LiquidOps is an overcollateralized lending and borrowing protocol developed on the Arweave and AO ecosystems. The platform enables users to supply digital assets to liquidity pools to earn interest, or to borrow assets by providing collateral that exceeds the value of the loan. ^[1]

Overview

LiquidOps functions as a decentralized money market, bringing core decentralized finance (DeFi) capabilities to the Arweave and AO networks. The protocol's architecture is modeled after Compound V2, an established lending protocol on the Ethereum blockchain. It operates on a pool-based lending system, where lenders contribute assets to a common pool rather than lending directly to individual borrowers. This pooled liquidity is then made available for borrowing. ^{[1] [2]}

The primary goal of the protocol is to enhance capital efficiency within its native ecosystem. For asset holders, it provides an opportunity to generate passive yield on their holdings. For borrowers, it offers access to liquidity that can be used for various purposes, including participating in other DeFi applications or implementing leverage strategies. All borrowing is overcollateralized, meaning borrowers must deposit assets of a greater value than the amount they wish to borrow, which serves as a security measure for the protocol and its lenders. Interest rates are determined algorithmically based on the supply and demand dynamics within each asset pool. ^[3]

History

The development and launch of LiquidOps followed a series of public milestones throughout 2025. On January 8, the project announced it had secured $325,000 in a pre-seed funding round to support its development. This was followed by the launch of the protocol's public testnet on January 24, allowing users to interact with its features in a simulated environment and provide feedback. ^[4]

On March 27, LiquidOps launched its Mainnet Beta, marking the first live deployment of a lending and borrowing protocol on the AO network. This initial mainnet version allowed for real-asset transactions under a beta designation. The protocol's official fair launch was announced on July 28, signaling a new phase for the project. Co-founder Lorimer Jenkins commented on the launch, highlighting it as a significant step for the protocol. ^[4]

Technology

The LiquidOps protocol is built upon several key technological components that govern its lending, borrowing, and risk management functions. Its design prioritizes algorithmic control and decentralization to ensure stability and security.

Protocol Architecture

LiquidOps employs a cross-collateral, pool-based lending model. Users can deposit any supported asset into the protocol, and these deposits are aggregated into distinct lending pools for each asset. The deposited assets can then be used as collateral to borrow other supported assets. This cross-collateral functionality provides users with flexibility, as they are not restricted to borrowing the same asset they supplied. ^[5]

The protocol issues oTokens (interest-bearing tokens) to lenders upon depositing assets. These oTokens represent the lender's share in the asset pool and accrue interest in real-time. As the underlying asset pool earns interest from borrowers, the exchange rate between the oToken and the original asset increases, allowing lenders to redeem their oTokens for a greater amount of the underlying asset than they initially deposited. ^[6]

Interest Rate Model

Interest rates for both lending and borrowing on LiquidOps are not fixed but are determined algorithmically for each market. The protocol utilizes the Jump Rate Interest Model, which is designed to respond to market conditions, specifically the utilization rate of an asset pool. The utilization rate is the percentage of supplied assets that has been borrowed. ^[7]

The model features a two-slope interest rate curve:

• Normal Rate: When the utilization rate is below a specific threshold (the "kink"), the interest rate increases at a slow, linear pace as borrowing increases. This encourages borrowing while maintaining a stable return for lenders.
• Jump Rate: If the utilization rate surpasses the kink, the slope of the interest rate curve becomes significantly steeper. This sharp increase in borrowing costs is intended to disincentivize further borrowing and encourage new deposits to restore liquidity to the pool.

This dynamic model helps to ensure that sufficient liquidity is always available for lenders who wish to withdraw their funds. ^[8]

Liquidation Model

To protect lenders and maintain solvency, LiquidOps requires all loans to be overcollateralized. If the value of a borrower's collateral falls below a predetermined liquidation threshold relative to their borrowed amount (due to market price fluctuations), their position becomes undercollateralized and is subject to liquidation. ^[9]

LiquidOps employs an auction model for liquidations. When a loan is flagged for liquidation, a portion of the borrower's collateral is made available for purchase at a discount by third-party liquidators. The liquidators repay the borrower's debt in exchange for the discounted collateral. This process is designed to be competitive, ensuring that debt is repaid quickly and efficiently, thereby securing the protocol against bad debt. ^[10]

Oracles

The protocol relies on a price oracle to supply accurate, real-time price data for all supported assets. This data is critical for several core functions, including calculating the value of a user's collateral, determining borrowing capacity, and identifying positions that are eligible for liquidation. The integrity and reliability of the oracle are essential for the security and proper functioning of the entire market. ^[11]

Developer Tools

To facilitate integration and development on top of the protocol, LiquidOps provides a JavaScript library.

LiquidOps JS

LiquidOps JS is a JavaScript SDK that allows developers to interact with the LiquidOps protocol programmatically. It provides a suite of functions for building applications and services that leverage the protocol's features. The library simplifies complex interactions with the underlying smart contracts. ^[12]

Key functionalities of the SDK include:

• Installation and Quickstart: Guides for setting up the development environment.
• Data Retrieval: Functions to fetch data about tokens, oTokens, and the overall protocol state.
• Core Interactions: Methods for executing lending, borrowing, and liquidation transactions.
• Transaction History: Tools for retrieving transaction data related to specific accounts.
• Utility Functions: Helper functions to assist with common calculations and data formatting.

These tools enable the creation of custom user interfaces, trading bots, and other decentralized applications that connect to LiquidOps' liquidity pools. ^[13]