Profitable Lending on the TON Blockchain with Aqua Protocol

AquaUSD is over-collateralized by other cryptocurrencies, specifically coins from liquid staking, that users deposit as collateral. The minimum collateralization level is always above 150%. This means that for every AquaUSD issued, there is already more cryptocurrency in the system than its dollar value. It's like a collateral in a bank: to borrow money, you leave something valuable as collateral. Similarly, AquaUSD is backed by the value of other cryptocurrencies to ensure its value remains at one dollar.

AquaUSD aims to maintain its value equal to one United States Dollar (USD) through several mechanisms:

1. Over-Collateralization: Each issued AquaUSD is backed by collateral that is double its value. This means that if you want to obtain 100 AquaUSD, you need to provide collateral, such as TONCOIN, equivalent to at least 200 dollars.
2. Hard Peg: Within the Aqua protocol, there is a special 'redemption pool' where you can always exchange AquaUSD for TONCOIN at a 1-to-1 rate, ensuring that AquaUSD always equals one dollar.
3. Market Arbitrage: If the value of AquaUSD deviates from one dollar in the market, traders can take advantage of this to make a profit, ultimately returning the value back to one dollar.
4. Interest Fees: The fees charged incentivize users to create (mint) or destroy (burn) AquaUSD to maintain its value at one dollar.
5. Risk Management: The introduction of a debt ceiling limits the amount of AquaUSD that can be created, preventing excessive issuance and maintaining price stability.

In case of a TONCOIN price drop, an oracle system is used to average prices from different exchanges, preventing instant liquidations due to temporary fluctuations on a single exchange.
If liquidation is still necessary, the process is handled smoothly:

• Liquidation is typically partial, not affecting all of your assets.
• The liquidation fee is approximately 8%, serving as both an incentive to avoid this scenario and a necessary component to support the system.
• You retain control over the remaining AquaUSD even after liquidation.

These mechanisms together ensure the stability and reliability of AquaUSD as a stablecoin.

When does this happen:
If the value of your collateral falls to 150% or lower, a portion of the collateral may be automatically sold to cover the loan.

Why it's not so bad:
Partial liquidations: Only a part of your collateral is sold, not the entire amount.
Penalties: In case of liquidation, an 8% penalty is imposed, but you still retain some of your funds.
You keep your money: Since you obtained a loan, you don't lose all your assets.
Protection against volatility: We use special tools to guard against sudden market fluctuations.

Our advice:
Monitor the value of your collateral and avoid taking excessively large loans to prevent liquidation.

AquaUSD is not an algorithmic stablecoin because its value is backed by real assets, not algorithms. In general, there are three main types of stablecoins, each backed in its own way:

1. Fiat-Collateralized (1:1): These stablecoins are pegged to real-world currencies, such as the U.S. dollar, on a one-to-one basis. For every stablecoin in circulation, there is an equivalent amount in fiat currency held.
2. Over-Collateralized by Cryptocurrency: In this model, stablecoins are backed by other cryptocurrencies but in an amount exceeding the stablecoin's value. For example, for every dollar of stablecoin, there might be two dollars in cryptocurrency collateral. AquaUSD falls into this category, ensuring stability through excess crypto collateral.
3. Unsecured Algorithmic: These stablecoins use algorithms to manage their supply in the market, aiming to maintain price stability. They are not backed by any physical or digital assets and rely on complex mechanisms to support their value.

AquaUSD, by maintaining stability through excess cryptocurrency collateral, provides greater security and predictability in its value, making it a preferred choice for those seeking stability in the world of cryptocurrencies.

Aqua Protocol's advantage over other lending protocols on TON lies in several key aspects:

1. Independence from the Quantity of Stablecoins in the Ecosystem: Unlike many other protocols, Aqua Protocol does not face the 'chicken and egg dilemma,' where the need for a large quantity of stablecoins limits ecosystem development. Our protocol generates stablecoins on-demand, based on user needs, ensuring liquidity without limitations on the number of stablecoins.
2. Higher Capital Efficiency: Aqua Protocol optimizes capital usage by offering users more efficient lending terms and ways to utilize their crypto assets. This means users get more opportunities to manage their assets and capital effectively.
3. Utilization of Liquid Staking: Aqua Protocol's unique feature is the use of liquid staking as collateral. This allows collateralized assets to continue earning staking rewards while users utilize stablecoins. Thus, your assets remain active and generate income, even when used as collateral for loans.

In combination, these factors make Aqua Protocol more flexible, capital-efficient, and advantageous for users in the current market situation on TON compared to other lending protocols.