BOLD

BOLD: Liquity V2’s Ethereum-Backed Stablecoin

BOLD is the stablecoin issued by Liquity V2, a collateralized borrowing system built around ETH and liquid-staked ETH. Its design combines user-set borrowing rates, branch-specific liquidation pools, redemptions, and limited governance over liquidity incentives.

What BOLD is designed to do

BOLD is Liquity V2’s native stablecoin. Users create it by depositing supported collateral into a Trove, Liquity’s term for a collateralized debt position. The protocol currently describes three collateral markets: WETH, wstETH, and rETH. BOLD can then be transferred to any compatible address and repaid by burning it against Trove debt. The intended value is one US dollar, but that target depends on collateralization, liquidations, redemptions, market liquidity, and oracle operation rather than on a bank deposit or fiat reserve.

The live deployment should be distinguished from Liquity’s earlier V2 contracts. Liquity’s technical documentation identifies the current BOLD contract as 0x6440f144b7e50D6a8439336510312d2F54beB01D on Ethereum, with 0x03569CC076654F82679C4BA2124D64774781B01D listed for Base and Optimism. The same documentation separately labels older addresses as legacy V2 deployments, so users and integrators need to check the network and contract version before interacting.

Trove mechanics and user-set rates

A Trove lets a borrower choose both the amount of BOLD debt and an annual interest rate. This differs from lending systems where a DAO or algorithm sets one protocol-wide borrowing rate. Liquity’s model creates separate rate markets for each collateral branch: borrowers can choose a lower rate but accept greater exposure to redemption, while a higher rate generally gives a Trove more protection from being selected first. The protocol also requires a minimum debt of 2,000 BOLD and can liquidate a position when its collateral ratio falls below the applicable minimum.

Interest accrues on Trove debt and is distributed through the protocol’s revenue system. Liquity’s risk documentation states that 75% of borrower interest is directed to the relevant Stability Pool, while 25% supports liquidity-provider incentives through Protocol-Incentivized Liquidity. This creates a direct connection between borrowing demand, BOLD liquidity, and the rewards available to depositors, but it also means those rewards depend on borrowers continuing to pay interest and on the associated markets retaining useful liquidity.

Liquidations and Stability Pools

Each collateral branch has its own Stability Pool. Depositors place BOLD into the pool, where it can be used to cancel the debt of an under-collateralized Trove. In return, depositors receive a proportional share of the liquidated collateral and a portion of borrower-paid interest. If the Stability Pool cannot cover all of a liquidation, the remaining debt and collateral can be redistributed among active Troves in the same branch. This branch structure is intended to prevent a liquidation involving one collateral type from directly transferring its debt to every other market.

The Stability Pool mechanism is not a guaranteed positive-yield product. A liquidation may produce a gain when the seized collateral is worth more than the cancelled BOLD debt, but oracle lag, a rapid fall in an LST’s value, or market disruption can reduce or reverse that result. The protocol also documents fallback procedures, including redistribution and market shutdown thresholds, for cases where collateral values deteriorate severely.

Redemptions and the peg mechanism

BOLD holders can redeem the stablecoin for an intended one dollar of collateral, less a dynamic fee. Redemptions are routed across collateral branches by the CollateralRegistry and generally prioritize Troves with the lowest interest rates. This gives BOLD a protocol-level exit path when it trades below its target: an arbitrageur may buy discounted BOLD and redeem it for collateral at face value, reducing BOLD supply. The mechanism can also affect borrowers directly, because a redeemed Trove loses debt and a corresponding amount of collateral.

Liquity V2 uses Chainlink price feeds for collateral valuation and includes branch shutdown logic for extreme conditions. If a market falls below defined collateral thresholds, new borrowing can be paused, withdrawals can be restricted, and the branch can be shut down while redemptions continue under special rules. These mechanisms are safeguards, not proof that BOLD will remain fully backed in every scenario; the project’s own risk disclosure acknowledges that a severe collateral failure could leave part of the supply under-backed.

Governance, dependencies, and access

Liquity V2 is designed to keep its core contracts immutable and non-upgradeable. Governance does not control core collateral parameters, interest-rate rules, liquidation logic, or the BOLD token contract. LQTY stakers have a narrower role: they can direct the 25% portion of protocol revenue assigned to liquidity incentives. This reduces the risk of discretionary core-parameter changes but also limits the system’s ability to respond through upgrades if an unforeseen design problem appears.

Liquity AG does not operate a central V2 frontend. Users instead interact through independent community frontends or directly through contracts. BOLD’s cross-chain distribution also introduces an external dependency: Liquity says it uses Chainlink’s Cross-Chain Token standard and CCIP for transfers across supported networks. A bridge or frontend can therefore add operational and smart-contract risk beyond the core Ethereum deployment.

Security record and practical limits

Liquity publishes the BOLD codebase and lists multiple reviews, including ChainSecurity, Dedaub, Certora, Coinspect, Recon, and a Cantina audit competition. These reports provide evidence that the contracts received external scrutiny, but an audit is not a guarantee against undiscovered vulnerabilities, economic failure, oracle problems, or losses caused by integrations. ChainSecurity’s report also states that the financial model itself was outside the scope of its review.

Key takeaways

• BOLD is minted against ETH, wstETH, and rETH through Liquity V2 Troves.
• Borrowers choose their own interest rates, with lower rates carrying greater redemption exposure.
• Each collateral branch has a separate Stability Pool and liquidation process.
• Redemptions are intended to support the one-dollar target but can affect borrowers and depend on oracle and market conditions.
• Core Liquity V2 contracts are designed to be immutable; LQTY governance mainly directs liquidity incentives.
• The Ethereum deployment and legacy V2 contracts use different BOLD addresses, so contract verification is essential.

Risks and open questions

• BOLD can become under-backed if a collateral market suffers a severe price collapse, oracle failure, or shutdown event.
• Stability Pool deposits can incur losses if liquidation collateral falls in value or is priced inaccurately.
• Borrowers face liquidation and redemption risk, especially when using high leverage or setting relatively low interest rates.
• Cross-chain BOLD transfers depend on bridge infrastructure and add risks beyond the Ethereum contracts.
• Independent frontends are not operated or fully vetted by Liquity AG, creating an additional user-interface and operational dependency.
• Immutable contracts cannot be upgraded to correct an unforeseen core design flaw.