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DeFi Decrypted: Linear Finance and LINA Explained

DeFi Decrypted: Linear Finance and LINA Explained

Explainers DeFi

10 Sep 2021

Despite May's market crash and the fact that the recent NFT boom stole some of the show, the decentralized finance (DeFi) industry continues to boom in 2021.

In fact, the sector has been reaching new highs lately. According to Defi Llama, the total value locked (TVL) in decentralized finance apps has increased from July 20's $101 billion to $201.64 billion by September 10, 2021.

For that reason, new and innovative DeFi solutions appear on the market every day.

And today, we will explore the essentials of Linear Finance (LINA), a synthetic asset-powered decentralized finance protocol that seeks to solve some of the industry's key issues.

Let's dive in!

What Is Linear Finance?

Linear Finance (LINA) is a cross-chain compatible delta-one asset protocol.

For some clarity, delta refers to the sensitivity of the price of a derivative product to a change in the underlying asset. For that reason, delta-one refers to when there's no (or very minimal) difference between the derivative and the asset's price it tracks.

Indeed, Linear Finance operates a DeFi protocol that allows users to create, trade, stake, and farm synthetic digital assets – tokenized derivatives that mimic the value of an underlying instrument (e.g., a Tesla stock or a gold ETF) and provide investors exposure to the asset without actually owning it.

Since you don't trade the actual assets but the contracts or synthetics based on them, there is usually a delay or difference between the two instruments' prices.

However, Linear solves this problem with cross-chain compatibility. Utilizing a combination of Ethereum and chains compatible with the Ethereum Virtual Machine (EVM) – currently, Binance Smart Chain (BSC) with future integrations with Polkadot and other DLT networks –, allows the DeFi project's oracles to refresh prices at a very high frequency and with low fees.

As a result, while this architecture enables cross-chain composability and compatibility between various DeFi protocols, Linear users can exchange synthetic assets (called liquids) instantaneously and cost-efficiently.

And, since transactions are near-instant and Linear is a delta-one protocol, the protocol has zero slippage, which eliminates the risks of front-running, a tactic malicious parties leverage to make a profit on the pending orders of users.

The Linear Finance platform has four major solutions:

  • Buildr: The app where you can stake native LINA tokens to mint LUSD, a stablecoin utilized to purchase liquids on Linear. The minting process is overcollateralized (you mint less LUSD than your LINA stake), and you receive staking rewards as well as a share of transaction fees in exchange. Buildr is also the platform where you can claim your rewards and burn LUSD to redeem your LINA.
  • Exchange: The Linear Exchange is a service you can use to trade liquids via LUSD to gain exposure to digital assets, commodities, and indices. Trades are near-instant, have no slippage, and come with a 0.25% fee. While all the synthetics are curated by the project at the moment, it will be possible in the future to add your own liquids.
  • Swap: The Swap service allows users to move their LINA tokens, liquids, and LUSD coins across multiple blockchains (currently Ethereum and BSC).
  • Vault: Vault is the yield farming product of Linear that you can leverage to stake LUSD and supply tokens into liquidity pools to earn rewards.

What Is LINA and What Happened to its Price?

LINA is the native token of the Linear Finance protocol that uses both Ethereum's ERC-20 and Binance Smart Chain's BEP-20 standard.

LINA has a maximum supply cap of 10 billion tokens, from which around 40% is currently circulating on the market. After its launch in September 2020, LINA's initial inflationary rate was set to 75%, which decreases by 1.5% every week until it reaches its supply cap.

LINA is a utility token that features the following functionalities:

  • Users can stake LINA and use it as collateral to mint LUSD stablecoin
  • Participate in community governance by voting on matters concerning the future of the project, such as synthetic listings, fee revenue splits, and collateral ratios
  • Locking up LINA as collateral allows users to earn a portion of trading fees as well as staking and inflationary rewards

Next on, let's check what has happened to the cryptocurrency's price since its launch. While LINA closed 2020 with a small loss (-15%), the digital asset entered into a significant bull run this year.

Between January 1 and March 18, LINA's value surged from $0.01 to its all-time high of $0.2746, representing an over 2,600% increase. Later on, the cryptocurrency's price went through a period of correction and suffered some losses due to May's market crash.

While it drove down the token's price to as low as $0.02471, it has been uptrending in the last two months, trading at $0.0479 as of September 10.

As a result, LINA has achieved a year-to-date ROI of nearly 380%.

What Are Linear Finance's Most Important Project Updates?

Now, let's explore the most important project updates concerning Linear Finance.

Before it launched, the protocol held multiple private and public sale rounds in which the team collected nearly $2.4 million from investors.

In addition to striking multiple partnerships with projects like the Band Protocol and Hashed, Linear launched the testnet of its exchange in 2020, which became fully functional on the mainnet in January 2021 along with Buildr (and its other apps later on).

Since then, Linear introduced perpetual contracts on its exchange service, liquids mimicking traditional market assets (e.g., commodities like gold), along with multiple protocol upgrades and tweaks.

Like most DeFi projects, Linear has started out with an increasingly centralized governance process in which its core dev team decides on key decisions around the protocol. However, developers have been actively working to implement community governance via a decentralized autonomous organization (DAO).

Trade LINA on AAX

Linear Finance is a DeFi project that leverages the benefits of cross-chain functionality and synthetic assets to offer a seamless, near-instant, and cost-efficient trading and farming experience for users.

In addition to that, traders can utilize Linear to avoid the high gas fees of DeFi protocols on Ethereum while eliminating the risks of slippage and schemes like front-running.

The good news is that you can trade LINA right away on AAX. Just log into your account and head to the following page to place your trade!

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