Aquarius is a fork of the Liquity protocol in the Fantom network. Therefore, we will quote the official content to introduce how it works. You can also directly check the official documentation for more details.

What is Aquarius?

Aquarius is a decentralized borrowing protocol that allows you to draw interest-free loans against FTM used as collateral. Loans are paid out in aUSD (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 aUSD and by fellow borrowers collectively acting as guarantors of last resort. Learn more about these mechanisms under Liquidation.
Aquarius as a protocol is non-custodial, immutable, and governance-free.

How can I use Aquarius?

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. Aquarius is instead accessed by third-party frontend applications and integration services.
You can find a list of frontends here.

What are the main use cases of Aquarius?

  1. 1.
    Borrow aUSD against FTM by opening a Trove
  2. 2.
    Secure Aquarius by providing aUSD to the Stability Pool in exchange for rewards
  3. 3.
    Stake AQU to earn the fee revenue paid for borrowing ,redeeming aUSD and AQU transfer fee.
  4. 4.
    Redeem 1 aUSD for 1 USD worth of FTM when the aUSD peg falls below $1

What are aUSD and AQU?

aUSD is the USD-pegged stablecoin used to pay out loans on the Aquarius protocol. At any time it can be redeemed against the underlying collateral at face value. Learn more about the stability mechanism.
AQU is the secondary token issued by Aquarius. It captures the fee revenue that is generated by the system and incentivizes early adopters and frontends. The total AQU supply is capped at 100,000,000 tokens.

Does Aquarius charge any fees?

There is a one-off fee whenever aUSD is borrowed, and when aUSD is redeemed:
  • For borrowers, there is a borrowing fee on loans as a percentage of the drawn amount (in aUSD).
  • For redeemers, there is a redemption fee on the amount paid to users by the system (in FTM) when exchanging aUSD for FTM. 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:

How can I earn money using Aquarius?

There are two different ways to generate revenue using Aquarius:
  • Deposit aUSD to the Stability Pool and earn liquidation gains (in FTM) and AQU rewards.
  • Stake AQU and earn aUSD , FTM and AQU revenue from borrowing fees, redemption fees and AQU transfer fees.

Can I lose my funds?

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.
There are two scenarios under which you may lose a part of your funds:
  • You are a borrower (Trove owner) and your collateral in FTM is liquidated. You will still keep your borrowed aUSD, 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 aUSD is used to repay debt from liquidated borrowers. Since liquidations are triggered any time borrowers’ collateral drops below 110%, you will receive more FTM in return with a very high probability. However, if FTM decreases in price and you maintain exposure, you may lose value in your total pool deposits.
Please note that a hack or a bug that results in losses for the users can never be fully excluded.