[Serenity Premium] Liquity V2: BOLD and User-set Borrowing Rate [2nd Review Jan 2025]

We covered Liquity's Chicken Bond as early as in 2022. This year, Liquity brought another innovation, a CDP where users can set their own borrowing interest rate. This article summarises Liquity V2, the new stablecoin BOLD and this new feature of Liquity V2.

Recap of Liquity

Liquity is a CDP, launched a time when MakerDAO was the market incumbent. Liquity made some innovations with its LUSD then:

• Instead of users (or bots) making liquidations, Liquity invested the idea of stability pool and automated the liquidation process. This became ubiquitous in CDP later.

• Instead of charging an interest rate, Liquity charges only a loan initiation fee. This proves to be too aggressive and not economical of the protocol's growth. So in V2, it's changed to user-set interest rate.

• Liquity does not have a front-end. This could be of legal concern, due to founder Dr. Robert Lauko's legal Ph.D background. This is still the case in V2.

• Liquity V1 has minimal governance. Despite having a LQTY token, its utility is very limited. Most contracts of Liquity is hard-coded and immutable. To many, Liquity is the purest CDP mechanism in DeFi - a stark contrast against many other protocols that are devoted to creating layers of confusing mechanisms. In V2, there's no governance and LQTY is not relevant either.

As of today, there are still $371m ETH locked in Liquity for 57.7m LUSD.

Liquity V2 and BOLD In a Nut Shell