jackbinswitch.btc | Blog
February 26, 2023
8 min read

Stacks Feature: Liquidium Finance

Stacks Feature: Liquidium Finance

Gm, I trust you all have been enjoying the buzz surrounding the Stacks ecosystem. Every day it seems we have more people discovering Stacks, and this is as it should be. If you are new here, welcome!

One of the major factors influencing the growth that we are currently seeing is the culture of the Stacks ecosystem. This is an environment that consistently fosters growth and excellence. It is no accident that Stacks is home to such amazing projects and protocols. Today we are going to take a look at one such protocol. Let’s get to it

The Beginning

Liquidium Finance traces its roots to the Bitcoin Startup Lab. The Bitcoin Startup Lab is a program that helps entrepreneurs convert their ideas into investment ready startups, and it is where the Liquidium founders: Robin, Pete, Julian, and Leo met. They discovered a need, knew that the Stacks ecosystem was the place to build, and went to work.

I asked the team why they chose to build on Stacks, and the answer will be familiar to you Stacks ecosystem veterans. Building on Stacks was a no-brainer due to Stacks’ ability to build decentralized applications that use the security and stability of the Bitcoin blockchain. In addition to the technological advantages of building on Stacks, the team was quick to point out that the support from the Stacks community is unparalleled in this space.

Its all in the Name

Liquidium Finance is a protocol that allows users to borrow STX against their NFT assets. When you think about it, this is a massive problem that they are solving. Trading tokens is relatively easy (unless you have been rugged…rip) as there is typically enough liquidity in the CEX/DEX for the owner to free up some funds. With NFTs the owner may find that they are bereft of good options to access liquidity in an expedited manner. This has been a frustration that every NFT collector has faced at one point or another.

How it Works

Lets say a new project just dropped, and I am short on STX. I can go to the Liquidium Finance protocol and quickly borrow up to 35% of the floor price of one of my NFTs. The duration of the loan can be anywhere from one week to one month. The cost of taking out the loan is a 0.5% fee based on the amount of the loan, and 1% interest on the total amount borrowed per month. The protocol locks my NFT into escrow, and at the end of the term I get my NFT back. If for some reason, I am still illiquid when it is time to repay the loan, the protocol will then hold an auction to recover its assets.

As of right now a user can borrow against the following NFT assets: Megapont Apes, OG Guest, and Satoshibles. The team does plan on expanding the list of qualified assets in the future, and I know that they are currently working on ways to add BTC ordinal inscriptions to the protocol.

Mitigated Risk

As someone who frequently uses margin to trade, a couple of things immediately came to mind when learning about Liquidium Finance:

  • Liquidation

  • Market manipulation

The first way that Liquidium helps users avoid liquidation is inherit in the amount that it lets you borrow in the first place. So if I borrow the maximum amount against my Guest NFT (35%) the liquidation threshold is 45%

In terms of market manipulation the protocol measures the floor price of the asset over a period of 5 days and uses its average to determine its value.

Closing Thoughts

As far as I am concerned Liquidium Finance highlights some important aspects of the NFT market and Stacks itself.

By providing another way for NFT owners to access liquidity the entire market benefits and is able to grow. Liquidium Finance is a clear example of how these various protocols can become building blocks in the larger digital economy being built on Bitcoin. As someone who has become an avid NFT collector, this makes me incredibly bullish.

In terms of the Stacks ecosystem, programs like the Bitcoin Startup Lab demonstrate a dedication to the growth and nurturing of this space by investing time and resources into the community. Liquidium is just one of the well-known projects that can trace its roots to the Stacks Accelerator. In addition to helping entrepreneurs get their start, Stacks also helps people learn how to code Clarity, and educates the community through its various chapters and outreach. This investment into people is not only laudible, but it plants the seeds of change that will grow into massive trees of opportunities for people as well as nations in time. I have immense respect for this blockchain and community, and am so glad that I am in the right place.

That is all I have to say for now. Thanks, as always for reading. I have a lot of projects to tell you about, so stay tuned! Until next time, Jack.

I am going to start including a BTC and STX address in my articles. I am implementing this until Sigle brings the monetary component of the app to fruition. Don’t by any means feel compelled to pay anything, this blog brings me a lot of joy and is my way of contributing to the Stacks ecosystem. If you do enjoy the material and want to contribute, it is certainly appreciated.

BTC: bc1qv538qmsqvcydglsedyqvu3mgy87pcmxwa8y6c5


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