What is Linear Finance?

In recent years, DeFi has rapidly emerged as a game-changing force in the financial world. With DeFi, individuals can participate in financial activities, such as borrowing, lending, and trading, without the need for intermediaries or KYC. However, trading directly on-chain can be expensive due to high transaction fees, and settling times can be inconvenient for passionate traders. This is where synthetic assets come in.

Synthetic assets are financial instruments that are created using smart contracts and are designed to mimic the price movements of underlying assets, such as stocks, commodities, or fiat currencies. By trading synthetic assets, users can gain exposure to these underlying assets without actually owning them.

Linear Finance is a synthetics trading protocol that offers users the best trading experience in crypto. With Linear Finance, users can easily trade a variety of synthetic assets, including derivatives, in a cost-effective and efficient manner. The platform's innovative technology ensures that users can easily access the best prices and trading liquidity, while also benefitting from low transaction fees and fast settlement times.

Whenever you interact with Linear Finance, crypto tokens always remain in your possession. In order to access the protocol, users have to manually approve the smart contracts. You can think of it as a bot that performs the action you agree with based on a strict set of rules. This is an important difference compared to traditional finance, where the money is placed with a third party.

With smart contracts, there is no risk of a person running away with users’ money, or ever worse, locking up the money for any reason. Furthermore, anyone can access Linear Finance regardless of their geography, political views, or religion — Linear Finance doesn’t require KYC.

Transparency and decentralization are powerful tools to enable a thriving DeFi ecosystem. With the traditional limitations out of the way, an important question arises: “How does Linear Finance become self-sustaining?”

Linear Finance mainly derives its value from issuing synthetic tokens that can be freely traded on Ethereum and BNB Chain. In exchange for the service provided, Linear Finance receives a small fee that goes into maintaining the protocol. Upon consulting with the community, core developers are in charge of implementing the protocol upgrades. This ensures Linear Finance stays safe from hacks and the protocol adapts to the market conditions.

LINA token holders can adjust several parameters of the protocol to ensure its longevity. For example,  LinearDAO can decide the collateralization ratio to issue synthetic tokens, LINA inflation reward, or split of transaction fees on areas such as burn, fee claims and Linear Reserve. 

How does Linear Finance work?

Linear Finance works by converting ERC20 and BEP20 tokens into synthetic assets that can easily be traded across Ethereum and BNB Chain. In order to circumvent high transaction fees and long settlement times, Linear Finance has developed a suite of services centered around trading synthetic assets. Eventually, Linear Finance will incorporate more blockchains and start supporting real world assets such as stocks and commodities.

Linear Finance's features come from four main dapps: Linear Buildr, Linear Exchange, Linear Swap and Linear Vault.

Linear Buildr

Linear Buildr enables users to stake LINA tokens to build ℓUSD, the base currency of Linear Exchange. Stakers are entitled to staking rewards and a split of the transaction fees generated by Linear Exchange. Users can use built ℓUSD to purchase synthetic assets on the Linear Exchange to gain different investment exposures. ℓUSD can also be moved to other protocols or dApps within the DeFi ecosystem. 

The creation of Liquids will require a pledge ratio currently set at 500%. Overcollateralization is necessary to ensure the volatility of the pledged assets do not adversely affect the stability of the entire system. In the long run, the pledge ratio can gradually be optimized and this will be determined by the community-driven LinearDAO. For example, the community has agreed to gradually shift to just 400% collateralization. 

Overcollateralization is necessary to ensure the volatility of the pledged assets do not adversely affect the stability of the entire system. In case of a black swan event or extreme volatility, the system should be able to come unscathed, hence building more trust in the protocol.

Liquids on Linear.Exchange can be bought and traded via ℓUSD. The stablecoin is pegged 1:1 with the US dollar and ensures the trading experience on Linear is smooth. Essentially, all assets on Linear are synthetics that are priced in ℓUSD. 

Linear Exchange

At first glance, Linear Exchange uses the traditional order book model, but the underlying infrastructure is decentralized.

Users are trading directly with Linear’s smart contracts backed by a debt pool with the price provided by oracle providers to supply price feed of underlying assets.

On the Linear Exchange, LINA tokens can be staked to create ℓUSD, which, in turn, can be used to buy Liquids on the Linear Exchange DApp. The Liquids can then be applied toward the purchase of indices, commodities and cryptos.

Linear Vault

Like every other DeFi protocol, Linear has its own vault where users can lock ℓUSD or LP tokens to passively and efficiently earn interest paid in ℓUSD, BUSD and LINA tokens.

How to make money on Linear Finance?

Linear Finance offers a suite of dapps from which users can make money. The main methods of making money on LINA are tied to its native token and the ℓUSD stablecoin.

Linear Buildr

Linear Buildr offers a simple way for users to stake their LINA tokens to mint ℓUSD. By staking LINA to mint ℓUSD, users are entitled to staking rewards and a split of the transaction fees generated on the Lina exchange.

Price Prediction for Linear Finance — Can it hit $1000?

Buying and hodling LINA — the native token of the Linear Finance — is one way of potentially making money on Linear Finance.

By looking at its current price, it’s natural to think about the chance of LINA hitting $1000 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.

Let’s examine the potential growth of the LINA token by analyzing its tokenomics. LINA’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} LINA tokens being in circulation today, that means a price of {PRICE} per LINA.

How did we come to that calculation? It’s quite easy, the price of a LINA token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each LINA coin. 

By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of LINA at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for LINA to hit that price.

At a price of $1000 per token, that means the current market cap of LINA would equal ${{CIRCULATING_SUPPLY} * 1000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $1000.

Now let’s shift our attention to the fully diluted market cap.

Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.

The fully diluted market cap represents the total value of a coin if all tokens were in circulation. LINA’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} LINA which means that no more coins above that number will ever be created.

These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.

How does this impact the price of LINA? Taking into account the current price of a LINA token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. LINA coins that have been burned are not taken into consideration because they have been permanently removed from circulation.

Whether it seems gigantic or not, the number we came to above only takes into account the current price of a LINA token. Doing the same calculation but with a price of $1000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1000} for the LINA protocol fully diluted market cap.

These are all crucial details to know when calculating if LINA can reach the price of $1000 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.

The future of LINA depends solely on its growth as a network used by tens and hundreds of millions of users.

If you’re looking to add some LINA to your portfolio, the most trusted places to get some are Binance and Coinbase.