What is Liquity USD?
Liquity USD (LUSD) is a 1:1 dollar-pegged stablecoin released by the DeFi borrowing protocol Liquity. By locking up Ether with a minimal collateral rate of 110%, users can get LUSD. The process requires a one-time fee. There is also a possibility of depositing LUSD to the Stability Pool (SP) and get Ether and LQTY returns. LUSD weigh in the SP will lessen with the increasing number of liquidations. Thus, the network will dole out a proportional percentage of liquidated Eth, and LQTY returns to users. Users can draw out Liquity USD against the put collateral anytime. The liquidation of borrowers' positions (Troves) is achieved by offsetting and recirculation. The LUSD coins are employed to pay back the undercollateralized loan and are eventually burned. The collateral from the closed balances goes to the SP. If the Pool doesn't have enough Liquity USD to pay the debt, the rest of the sum along with collateral from the closed Trove are doled out to all active borrowers.