<figure class="wp-block-image size-large"><img width="325px" height="183px" srcSet="https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/08/28234434/Liquid-Loans-Testnet-1-375x211.webp 375w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/08/28234434/Liquid-Loans-Testnet-1-662x372.webp 662w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/08/28234434/Liquid-Loans-Testnet-1-768x432.webp 768w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/08/28234434/Liquid-Loans-Testnet-1.webp 688w" sizes="(max-width: 425px) 150px, 450px" src="https://ll-blog-dev.s3.ap-southeast-2.amazonaws.com/wp-content/uploads/2023/08/28234434/Liquid-Loans-Testnet-1.webp" alt="Liquid Loans Testnet" class="wp-image-3827"/></figure>



Liquid Loans’ launch is fast approaching, but are you ready?



By using the testnet right now, you can experience what <a href="https://www.thecoinzone.com/blockchain/explained-liquid-loans-defi-protocol-on-pulsechain" target="_blank" rel="noreferrer noopener">Liquid Loans</a> has to offer and familiarize yourself with everything you need to know before the mainnet goes live. 



If you’re not already using the testnet, here’s why you should be.



<h2 class="wp-block-heading tablecontent">What is a Testnet?</h2>



A testnet (aka. a test network) is a version of a blockchain that essentially serves as a testing ground for both users and developers. 



 Essentially, a testnet is a prototype of a blockchain network that is usually made available prior to the release of a new feature or project.



Testnets allow developers to catch and repair bugs in order to ensure that decentralized networks are safely working as intended before real value is sent through the network.



At the same time, they allow users to experience and familiarize themselves with a network without having to worry about any risks associated with user error. 



In other words, using a testnet is like being part of a risk-free trial.



Testnets are commonplace today, with many exciting crypto projects making use of them right now.



In fact, Ethereum developers recently <a href="https://www.theblock.co/post/246335/ethereum-developers-to-debut-new-testnet-holesky-next-month" target="_blank" rel="noreferrer noopener">announced</a> a new testnet called Holesky which is set to arrive next month. This will reportedly replace one of Ethereum’s two current testnets, which is known as Goerli.



Most crypto projects of this scale will have at least two types of blockchains: <a href="https://www.thecoinzone.com/blockchain/testnet-vs-mainnet">testnets and a mainnet</a>. 



In comparison to a testnet, the term “mainnet” refers to a live network. Here, real value is being transacted at any given time. 



Let’s take Ethereum and Goerli as an example of the difference between a testnet and a mainnet. Since the Ethereum testnet does not hold any real value, you can’t use Goerli to pay for goods and services. You can, however, readily use Ethereum’s mainnet to do so. 



<h2 class="wp-block-heading tablecontent">Why Should You Practice on Testnet before Mainnet?</h2>



Decentralized networks don’t have traditional customer service. When you make a mistake, it is up to you to deal with the consequences.



When we are talking about decentralized finance, making a mistake can be costly. Even the largest cryptocurrencies in the space, like Bitcoin, are constantly named in headlines where users have lost large sums of money due to avoidable user error.



This is why it is invaluable to make use of a testnet before interacting with a mainnet—especially when it comes to getting your hands on a new project. 



On a testnet, you never have to worry about losing anything.



It’s the perfect place for you to experiment with a blockchain network. Testnets let you get your hands dirty, without having to endure any risk.



In other words, using a testnet is like playing with Monopoly money while you build the knowledge needed to venture out and safely transact with real value.



Since the <a href="https://www.thecoinzone.com/liquidloans/dont-dump-on-yourself-cash-out-with-liquid-loans/" data-wpil-monitor-id="1034">Liquid Loans</a> testnet has been made available ahead of the mainnet’s launch, developers and auditors are able to ensure that everything is running smoothly before anyone starts moving real value through the network.



Users have the opportunity here to capitalize on this early access to a preview of the Liquid Lonas network. You can do this by familiarizing yourself with the ins and outs of how the ecosystem works, so that you can hit the ground running when Liquid Loans goes live.



<h2 class="wp-block-heading tablecontent">How To Access Liquid Loans Testnet</h2>



<figure class="wp-block-image size-large"><img loading="lazy" width="325px" height="183px" srcSet="https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/08/28234631/Liquid-Loans-Testnet-2-375x211.webp 375w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/08/28234631/Liquid-Loans-Testnet-2-662x372.webp 662w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/08/28234631/Liquid-Loans-Testnet-2-768x432.webp 768w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/08/28234631/Liquid-Loans-Testnet-2.webp 688w" sizes="(max-width: 425px) 150px, 450px" src="https://ll-blog-dev.s3.ap-southeast-2.amazonaws.com/wp-content/uploads/2023/08/28234631/Liquid-Loans-Testnet-2.webp" alt="Liquid Loans Dapp" class="wp-image-3828"/></figure>



You can access the Liquid Loans testnet for free right now by visiting <a href="https://testnet.liquidloans.io/" target="_blank" rel="noreferrer noopener">Testnet.LiquidLoans.io</a>. 



Alternatively, you can navigate to the Liquid Loans project <a rel="noreferrer noopener" href="https://www.liquidloans.io/" target="_blank">website</a> and click the “Launch Testnet V4” button located on the top right corner of the page.



<h2 class="wp-block-heading tablecontent">3 Important Things to Understand BEFORE Mainnet</h2>



Since the testnet is your best opportunity to safely build familiarity with the Liquid Loans ecosystem, here are three things that you should master before venturing out to the mainnet. 



<h5 class="wp-block-heading">1. How to Set the Right Collateral Ratio</h5>



One of the most important things to know before you use the Liquid Loans mainnet is the ideal <a href="https://www.thecoinzone.com/tradfi/what-is-collateral-ratio" target="_blank" rel="noreferrer noopener">collateral ratio</a> that you should use when opening up a Vault.



Collateral is the asset which a borrower provides in order to take out a loan. In the Liquid Loans ecosystem, users can take out an interest-free loan by putting up PulseChain (PLS) as collateral. 



The collateral ratio is the ratio between the US Dollar value of the collateral in your Vault and its debt in USDL.



The minimum amount of collateral that a user can set to open a vault is 110%. However, 110% would be reckless on the part of the Vault owner as it could be liquidated during <a href="https://docs.liquidloans.io/recovery-mode" target="_blank" rel="noreferrer noopener">Recovery Mode</a>. 



Currently, it is recommended to keep this ratio comfortably above 150% in order to <a href="https://www.thecoinzone.com/liquidloans/how-to-avoid-pls-liquidations" target="_blank" rel="noreferrer noopener">avoid your vault being liquidated</a>. For example, you might decide to set it to a safer ratio of 250% or even as high as 500%+. 



The testnet is the perfect opportunity to figure out how to set a sufficient collateral ratio when taking out and maintaining a decentralized loan. 



<h5 class="wp-block-heading">2. How to Liquidate Vaults</h5>



Users in the <a href="https://www.thecoinzone.com/liquidloans/dont-sell-your-pls/" data-wpil-monitor-id="1135">Liquid Loans ecosystem</a> have the opportunity to maintain the health of the ecosystem and receive rewards by liquidating Vaults that have a collateral ratio below 110%.



When a Vault is liquidated, the debt of the Vault is canceled and absorbed by the <a href="https://www.thecoinzone.com/liquidloans/stability-pool" target="_blank" rel="noreferrer noopener">Stability Pool</a>. When this happens, its collateral is distributed among Stability Providers in order to reward them for their work in keeping <a href="https://www.thecoinzone.com/liquidloans/the-biggest-misconception-about-ll/" data-wpil-monitor-id="1633">Liquid Loans</a> healthy and decentralized.



It is beneficial to know how to liquidate Vaults before leaving the testnet, so that you can avoid missing out on the opportunity to do so on the mainnet.



Importantly, anyone can liquidate a Vault the instant it falls below the minimum collateral ratio of 110%. 



Each time you liquidate a vault, you receive a financial reward set at 200 USDL + 0.5% of the Vault&#x27;s collateral. As such, knowing how and when to liquidate vaults can be incredibly lucrative.



<h5 class="wp-block-heading">3. Borrowing and Lending Fees</h5>



While <a href="https://www.thecoinzone.com/liquidloans/why-real-estate-investors-understand-ll/" data-wpil-monitor-id="862">Liquid Loans</a> enables people to access decentralized interest-free loans, there is a one-time fee when opening a Vault.



Rather than the typical predatory fees and interest charged by banks and other lending platforms, <a href="https://www.thecoinzone.com/defi/defi-yield-protocol/" data-wpil-monitor-id="360">Liquid Loans</a> users only pay a transparent fee when taking out a loan against their PLS holdings.



This fee is entirely distributed back to the community. It’s collected in order to allow the network to stay decentralized while avoiding counterparty risk or the need for  third-party intervention.



Typically, the fee for opening a Vault sits at around 0.5%. However, this fee is adjusted based on the amount of redemptions taking place in the network. At times when the volume of redemptions is unusually high, this fee can reach as high as 5%. 



Before opening a Vault on the mainnet, it is crucial to familiarize yourself with this one-off fee on the testnet. Doing so will ensure that you are fully comfortable with how much it will cost you to take out your loan or extract value from your holdings while <a href="https://www.thecoinzone.com/liquidloans/what-you-can-do-with-liquid-loans" target="_blank" rel="noreferrer noopener">#NeverSelling</a>.



At the end of the day, the testnet is the best way to get practical experience in the Liquid Loans ecosystem before earning, lending, and borrowing real value once the mainnet launches.

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Click here to learn why you should get as much practice as possible on the Liquid Loans testnet.