General

Darli is a decentralized borrowing protocol that allows you to draw interest-free loans against Ether used as collateral. Loans are paid out in DaUSD (a USD pegged stablecoin) and need to maintain a minimum collateral ratio of 110%.

In addition to the collateral, the loans are secured by a Stability Pool containing DaUSD and by fellow borrowers collectively acting as guarantors of last resort. Learn more about these mechanisms under Liquidation.

Darli as a protocol is non-custodial, immutable, and governance-free.

Stable-value assets are an essential building block for Ethereum applications and have grown to represent tens of billions of dollars in value.

However, the vast majority of this value is in the form of fiat-collateralized stablecoins like Tether and USDC. Decentralized stablecoins like DAI and sUSD make up only a small portion of the total stablecoin supply, meaning the vast majority of stablecoins are centralized.

Darli addresses this by creating a more capital efficient and user-friendly way to borrow stablecoins. Furthermore, Darli is governance-free, ensuring that the protocol remains decentralized.

Liquity’s key benefits include:

0% interest rate — as a borrower, there’s no need to worry about constantly accruing debt

Minimum collateral ratio of 110% — more efficient usage of deposited ETH

Governance free — all operations are algorithmic and fully automated, and protocol parameters are set at time of contract deployment

Directly redeemable — DaUSD can be redeemed at face value for the underlying collateral at any time

Fully decentralized — Darli contracts have no admin keys and will be accessible via multiple interfaces hosted by different Frontend Operators, making it censorship resistant

No. Darli has no admin key, and nobody can alter the rules of the system in any way. The smart contract code is completely immutable.

Darli version 1 will not changed so users can be insured everything in version 1 is immutable.

You first need to choose a web interface (aka frontend) to access the system. The core team building the protocol will not operate a frontend. Darli is instead accessed by third-party frontend applications and integration services.

You can find a list of frontends here.

1- Borrow DaUSD against ETH by opening a Trove

2- Secure Darli by providing LUSD to the Stability Pool in exchange for rewards

3- Stake DARLI to earn the fee revenue paid for borrowing or redeeming DaUSD

4- Redeem 1 DaUSD for 1 USD worth of ETH when the DaUSD peg falls below $1

DaUSD is the USD-pegged stablecoin used to pay out loans on the Darli protocol. At any time it can be redeemed against the underlying collateral at face value. Learn more about the stability mechanism.

DARLI is the secondary token issued by Darli. It captures the fee revenue that is generated by the system and incentivizes early adopters and frontends. The total DARLI supply is capped at 100,000,000 tokens. For more information on how the tokens are allocated and released over time, please refer to DARLI Rewards and Distribution.

To borrow DaUSD, all you need is a wallet (e.g. MetaMask) and sufficient Ether to open a Trove and pay the gas fees.

To become a Stability Pool depositor or DARLI staker, you need to have DaUSD and/or DARLI tokens. DaUSD can be borrowed by opening a Trove while DARLI can be earned as a Stability Pool depositor. You can also use Uniswap or another (decentralized) exchange to buy the tokens on the open market.

There is a one-off fee whenever DaUSD is borrowed, and when DaUSD is redeemed:

1- For borrowers, there is a borrowing fee on loans as a percentage of the drawn amount (in DaUSD).

2- For redeemers, there is a redemption fee on the amount paid to users by the system (in ETH) when exchanging DaUSD for ETH. Note that redemption is separate from repaying your loan as a borrower, which is free of charge.

Both fees depend on the redemption volumes, i.e. they increase upon every redemption in function of the redeemed amount, and decay over time as long as no redemptions take place. The intent is to throttle large redemptions with higher fees, and to throttle borrowing directly after large redemption volumes. The fee decay over time ensures that the fee for both borrowers and redeemers will “cool down”, while redemptions volumes are low.

The fees cannot become smaller than 0.5% (except in Recovery Mode), which protects the redemption facility from being misused by arbitrageurs front-running the price feed. The borrowing fee is capped at 5%, keeping the system (somewhat) attractive for borrowers even in phases where the monetary is contracting due to redemptions. Other than that, the two fees are identical and are depicted as “Fee” in the following exemplary chart:

There are two different ways to generate revenue using Darli:

1- Deposit DaUSD to the Stability Pool and earn liquidation gains (in ETH) and DARLI rewards.

2- Stake DARLI and earn DaUSD and ETH revenue from borrowing and redemption fees.

As a non-custodial system, all the tokens sent to the protocol will be held and managed algorithmically without the interference of any person or legal entity. That means your funds will only be subject to the rules set forth in the smart contract code, which has been audited twice by Trail of Bits and once by Coinspect (find their reports here).

There are two scenarios under which you may lose a part of your funds:

You are a borrower (Trove owner) and your collateral in ETH is liquidated. You will still keep your borrowed DaUSD, but your Trove will be closed and your collateral will be used to compensate Stability Pool depositors.

You are a Stability Pool depositor and your deposited DaUSD is used to repay debt from liquidated borrowers. Since liquidations are triggered any time borrowers’ collateral drops below 110%, you will receive more ETH in return with a very high probability. However, if ETH decreases in price and you maintain exposure, you may lose value in your total pool deposits.

Please note that DaUSD isn’t perfectly pegged to the USD, and can deviate slightly in both directions under certain market conditions. See On Price Stability of DaUSD for more details.

Although the system is diligently audited, a hack or a bug that results in losses for the users can never be fully excluded (see disclaimer).