Why $lqty v2 is the biggest thing in DeFi / will kick off DeFi 3.0 What's a reference rate? A reference rate is a baseline interest rate used to price financial products and determine borrowing costs. Think of it as the foundation that all other interest rates are built on. The most famous example was LIBOR, which underpinned hundreds of trillions in financial products. Today, rates like SOFR and SONIA serve this function in traditional finance. Why does DeFi need reference rates? Well, DeFi currently lacks this primitive... there's no standardized way to price the time value of money. This leads to market inefficiencies and fragmented pricing of risk and capital. Without a reference rate, DeFi can't develop the sophisticated financial products that institutions use daily. Want to create interest rate swaps? Can't do it properly. Need to hedge interest rate risk? Good luck. Want to build complex fixed income products? Not happening. How does Liquity create a reference rate? Liquity lets users set their own interest rates. Lower rates = more redemption risk Higher rates = less redemption risk This creates natural price discovery: Users compete to optimize their rates Market finds equilibrium between cost and risk Rates adjust dynamically to market conditions What could we build with a reference rate? This is where it gets interesting. A solid reference rate would unlock entirely new categories of DeFi products... Think interest rate swaps, rate futures, zero-coupon bonds, and sophisticated risk management tools. All the stuff that makes up the backbone of traditional finance could finally come to DeFi. Why is this a big deal? We're not talking about just another DeFi protocol... we're talking about fundamental market infrastructure. Once established, network effects make it nearly impossible to displace. Every new product that builds on top of the reference rate makes it more valuable. And as more value builds on top, more products want to use it as their foundation. The potential value capture here is massive. This isn't just another DeFi primitive. It's the foundation for DeFi to finally mature into a sophisticated financial system. It's bigger than MKR... bigger than AAVE... and it's coming soon(tm) #ihaveabag