Bold Stablecoin
BOLD is a decentralized, overcollateralized stablecoin backed by ETH and LSTs, designed to maintain stability through redemptions, user-set interest rates, and Stability Pools.
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- Asset Type: ERC-20
BOLD is a low-cap, fully collateralized asset. This asset is exposed to the underlying risks of Liquity V2, a protocol rated as Average.
BOLD is a stablecoin that trades within 50bps of its peg to USD, which makes it a less volatile store of value.
Bold Stablecoin has no dependencies.
BOLD does not have a supply schedule. BOLD is a decentralized, overcollateralized stablecoin backed by ETH and LSTs, maintaining stability through Stability Pools, redemptions, and user-set interest rates.
How does BOLD work
BOLD is an overcollateralized, decentralized stablecoin issued by Liquity v2, backed by ETH and Liquid Staking Tokens (LSTs) like wstETH and rETH. Users can mint BOLD by depositing these assets as collateral into a Trove (a borrow vault) and setting their own interest rate. Unlike traditional borrowing models, Liquity v2 introduces user-set interest rates, allowing borrowers to determine their own borrowing costs. Borrowers pay interest over time, and 75% of these payments go to BOLD depositors in Stability Pools, offering them real yield. Additionally, BOLD remains redeemable for its underlying collateral at all times, ensuring it maintains a strong backing.
What are the risks?
BOLD’s stability relies on the value of its underlying collateral (ETH, wstETH, and rETH). A severe drop in collateral value could lead to liquidations and impact BOLD’s overcollateralization. If BOLD trades below $1, redemptions allow users to swap BOLD for collateral, starting with borrowers who set the lowest interest rates—effectively reducing their collateral holdings. This creates a dynamic where borrowers must balance liquidation risk, redemption risk, and borrowing costs. Additionally, Liquity v2 depends on Chainlink oracles for pricing, meaning delayed or faulty price updates could impact liquidations or redemptions. The Stability Pool also plays a crucial role in absorbing liquidations, but if it lacks sufficient deposits, liquidation risk shifts to redistribution among other borrowers, increasing systemic risk.
How is the price of BOLD kept stable?
BOLD maintains its peg through market-driven mechanisms rather than centralized controls. When BOLD trades above $1, borrowers lower their interest rates since redemption risk is reduced, making borrowing more attractive and increasing supply. Conversely, if BOLD trades below $1, arbitrageurs redeem it for collateral at face value, reducing supply and pushing the price back up. The Stability Pool acts as the first line of defense against liquidations—when a borrower is liquidated, their collateral is distributed to Stability Pool depositors at a discount, ensuring that bad debt does not accumulate. If the Stability Pool is empty, liquidations are handled through redistribution, spreading debt and collateral among existing borrowers. By combining redemptions, Stability Pool liquidations, and redistribution mechanisms, BOLD maintains a strong peg without relying on external interventions.