Liquity V2

Lending

Liquity v2 is a decentralized borrowing protocol that lets users mint BOLD stablecoin by collateralizing ETH and LSTs with user-set interest rates.

Risk Rating
Average
Protocol Code Quality
Protocol Maturity
Protocol Design
What is Liquity V2?
What we like
Liquity v2 removes governance reliance and introduces user-set interest rates, making borrowing more capital-efficient and flexible.
What we like less
BOLD’s peg stability is entirely dependent on the effectiveness of redemptions, and borrowers must actively manage rates to avoid redemption risk, which may be complex for passive users.
What it means for you
Liquity v2 is a decentralized alternative to borrowing stablecoins without governance interference, offering attractive yield opportunities through Stability Pools and liquidity incentives.

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Information
Exploit/Hacks
None
Info
  • Website
  • Token: LQTY
  • Tags: Lending
Key Metrics
  • TVL: $38.2M (Rank #136)
  • TVL Ranking by Lending: #0
  • Blockchain: Ethereum
  • Chain TVL
    • Ethereum: $38.23M
Risk Assessment
Average
Protocol Code Quality
  • Code reviewed by several experienced auditors including ChainSecurity, Dedaub and Certora
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Latest protocol version launched recently in 2025; maturity less than three months increases technical risk as smart contracts are not battle-tested
  • Top 10% by total value locked reduces risk
  • Core contracts are fully immutable
  • No governance token and/or contracts are fully immutable
Protocol Design
  • Robust controls to mitigate oracle price manipulation
  • Isolated markets enable asset risks to be contained to each individual pool without impacting the entire protocol
  • Robust controls in place to prevent risky borrowing
  • Robust mechanisms in place to ensure healthy liquidations
  • Robust methods to accrue protocol reserves
Things to know about Liquity V2

What is Liquity V2

Liquity v2 is a decentralized borrowing protocol that allows users to deposit ETH and Liquid Staking Tokens (LSTs) as collateral to mint BOLD, a fully decentralized, overcollateralized stablecoin. It introduces user-set interest rates, enabling borrowers to control their borrowing costs without relying on governance or algorithmic rate adjustments. The protocol also features improved capital efficiency, multiple vaults (Troves) per address, enhanced redemption mechanisms, and protocol-incentivized liquidity (PIL) to sustain BOLD’s peg.

What are the risks

Liquity v2 allows borrowing against ETH, wstETH, and rETH, meaning BOLD’s stability depends on these assets retaining their value. A severe price collapse in any collateral asset could threaten the system. Borrowers must carefully manage their Loan-to-Value (LTV) ratios and interest rates to avoid liquidations or redemptions, as BOLD trading below $1 increases the risk of low-interest borrowers having their debt repaid in exchange for their collateral. Additionally, the protocol relies on Chainlink oracles for pricing, and any failures or delays in updates could impact liquidations or redemptions. While Liquity v2 is immutable and non-upgradable, reducing governance risks, potential smart contract vulnerabilities could still pose a threat to the protocol’s stability.

How you make money on Liquity V2

Users can earn yield through Stability Pools, where BOLD deposits earn liquidation gains (in ETH or LSTs) and protocol revenue (from borrower-paid interest). Liquidity providers can stake LQTY to direct incentives and earn a share of fees. BOLD holders can supply liquidity on DEXs to earn incentives via Protocol-Incentivized Liquidity (PIL). The ability to loop leverage ETH exposure with one-click multipliers also enables strategies for yield maximization.

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