Liquity V2 Whitepaper
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Liquity V2 improves on the pioneering achievements of Liquity V1 by introducing a more capital efficient borrowing protocol that offers user-set interest rates and the ability to borrow against multiple collateral assets.
Liquity V2 will support ETH as well as leading liquid staking tokens (LSTs) –Lido wrapped staked ETH, and Rocket Pool staked ETH– as collateral, and introduces a new stablecoin named BOLD. BOLD will be native to Ethereum and have minimal centralized collateral risks.
BOLD inherits the resilience of LUSD, while also benefiting from improved peg dynamics and sustainable real yield. Peg stability and demand for the stablecoin are ensured by diverting the entirety of the protocol’s revenues towards the Stability Pool and protocol incentivized liquidity (PIL) or similar incentives. By minting BOLD, users can gain instant liquidity or multiply their collateral, while managing their own borrowing costs relative to market conditions.
In addition to introducing dynamic interest rates, Liquity V2 also welcomes a novel adaptive redemption mechanism around it, which helps facilitate a dynamic market between borrowers and stability seekers without the need for active governance.
With minimal governance, and the core components of the system being immutable, Liquity V2 continues to prioritize security, decentralization, and user autonomy. []