Introduction to Quill Finance

What is Quill Finance?

Quill is a decentralized and over-collateralized stablecoin protocol operating on the zK-Rollup-based Scroll network and governed with its native token $QUILL. It is forked from Liquity V2 and empowers users to mint $USDQ (a stablecoin) by collateralizing assets such as wstETH, weETH, wETH and SCR. This mechanism allows users to access liquidity while maintaining their exposure to their assets.

Why Quill and what are the benefits of using it?

Protocols such as Quill are essential for users seeking a decentralized and user-friendly platform for borrowing and lending. Here are some key reasons to consider using Quill:

• Variable Interest Rates: Quill offers stablecoin loans where borrowers can set their own interest rates with lower rates increasing the risk of redemption, creating a flexible, market-driven system that adjusts to changing conditions and borrowing strategies

• Trove Delegation Mechanism: Allows the loanees to delegate borrowing power and management actions to third parties, enabling flexible and efficient use of collateral without transferring ownership.

• Efficient Liquidity Access: By leveraging their crypto assets, users can access liquidity quickly and conveniently without the associated risks and complexities of conventional banking systems. This feature empowers users to utilize their assets more effectively, enhancing financial flexibility​.

• Robust Security: Quill ensures the security of user funds through advanced smart contract mechanisms. These protocols are designed to be resilient against vulnerabilities, offering peace of mind to users concerned about the safety of their investments​.

• Directly Redeemable: One of the key advantages of Quill is that its stablecoin can be directly redeemed for the underlying collateral at face value. This mechanism instills confidence in users as it ensures that they can always retrieve the full value of their collateral, thus enhancing the stability of the Quill ecosystem​.

• Decentralization: Being built on a decentralized framework, Quill eliminates intermediaries, allowing for direct interactions between users. This not only reduces costs but also enhances transparency and trust within the system​.

• Governance: Quill will operate on a decentralized governance model, allowing users to participate in decision-making processes related to the protocol. This democratic approach ensures that the community has a voice in shaping the future of the platform, promoting transparency and user engagement​

In summary, Quill stands out as a robust option for users looking to navigate the world of decentralized finance effectively.

Maincases of using Quill

• Borrow $USDQ Against ETH: Quill allows users to borrow $USDQ, its stablecoin, by leveraging their ETH (and other assets) holdings as collateral. This enables users to access liquidity without selling their assets, providing a cost-effective way to obtain funds while maintaining exposure to potential price appreciation in Ethereum​.

• Use $USDQ for Anything You Need: Once borrowed, $USDQ can be used for various purposes, including trading, investing in other DeFi projects or simply covering everyday expenses. This flexibility allows users to utilize their stablecoin in ways that best suit their financial goals and needs.

• Redeem $USDQ for ETH If Its Peg Falls Below $1: In case the value of $USDQ falls below its intended peg of $1, users have the option to redeem their stablecoins directly for ETH. This mechanism serves as a safety net, ensuring that users can recover the value of their collateral even during market volatility, thereby reinforcing confidence in the protocol.

• Easy leverage exposure to collateral: Quill allows users to amplify their position and potential returns efficiently, without needing complex manual processes or multiple transactions.

Costs of using Quill

There is a one-off fee whenever $USDQ is borrowed and when $USDQ is redeemed:

• One-Time Borrowing Fee: A small, dynamic fee paid when borrowing $USDQ.

• Redemption Fee: Fee for redeeming $USDQ.

• Liquidation Reserve Deposit: Deposit held as a reserve, refunded if Trove is closed without liquidation.

• Set Interest: Set interest rate for predictable borrowing costs.

• Collateral Penalty on Liquidation: Fee charged if Trove is liquidated due to low collateral.

• Gas Fees: Minimal zk-Rollup gas fees for Trove management, keeping transactions cost-effective.

What are the risks of using the protocol?

As a non-custodial and decentralized system, all the ETH or other collateral 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 in the smart contract code, which have been audited by companies such as debaub and Trail of Bits.

• If you are a borrower and your collateral is liquidated, you will still keep your borrowed $USDQ but your collateral will be lost.

$QUILL and $USDQ, the tokens

$USDQ is the USD-pegged stablecoin used within the Quill protocol, designed to facilitate loans secured by their collateral. Users can borrow $USDQ against Ether (and other assets) with a unique interest model. Importantly, $USDQ can be redeemed at any time for the underlying collateral at face value, ensuring that it retains its peg to the US dollar.

$QUILL is central to Quill’s governance and liquidity model, allowing users to participate in decision-making and earn rewards for contributing to the protocol.

DAO users inherently have a vested interest in the protocol’s success, since they are token holders. By distributing governance power, Quill ensures that the long-term health of the ecosystem aligns with the interests across the community.

For any other information or questions about the project, please join us at our Discord.