Liquity V2
About
Liquity V2 is an immutable, decentralized borrowing protocol on Ethereum that lets users deposit ETH or liquid staking tokens (wstETH, rETH) as collateral to mint the overcollateralized stablecoin BOLD. It features user-set interest rates, up to 91% loan-to-value, one-click leverage looping ("Multiply"), and native yield opportunities through Stability Pool deposits and Protocol Incentivized Liquidity directed by LQTY stakers.
Where Does Yield Come From?
All yield in Liquity V2 comes from interest payments made by borrowers — there are no new tokens printed or given out as rewards.
Each borrower chooses their own interest rate (set per-second) on their Trove (their loan position). All those interest payments are collected into one stream, then split automatically by fixed percentages:
- 75% goes to the Stability Pool for that collateral type (there are separate pools for WETH, wstETH, and rETH).
- 25% funds Protocol Incentivized Liquidity (PIL) — a program that rewards external liquidity.
Stability Pool depositors (called "Earn") supply BOLD (the protocol's stablecoin) and earn a continuous yield paid in BOLD. Your share of the pool's rewards is proportional to your share of the pool's total deposits. This comes from the 75% revenue share of that borrow market.
On top of that, when a Trove becomes undercollateralized (its loan value exceeds its collateral), the Stability Pool's BOLD is used to buy the liquidated collateral at roughly a 5% discount. This creates liquidation gains paid out in staked ETH. You can withdraw from the pool at any time — there is no lockup.
The remaining 25% of protocol revenue (PIL) is distributed weekly to outside liquidity initiatives — like DEX pools or yield vaults — through a gauge voting system controlled by LQTY stakers. LQTY stakers earn time-weighted voting power (Voting Power = LQTY Staked × Staking Age) with no lock-up, and they keep receiving V1 protocol fees (LUSD and ETH) from Liquity V1. LQTY stakers may also receive third-party bribes for their votes.
For passive yield seekers: third-party wrappers like sBOLD (by K3 Capital), ysyBOLD (by Asymmetry), and yBOLD (by Yearn) auto-compound Stability Pool rewards. You earn passively while the receipt tokens can still be used across DeFi.
One key takeaway: all yield is paid in BOLD or staked ETH (the collateral itself). There are no protocol-issued liquidity mining tokens.
Persons
Audits
| Audit / Date | Findings | Verdict |
|---|---|---|
ChainSecurity30-08-2024 - 14-05-2025 |
| The audit identified 1 critical, 3 high, 10 medium, 20 low, and 12 informational findings, with all critical and high-severity issues remediated through code corrections across multiple versions; the single open medium finding (unredeemable trove interest rates) and open low finding (swap discrepancy) present limited residual risk, supporting ChainSecurity's conclusion that the core contracts provide a good level of security. |
Dedaub28-08-2024 |
| The audit uncovered no critical vulnerabilities but identified a significant number of accounting bugs concentrated in the batch interest delegation subsystem, all of which the Liquity team resolved. The codebase was well-structured with high-quality documentation and tests, though the auditors recommend further testing before deployment due to the complexity of the batch logic. |
Dedaub11-11-2024 |
| The second audit of Liquity V2 identified no critical, high, or medium severity vulnerabilities, with all four low-severity findings either resolved or acknowledged, indicating a mature and well-hardened codebase ready for deployment. |
Certora09-09-2024 - 22-11-2024 |
| All 11 formal verification properties for Liquity V2's batch trove mechanisms were mathematically proven correct under the stated assumptions, with no violations or counterexamples found. The protocol benefits from strong mathematical assurance that core batch-trove behaviors (interest rates, fees, debt/collateral calculations, and equivalence with individual troves) are implemented correctly. |
Coinspect31-12-2024 |
| The two medium-severity findings were fixed or mitigated, and the seven informational issues present minor residual risks; overall, the audit concludes that Liquity V2 Bold Core is a robust implementation of an innovative DeFi protocol. |
Coinspect20-01-2025 |
| The audit found one medium-risk issue that was resolved via documentation and two acknowledged non-risk recommendations, with no unresolved high or critical findings, indicating the Bold Governance contracts are reasonably secure for deployment. |
ChainSecurity25-09-2024 - 16-01-2025 |
| After all critical and high-severity issues were remediated across four code versions, the codebase provides a satisfactory level of security for the Liquity V2 Governance contracts, with only one accepted-risk medium finding and five low-severity items remaining open. |
Dedaub12-08-2024 |
| Dedaub's first audit of Liquity V2 Governance uncovered severe vulnerabilities affecting core voting and bribe mechanisms, all of which were resolved in a subsequent refactored codebase reviewed in a second audit; the scope and limited test coverage highlighted by the auditors suggest continued security diligence is warranted. |
Dedaub11-11-2024 |
| This re-audit identified and resolved 5 High-severity issues and most Medium findings through code refactoring, but significant residual risk remains from unresolved rounding errors in the average-timestamp-based accounting (P1) that could desync protocol invariants over time, and from potential gas-based manipulation of voting costs (M2) which was only partially addressed. |
Dedaub22-12-202417-01-2025 |
| The refactored offset-based voting mechanism resolved prior rounding errors, and the most critical bribe miscalculation has been fixed, but several medium-severity issues remain acknowledged and require ongoing user diligence. Overall the protocol has improved since prior audits and the fixes review further strengthened the codebase. |
Recon (Alex The Entreprenerd)02-10-2024 |
| The review uncovered two high-severity vulnerabilities—Batch shares rebase enabling unlimited free borrowing and insufficient flashloan access controls in Zappers—alongside systemic medium-severity risks in oracle-driven redemption pricing and batch rounding, making clear that the Batch accounting logic requires fundamental redesign and at least one more security exercise before deployment. |
Dedaub13-05-2025 |
| The fixes review found zero security vulnerabilities across all severity bands (critical, high, medium, low), only five advisory notes, confirming the post-contest changes were safely and thoroughly implemented. The protocol appears in a robust security state ahead of deployment. |
Cantina21-03-2025 - 27-04-2025 |
| The audit found no critical or high-severity issues, with all 65 findings (medium, low, and informational) acknowledged but unfixed, indicating the protocol team accepted the identified risks as within acceptable design tolerances. The absence of critical or high vulnerabilities suggests the core economic and smart-contract safety mechanisms of Liquity V2 are sound, though the two medium-severity acknowledged issues warrant user attention. |
Backers
Liquity's official homepage and team page list the following investors and backers (shown as logos linked to their respective sites): Greenfield, Polychain Capital, A Capital, 1kx, Lemniscap, Robot Ventures, Pantera Capital, Tomahawk.VC, IOSG (105g), and DeFi Collective. No specific funding round names, amounts, or dates are disclosed on Liquity's official website, documentation, or blog posts. The team page also notes that Cédric Waldburger (founder of Tomahawk.VC) serves as a venture investor advisor.
Legal
Legal form
AG (Aktiengesellschaft, Swiss corporation)
Registration jurisdiction
Switzerland (registered address in Zurich; legal venue / exclusive jurisdiction in Zug, Switzerland)
Status and notes
The operating entity is Liquity AG, described in the Website Terms as a software development studio. Its registered address is Dufourstrasse 43, 8008 Zurich, Switzerland. The Website Terms are governed by Swiss law with exclusive jurisdiction of the competent Courts of Zug, Switzerland. The Privacy Policy identifies Liquity AG as the data controller. The Protocol Disclaimer states that Liquity AG developed the Liquity Protocol software but is not the operator of and does not control any version of the protocol. All three legal pages (Website Terms, Privacy Policy, Protocol Disclaimer) are dated September 4, 2024 / November 14, 2024 and are publicly accessible.