid “recycling” of long-tail coins and reduction of friction from fees can be achieved. The Liquidify protocol (initially) will serve the following use cases:
- Creating more liquidity for long-tail assets
- Providing market entry channels and price exposure for long-tail assets
- Reducing the risks in a single long-tail crypto asset due to price reductions
- Expanding the investor population for long-tail crypto assets
- Providing a new price discovery function
Liquidify Protocol System Architecture
The development of the Liquidify protocol is divided into three phases, to be delivered between March-October 2021:
Liquidify Protocol 1.0: collateral synthetization
For Protocol 1.0, users will need to hold a certain amount of LAT tokens to qualify to collateralize assets via the Liquidify protocol asset pool. In addition, the Liquidify protocol will limit the assets that can be mortgaged based on rated (allowlist) asset types. During the first protocol, the Liquidify asset pool will contain high-level crypto assets (mainstream assets, such as BTC/ETH) and some select long-tail crypto assets.
The collateralized assets will pass through the liquidity accelerator to be converted into a certain number of LAT and LFY tokens based on the protocol parameters.
LAT is an ERC-20 protocol token. Its prices and fluctuations are anchored to the Liquidify crypto asset pool portfolio. Users can set up trading pairs on Uniswap, participate in liquidity mining and also participate in other third-party mining pools or protocols. Plus, LAT tokens will also be used for fees in the synthetization process. LFY is the ERC-1410 protocol token, which is the governance token for the Liquidify protocol. LFY allows users to participate in community voting and governance aspects for the protocol.
Liquidify Protocol 2.0: long-tail asset pool synthetization with extended allowlist
Supported by the 1.0 Architecture, the Liquidify Protocol 2.0 will add a large number of long-tail crypto assets to the allowlist to be rated, increasing the number of long-tail assets that can be locked into the protocol. Moreover, the reverse exchange that reverts LAT tokens back to long-tail crypto assets and the core function of exchanging long-tail crypto assets among one other will be implemented.
Liquidify Protocol 3.0: long-tail asset pool synthesis with more flexible asset pool setup rules
The Liquidify Protocol 3.0 will fully completely up the long-tail crypto asset category and no longer set any allowlist restrictions. Any crypto asset that adheres to ERC standards (including STOs, NFTs, etc.) can enter the Liquidify long-tail crypto asset pool for collateralization and exchange. Liquidify Protocol 3.0 will allow Liquidify to become a completely open protocol that provides liquidity services to all long-tail crypto assets.
Liquidify Protocol Core Modules
1) Binance Smart Chain (BSC) & Huobi ECO Chain (HECO)
Liquidify chose to initially build its protocol on the Binance Smart Chain (BSC) and Huobi ECO Chain (HECO). Compared to the Ethereum public chain, BSC and HECO are more suitable for the technical development and business expansion of the Liquidify protocol in the early stage. From a technical point of view, both BSC and HECO are widely regarded as highly efficient, energy-saving, and scalable public chains. From a business perspective, Both BSC and HECO rely on the trading ecosystem of the centralized exchanges, which gives new DeFi projects the opportunity to obtain support from Binance and Huobi ecosystems based on promotions, liquidity and resources.
Of course, BSC and HECO are only Liquidify’s preferred public chain in the initial stage. In future the Liquidify protocol will be available on the Binance Smart Chain, Ethereum, Polkadot, and other major chains.
2) Liquidify Long-tail Crypto Assets Pool
The Liquidify protocol will aggregate the injected assets in the smart contract long-tail crypto asset pool. The asset pool will continue to accept more long-tail coins based on the Liquidify protocol allowlist expansion and even allow any ERC protocol token (including STOs, NFTs) to be collateralized from the Liquidify protocol 3.0 stage on.
For non-ERC protocol tokens, the Liquidify protocol will be upgraded in the future, using cross-chain and other technologies to aggregate tokens from different chains.
3) Liquidity Accelerator
The Liquidify liquidity accelerator can also be called a synthesizer for LAT and LFY tokens. It calculates the amounts of LAT and LFY that users can obtain based on the Liquidify smart contract algorithm, using price oracles to determine the prices and quantities of assets collateralized in the long-tail encrypted asset pool, as well as the weight of a single
asset in the asset pool.
In addition, the liquidity accelerator can also exchange LAT back to the original long-tail crypto assets by referring to the conversion ratio for real-time long-tail assets to LAT based on user needs.
Conclusion
The Liquidify protocol can significantly improve the liquidity of long-tail crypto assets. It can also satisfy investor needs of investors to obtain price exposure and participate in investment without actually holding those long-tail coins. Expanding the investor population for long-tail assets will help make the entire crypto market more active and healthier. In the future, with continuous development and the continuing expansion of the ecosystem, more long-tail assets from the field of traditional finance, such as long-tail bonds will also be tokenized and then included in the asset pool of the Liquidify protocol.
We firmly believe, as Ruth Porat said, that “liquidity is the oxygen for a financial system”. Therefore, we want to reinvigorate a large portion of the cryptocurrency market that is currently deprived of oxygen. Past experiences from the traditional industry, with non-performing loans for example, have shown that such an approach can be key to restoring the health of this financial system. For the sake of the healthy development of the crypto market and for the benefit of all those users holding onto their long-tail assets, Liquidify has chosen to build its protocol. To liquify all assets!
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Official website: www.liquidify.io
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Official E-mail: contact@liquidify.io