How to Earn Rewards using Liquity

DerrickN
4 min readApr 23, 2021

In this post, I’ll be providing a step-by-step guide on how to earn rewards via Liquity’s Stability Pool & the LQTY Staking Pool.

Before we continue:

The Stability Pool is where users deposit their LUSD to earn LQTY rewards. Meanwhile, their LUSD will be burned to offset liquidations in exchange for ETH collateral. To put it simply, you’ll be trading LUSD (when Troves get liquidated) for ETH and earning LQTY in the meantime. Good trade-off, right?

The LQTY Staking Pool is where users stake their LQTY tokens to earn protocol fees (paid in LUSD & ETH). LQTY stakers will capture 100% of protocol revenue while maintaining their exposure to LQTY, so it’s a win-win.

Choosing a Liquity Frontend

As mentioned in the previous tutorial (How to Borrow LUSD using Liquity), kickback rates matter if you’re depositing to the Stability Pool.

Full list of frontends here

If you don’t know what a kickback rate is — it essentially represents the percentage of earned LQTY rewards that a user will get to keep.

e.g. A 90% kickback rate means the frontend operator will be rewarded with 10% of your LQTY rewards, and you’ll get to keep the rest.

Depositing LUSD into the Stability Pool

After choosing a frontend, you’ll find a Stability Pool panel that looks something like this:

Users can deposit any amount of LUSD, but it’s worth mentioning that the LQTY rewards & liquidated ETH you receive will be proportionate to how much of the Stability Pool you own. In other words: More LUSD deposited = More LQTY rewards and ETH collateral received.

After you deposit LUSD, your LQTY rewards and liquidated ETH collateral (if there are any liquidations during your deposit) will show. The Stability Pool panel will expand into something like this:

Here I initially deposited 3000 LUSD, and you can see that my LUSD has dropped to ~2960. Now, let’s explain why, while also touching on some other key sections shown on the panel.

  • Deposit & Liquidation Gain — These two will change in correlation to each other. Over time, your LUSD deposit will decrease when your Liquidation Gain increases.
  • Pool Share — This shows what percentage of the Stability Pool you own.
  • Reward — This shows how much LQTY you’ve earned during your deposit. You’ll continuously earn rewards as long as you keep some LUSD in the pool.
  • LQTY Remaining — This shows how much LQTY is still left to be distributed to the Stability Pool.
  • LQTY APR — This is the estimated Annual Percentage Rate (APR) that you’ll be earning while in the pool. In other words, it’s an estimate of the LQTY return on your LUSD deposited to the Stability Pool over the next year, not including your ETH gains from liquidations.
  • “Claim” Functions — In the picture above, you can “Claim ETH and LQTY” which sends both rewards to your wallet, or you can “Claim LQTY and move ETH to Trove” which sends your LQTY to your wallet and ETH to your Trove (if you have one).

Whenever you’re ready to stop earning rewards, you can withdraw your LUSD at any time by using the “Adjust” function and lowering your LUSD deposit.

Quick note: Anytime you adjust your deposit, your rewards will be dispersed to your account. This is by design.

If you want to learn how the Stability Pool works on a technical level, I’d recommend reading the docs. Now, we’ll transition to staking LQTY.

Staking LQTY

Once you’re ready to stake LQTY, you’ll find a panel that looks like this:

Similar to the Stability Pool, users can stake any amount of LQTY and the rewards will be proportional to how much of the pool they own.

Here I decided to stake 10 LQTY, and after you stake your LQTY you’ll see some extra info:

Pool Share — This shows what percentage of the staking pool you own.

Redemption Gain — This shows how much ETH you gained from Redemption Fees.

Issuance Gain — This shows how much LUSD you gained from Trove Issuance Fees.

Note: Some frontends may show a “LQTY Staking APR”. These calculations are not exactly accurate, since it is based on historical data of user activity which is not predetermined.

Over time, your staked LQTY will accrue protocol fees from loan issuance and redemption. Again, these are paid in LUSD and ETH.

LQTY staking doesn’t introduce new risks like slashing, backstopping the Liquity system, or anything else. It’s as simple as stake and receive rewards.

Whenever you’re ready, withdrawing staked LQTY follows the same process as withdrawing LUSD from the Stability Pool.

You’re now earning rewards using Liquity!

If you’d like to explore Liquity further, check out their documentation or join the community Discord — You can find me there too!

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