Liquity V2

Liquity V2 is a decentralized borrowing and stablecoin protocol on Ethereum mainnet that lets users borrow the ETH‑backed stablecoin BOLD against ETH and selected liquid staking tokens (wstETH, rETH). Protocol identification

• Name: Liquity V2
• Website / App: liquity.org and liquity.app (borrow/earn front‑ends).
• Docs: docs.liquity.org (Liquity V2 documentation, FAQs, risk disclosure, technical docs & audits).
• Category: DeFi lending / collateralized debt platform, Ethereum‑native stablecoin issuer.
• Deployment chain: Ethereum mainnet only for the core protocol; BOLD is bridged via Chainlink CCIP to other chains but the borrowing protocol itself is “native to Mainnet and no cross‑chain risks”.
• Native stablecoin: BOLD (ETH/LST‑backed).
• Token address (Ethereum mainnet): BOLD stablecoin at 0x6440f144b7e50D6a8439336510312d2F54beB01D.
• Launch timing: Liquity V2 is described as launched on Ethereum mainnet in Q2 2025. A redeployment post states V2 goes live on May 19 after audits and testing.
• Key functional features vs V1: user‑set interest rates; support for ETH and LST collateral (wstETH, rETH, plus WETH internally); new adaptive redemption mechanism; protocol‑incentivized liquidity (PIL); higher capital efficiency; multiple Troves per address; no “Recovery Mode”; looping / one‑click multiply. Main contract identification (Ethereum)
• Core contracts repo: “Liquity v2 monorepo containing the contracts, subgraph…” on GitHub; describes a collateralized debt platform with Troves and BOLD mint/burn mechanics.
• Explorer verification: The BOLD token address above is presented as the “Mainnet $BOLD token address” and “Official Liquity on ETH Mainnet”. Direct on‑chain verification status and other contract addresses (e.g., Trove manager, PIL, staking) are Not verifiable as of 2026‑09‑03 under current constraints. Fork lineage / relationship to Liquity V1
• Liquity V2 “builds on the success of V1” and “improves on the pioneering achievements of Liquity V1” by introducing dynamic, user‑set interest rates, multiple collateral types (ETH and LSTs), a new adaptive redemption mechanism, PIL, and removal of Recovery Mode.
• V2 retains the immutable, governance‑minimized borrowing model and ETH‑only risk profile (ETH, wstETH, rETH) but introduces the new stablecoin BOLD, distinct from V1’s LUSD.
• This is not presented as a fork of an external protocol like Maker or Aave, but as a second version of Liquity’s own design. Audit / fork‑risk context
• A redeployment update notes a five‑week audit contest with 800+ researchers, multiple re‑audits, and weeks of testing before V2 went live. Technical docs & audits section exists in the docs.
• Liquity V2 is described as immutable (no governance upgrades), which reduces typical “malicious‑modification” risk after deployment but increases migration risk if bugs exist.
• No independent evidence of malicious modifications in third‑party forks of V2 was found; such risks therefore are Not verifiable as of 2026‑09‑03 given current data access. On‑chain metrics and contract map
• Because direct on‑chain querying is not available in this run, all on‑chain claims (TVL, usage, full contract set, explorer verification beyond the BOLD address) are Not verifiable as of 2026‑09‑03.

Liquity V2 appears to be a real, live product rather than a pure landing page: the main site points users to active community frontends (Liquity.App, DeFi Saver, LQTY.IO, Trove Zero), and the official docs plus GitHub repos show a maintained monorepo with contracts, subgraph, frontend, and governance code. The public guide also describes live user flows for borrowing, earning, and protocol resources, which indicates functional product documentation rather than marketing-only copy. I could not verify live deposit/withdrawal status from on-chain data in this run, so the exact current availability of those actions is Not verifiable as of 2026-09-03.

The docs and governance repository do document deposit/withdrawal mechanics, but that is not the same as confirming present on-chain operability. For UX maturity, the presence of dedicated docs, a technical resources section, and separate public repositories suggests a relatively mature interface and documentation stack. I did not verify broken links, fake metrics, or template-site signs from the available source set, so those items are Not verifiable as of 2026-09-03.

An open API does appear to exist: Liquity’s API directory lists multiple public APIs, including a Liquity V2 Governance API and a Liquity V2 Website Data API, and the docs mention an API domain used for static JSON feeds.

Liquity V2 has an active bug bounty program hosted on Cantina. The current public program page lists a start date of 1 Jul 2025, with rewards capped at 125,000 BOLD for critical findings, 62,500 BOLD for high, and 12,500 BOLD for medium; low-severity rewards are discretionary. The program page also shows 487 findings submitted.

Separately, Liquity’s earlier V2-related bounty announcement on Hats Finance said the bounty was underwritten there and covered both V1 and V2 code, but that older announcement is superseded by the Cantina program page for the current active program. Results: an older Liquity bug bounty announcement says the program had been ongoing since 19 Feb 2021 and used a maximum bounty pool of $250,000; that was for Liquity’s initial program, not specifically the current V2 bounty. A later Liquity post on auditing V2 says the V2 codebase continues to be covered by a bounty program, but the current active submission venue is Cantina.

Assessment date: September 5, 2026. Dependencies / counterparties

• Oracle: Chainlink is the critical external dependency for ETH/USD, stETH/USD and rETH/ETH pricing. Failure, staleness, disabled feeds, or manipulation can cause delayed/incorrect liquidations and redemptions. Liquity’s controls include staleness checks, composite LST pricing, and automatic branch shutdown; however, Chainlink remains a single-provider dependency.
• Collateral issuers: wstETH introduces Lido staking, smart-contract, validator, withdrawal and stETH/ETH depeg risk; rETH introduces Rocket Pool exchange-rate, liquidity and issuer risk. A severe LST failure can create branch bad debt and potentially affect BOLD confidence.
• Stablecoin exposure: BOLD is backed only by WETH, wstETH and rETH—no RWA, fiat reserve, custodian, CEX, market-maker, or external stablecoin collateral is structurally required. BOLD’s main failure mode is collateral/oracle failure followed by bad debt, mass redemptions and depeg.
• Bridges / cross-chain: Core Liquity V2 borrowing is described as Ethereum Mainnet-only, with no cross-chain dependency. Contradiction: current technical documentation lists BOLD deployments on Base, Arbitrum, Optimism and other chains, while the risk disclosure still describes cross-chain as “none” and CCIP as potential/future. Therefore, Ethereum-core risk is bridge-independent, but cross-chain BOLD holders may face CCIP/token-messaging risk.
• Third-party vaults: sBOLD is maintained by K3 Capital, not Liquity; users of that wrapper add separate smart-contract/operator risk. Failure scenarios: Chainlink outage or stale LST feed → branch shutdown or incorrect pricing; Lido/Rocket Pool depeg or insolvency → collateral shortfall; rapid LST crash/oracle lag → liquidation losses; BOLD confidence loss → redemptions across healthier branches and possible systemic depeg. Exposure quantification: Not verifiable as of September 5, 2026. Dune/on-chain verification was unavailable; no defensible maximum exposure percentage is reported. Fields: dependency_failure_active: null; max_exposure_pct: null

Liquity V2 on Ethereum is organized as a non-custodial protocol: users keep control of their assets through smart contracts rather than handing them to an intermediary, and the protocol states that minters can always withdraw collateral and BOLD can never be frozen. Custody is segregated by collateral branch, with separate ETH, wstETH, and rETH branches and isolated contract sets for each collateral type. On withdrawals, the docs say users are generally free to withdraw collateral whenever they want, but withdrawals can be temporarily suspended if a borrow market’s total LTV goes above 75%; the risk disclosure also says there is no manual pause/freeze/shutdown function, though market-level shutdown thresholds can restrict actions under stress.

The main measurable impact reported publicly was outflows rather than a confirmed direct loss: Cointelegraph cited more than $17 million in 24-hour outflows after the warning, while The Defiant cited about $30 million over two days; these figures reflect liquidity exits, not a documented exploit loss to users.

Liquity V2 had a Stability Pool (“Earn”) issue disclosed on Feb. 12, 2025; the team said the protocol continued to work as expected, no users were known to be impacted, and the issue appeared isolated to the Stability Pool, with a redeployment/patched version planned.

Confirmed Stability Pool (“Earn”) vulnerability on the initial Ethereum deployment, disclosed February 12–13, 2025. Affected Liquity V2 Stability Pool depositors; Liquity stated Borrow, Multiply, Stake, collateral withdrawals, and BOLD backing were unaffected. Users were urged to withdraw immediately.

The initial immutable deployment was retired and patched contracts were redeployed on May 19, 2025 after additional audits and an open audit contest. Publicly reported realised loss: $0; no users were known to have been impacted. No reimbursement was required or publicly reported.

Current status: resolved. On-chain impact and reimbursement cannot be independently verified without Dune: Not verifiable as of September 5, 2026.

Date: July 3, 2025. Cause: logic/design flaw in shutdown-mode urgentRedemption: permissionless callers could select favorable sUSDe troves and receive a 2% collateral bonus without the normal ICR floor, enabling flash-loan extraction. Affected: the Ethereum sUSDe branch, its ActivePool, and the selected trove borrowers/system collateral.

Loss: approximately $2,696.49 realized by the protocol/users; attacker proceeds were approximately $2,696.49 (1.0385 ETH). Response/fix: the exploit and transaction are documented by an independent reproduction; no public Liquity incident response, deployed patch, or reimbursement was found. Because V2 contracts are immutable, a deployed-contract fix is not verifiable as of September 4, 2026.

Recovered: $0 publicly verified. Reimbursement: Not verifiable as of September 4, 2026. Current status: unresolved.

Liquity V2’s key management is organized to minimize privileged control. The protocol states that it has no admin key and that nobody can alter the system rules directly, while users themselves set and can only change their own interest rates. The core lending system is split into isolated collateral branches on Ethereum, each with its own contracts, while the separate governance layer only allocates the protocol’s incentive portion via LQTY staking and voting.

For interest-rate management, Liquity V2 uses an autonomous rate management system (ARM) rather than a human operator. The ARM consists of three Ethereum batch manager contracts, one per collateral type, plus a management canister hosted on the Internet Computer; this is an operational management component, not an admin key for changing protocol rules. For governance / incentive distribution, LQTY holders stake to obtain voting power, vote in weekly epochs, and direct the 25% incentive portion to registered initiatives; the governance system contract manages registration, staking/unstaking, voting mechanics, epoch transitions, and reward distribution.

This is a restricted governance function, not general protocol administration. So, in practical terms, Liquity V2 key management is decentralized and role-limited: users control their own positions, governance controls only incentive routing, and no centralized admin key is documented for altering core protocol rules.

As of September 5, 2026 — Ethereum Mainnet Structured fields:

• admin_can_drain: null — collateral-drain authority was not established; current owner/role state across the deployment is Not verifiable as of September 5, 2026.
• audited_deployment: true — core and governance code received reviews from ChainSecurity, Dedaub, Certora, Coinspect, and Recon. Final ChainSecurity governance review lists 1 critical and 6 high findings as corrected or specification-changed.
• upgradeable: false (design/documentation evidence; proxy-admin confirmation unavailable).
• unresolved_critical: 0 known in the cited final audit report.
• unresolved_high: 0 known in the cited final audit report. Addresses / verification. Current mainnet deployment includes BOLD 0x6440f144b7e50D6a8439336510312d2F54beB01D; shared contracts include CollateralRegistry 0xf949982b91c8c61e952b3ba942cbbfaef5386684, and the ETH branch includes BorrowerOperations 0x372abd1810eaf23cb9d941bbe7596dfb2c46bc65, TroveManager 0x7bcb64b2c9206a5b699ed43363f6f98d4776cf5a, StabilityPool 0x5721cbbd64fc7ae3ef44a0a3f9a790a9264cf9bf, and PriceFeed 0xcc5f8102eb670c89a4a3c567c13851260303c24f. BOLD is source-code verified on Etherscan. Upgrade/admin model. Liquity states that V2 core contracts are immutable and non-upgradeable; governance is limited to directing 25% of protocol revenue toward liquidity incentives. No proxy-admin/timelock architecture is documented. Dune decoded-event checks and on-chain timelock-delay measurement are Not verifiable as of September 5, 2026. The verified BOLD ABI nevertheless exposes an owner and owner-gated mint, setBranchAddresses, and setCollateralRegistry functions. Whether ownership was renounced or otherwise rendered harmless is Not verifiable as of September 5, 2026. This is the principal residual admin-risk finding. Controls / exit risk. No manual pause, freeze, or admin shutdown is documented. Branches can automatically shut down after severe collateral/oracle conditions; borrowers can close Troves, and urgent redemptions are enabled. Users therefore have a protocol-level exit path absent contract failure or oracle/collateral impairment. Architecture: ``text BOLD ── CollateralRegistry ──┬─ ETH Branch ├─ rETH Branch └─ wstETH Branch Each branch: BorrowerOps ↔ TroveManager ↔ ActivePool StabilityPool / PriceFeed / liquidation modules Governance ── revenue allocation only; no core upgrade path `` Worst case: compromised residual owner authority could mint BOLD or replace trusted system addresses, causing dilution, broken accounting, or branch-level loss; it is not evidenced as a direct arbitrary collateral-withdrawal function. Rug/freeze risk is lower than upgradeable systems but not zero until owner state is independently verified.

Formal verification of Liquity V2/BOLD.

Certora — Formal Verification

ChainSecurity — BOLD Core

Liquity V2 / Bold smart contract code assessment and Liquity V2 Governance audit.

Bold smart contract audit / code assessment. The supplied summary says the audit focused on functional correctness, rounding issues, and external integrations, and that prior issues in zappers, rounding in debt shares, and Balancer/leverage-zapper integrations had been resolved. The provided excerpt does not include the exact critical/high/medium issue counts for this report, so those counts are Not verifiable as of 2026-08-28 from the supplied text.

Fix status: the summary explicitly states the cited issues were resolved. Bytecode-match / deployed-code coverage: Not verifiable as of 2026-08-28.

Liquity Bold smart contract audit for Ethereum mainnet deployment, plus separate governance audit.

Bold Core smart contract audit. The report covers the Solidity implementation of Liquity V2 at repo liquity/bold, commit aa8361269bb505de06afbe5a6646160cc9a935ef. Coinspect’s public blog highlights two significant findings: BOLD-01 (approval reset renders Leveraged Zappers unusable) and BOLD-05 (a single-oracle failure can halt redemptions across all branches, potentially causing a depeg).

The supplied PDF excerpt does not enumerate severity counts beyond those named findings, so critical/high/medium totals are Not verifiable as of 2026-08-28 from the provided text. Fix status: not clearly stated in the supplied sources. Bytecode-match / deployed-code coverage: Not verifiable as of 2026-08-28.

Liquity V2 Bold Core smart contract audit.

Liquity V2 Bold Governance smart contract audit.

Dedaub — Governance Audit 1

Core protocol audit I. The report covers Liquity v2 (BOLD) smart contracts in the private repo liquity/bold, branch dev, at commit 2a859733eff540aae2996d13b06a9c5d334e7616. The audit found several accounting bugs, mostly around batch interest delegation, but no critical severity issues.

The report recommends further testing and potentially a second audit before deployment. Fix status: the later Dedaub re-audit says the second audit mainly examined updates after this initial audit and reviewed some fixes from this phase, but a full issue-by-issue closure list is not provided in the supplied sources. Bytecode-match / deployed-code coverage: Not verifiable as of 2026-08-28.

Dedaub — Core Protocol Audit II

Recon — Liquity Security Review

Liquity V2 is an evolution of the Liquity protocol, so the relevant “founders & team” reality check is essentially the Liquity core company and contributors behind V1, now branding around V2. Founders & key leaders

• Founder (Liquity / protocol family, incl. V2): Robert Lauko – identified as founder and CEO/Head of Research of Liquity, a Zurich‑based blockchain company building decentralized borrowing protocols (LUSD, LQTY, BOLD). He holds a PhD in Law (University of Zurich) and previously worked as a blockchain researcher at DFINITY in Switzerland, focusing on consensus and incentives, after a career as a lawyer and law clerk in Swiss public institutions.
• Co‑founder / Lead Engineer: Rick Pardoe – repeatedly named as co‑founder of Liquity and lead/ core Solidity engineer, with degrees in Physics and Economics and prior blockchain dev experience (e.g., ethdevs.com).
• Liquity V2 CEO: Michael Svoboda – listed on the Liquity V2 team page as CEO, with prior roles as CEO/COO at several blockchain companies and a background in computer science and economics. Team composition & public vs. anon
• Liquity V2’s team page lists multiple named individuals with roles (lead engineer, backend/frontend engineers, operations, growth, etc.), including Bingen Eguzkitza, Dániel Attila Simon, Samrat Lekhak, Bojan Peček and others.
• Core contributors and advisors (e.g., Kolten Bergeron, Ashleigh Schap, Yulin Liu) are public, with verifiable prior roles at Stellar, Uniswap, MakerDAO, academia.
• Overall, the core team is public and doxxed, with LinkedIn/podcast/media presence rather than anonymous avatars. Jurisdiction, office, onshore/offshore
• Multiple independent profiles describe Liquity as a Zurich, Switzerland–based blockchain company.
• F6S and other startup directories list location: Zurich, Switzerland; founded 2021.
• There is no clear evidence of a regulated, licensed financial entity; Liquity is typically described as a decentralized protocol, with “decentralized operations” and development mainly in Switzerland.
• A specific street‑address office for Liquity AG or similar is not verifiable as of 2026‑09‑03. Track record, prior projects, hacks / red flags
• Lauko’s prior work at DFINITY and Swiss public sector is well‑documented.
• No major protocol hacks or founder‑linked exploits of Liquity V1/V2 are reported by independent reviews up to 2026; Liquity is often cited as a conservative, over‑collateralized ETH‑backed system. (Absence of evidence is not proof of absence, but no high‑profile security event is visible in independent overviews.)
• Investors such as Pantera Capital and Tomahawk.VC (Cédric Waldburger) are reported as backers, indicating at least some institutional VC due diligence. Reality check: real business vs. pure web front
• Evidence supports a real, Swiss‑based development company with named staff and VC backing, building an on‑chain, governance‑minimized protocol (V1 and V2), rather than a throwaway anonymous web front.
• However, the protocol itself is intentionally non‑custodial and decentralized, with no clear regulated financial entity standing behind user positions; for institutional risk, governance/recourse should be treated as minimal by design.

Liquity V2 has a generally strong *protocol reputation* because it is the continuation of the well-known Liquity team and is presented as a decentralized borrowing protocol with minimal governance and immutable core components, which are repeatedly emphasized in its whitepaper and launch materials. The main *negative reputational event* in the public record is a reported stability-pool investigation / bug scare in 2025 that triggered withdrawals and a redeployment discussion; Liquity’s team said funds remained safe, but third-party coverage treated the episode as a meaningful trust test. Audits are a reputational positive: Liquity stated V2 went live after a five-week audit contest with 800+ researchers and multiple re-audits, and independent summaries also mention firms such as ChainSecurity, Dedaub, and Certora.

Economic model (Ethereum only). Liquity V2 is a non-custodial CDP protocol: users deposit ETH, wstETH, or rETH and mint BOLD. Borrowing is directional/long-ETH exposure, not market-neutral. Borrowers choose an annual interest rate; BOLD debt is variable-rate rather than interest-free.

One-click looping/multiplication is supported, creating leverage and liquidation risk; the site advertises up to 11× exposure, an unverified marketing claim. Yield and sustainability. BOLD Stability Pool yield is primarily borrower-paid interest plus liquidation collateral gains. Liquity states that 75% of borrower revenue goes to Stability Pools and 25% funds protocol-incentivized liquidity; no external TradFi/RWA lending is intended. This is fee-funded rather than token-emission-funded yield, although APY varies with borrowing demand, liquidation activity, BOLD deposits, and ETH/LST prices.

Liquidation gains are not risk-free and can become losses during oracle lag or LST crashes. Assets, exits, and constraints. Collateral: ETH, wstETH, rETH. BOLD can be withdrawn/used after borrowing, while collateral remains locked until debt and accrued interest are repaid; minimum debt, LTV, liquidation thresholds, redemption exposure, and gas costs constrain exits. Anyone holding sufficient BOLD can redeem for a dynamic mix of ETH/LST collateral, less a redemption fee; redemptions prioritize lower-rate Troves and can partially reduce a borrower’s position. Fees/revenue. Revenue consists mainly of borrower interest, upfront borrowing fees, redemption fees, and liquidation-related compensation.

DefiLlama reports current TVL of $93.87m, all on Ethereum, +30.3% over 30 days; 30-day fees are $180,459 and protocol revenue $41,278. It tracks three yield pools with average supply APY 3.35%. APY history/volatility and product-level TVL: Not verifiable as of September 5, 2026.

Dune comparison and on-chain verification: Not verifiable as of September 5, 2026. Risk conclusion: organic fee-backed yield, but economically exposed to ETH/LST collateral, liquidation losses, BOLD peg/redemption dynamics, leverage, and external DEX liquidity. No lock-up is indicated; withdrawals are permissionless but subject to Trove settlement and transaction execution.

Assessment — Ethereum; as of September 5, 2026

• Treasury / reserve design: Liquity V2 is documented as having minimal governance and no upgradeable governance powers. Borrowing revenue is designed to flow to users and incentives rather than accumulate in a conventional protocol treasury. The official “no centralized treasury” statement is an unverified marketing claim; independently verifying the absence of balances requires raw on-chain analysis.
• Revenue policy: 75% of borrowing revenue incentivizes branch Stability Pools; the remaining 25% is allocated through Modular Initiative Governance to permissionless initiative addresses. Claimed rewards are transferred directly to the qualifying initiative.
• Addresses / custody: No dedicated reserve or treasury address was identified in the reviewed sources. The documented Ethereum Governance address is 0x807def5e7d057df05c796f4bc75c3fe82bd6eee1; it is a revenue-distribution mechanism, not evidence of a treasury balance. Core contracts—including the CollateralRegistry, ActivePool, StabilityPool and TroveManager—custody or account for user collateral and system operations, not necessarily protocol-owned reserves.
• On-chain balances via Dune: Not verifiable as of 2026-09-05. Dune MCP was unavailable for this run; no reserve balance, token composition, custody concentration, or latest-block snapshot is asserted.
• Control: Governance can direct the 25% incentive portion to initiatives, while the core protocol is described as immutable and non-upgradeable. This does not establish discretionary control over a treasury.
• Attestations: Not verifiable as of 2026-09-05. The located audits concern smart-contract security, not reserve attestations or proof-of-reserves. Contradiction / scope note: DeFiLlama currently reports Ethereum TVL of approximately $95.32m, versus the previously recorded $72.16m. This is protocol TVL, not treasury reserves, and must not be treated as reserve evidence.

Liquity V2 does not yet have a launched native token on Ethereum as of 2026-09-03. All “Liquity V2 token” references are about a planned governance/revenue token for the upcoming V2 protocol, not an on-chain deployed asset. Because of this, most tokenomics items in your checklist are Not verifiable as of 2026-09-03:

• Native token name/ticker & contract address The team has discussed a future Liquity V2 governance token in blog/AMA-style materials, but there is no confirmed ticker, no deployed ERC‑20 contract, and no Etherscan-verified address attributable to “Liquity V2” on Ethereum mainnet. Not verifiable as of 2026-09-03.
• Total vs circulating supply; market cap; FDV No deployed token ⇒ no on-chain supply, market cap, or FDV. All third-party pages that try to list “Liquity V2” as a tradable token either refer to Liquity V1’s LQTY token or are unverified/likely erroneous aggregator entries. Not verifiable as of 2026-09-03.
• Token utility, governance role, revenue share, buybacks, burns, staking rewards Design discussions mention that V2 will be more governance-minimal than typical DeFi, in line with Liquity’s ethos from V1, but specific token utilities for a new V2 token are not finalized in any primary source (audits, governance, or code). Any stated roles are roadmap-level and therefore “unverified marketing claim”. Not verifiable as of 2026-09-03.
• Emissions & unlock schedule; team/investor/treasury/community allocations There is no binding token distribution schedule, vesting calendar, or allocation table posted in formal token docs, legal filings, or audited distribution contracts. Not verifiable as of 2026-09-03.
• Top-holder concentration & insider wallets; mint/blacklist/fee-switch; control With no token contract, holder and privilege analysis cannot be performed. Not verifiable as of 2026-09-03.
• DEX liquidity depth & listings There are currently no verifiable Uniswap/Curve/Balancer pools for a Liquity V2 token on Ethereum; where names appear, they either reference LQTY (V1) or are dust / spoof pools that cannot be reliably attributed. Not verifiable as of 2026-09-03. Callout – name collision vs Liquity V1:
• Liquity V1 has a live LQTY token and established tokenomics. Many aggregators auto-extend these to “Liquity V2”, but that is incorrect. For your institutional risk work, treat Liquity V2 as currently non-tokenized and keep V1’s LQTY separate.

For Liquity V2 on Ethereum, a Bitcoin move below $10,000 is not directly specified as a protocol trigger, because Liquity V2’s risk controls are based on each borrow market’s collateral price and TCR (total collateral ratio), not BTC price itself. The stress impact therefore depends on whether the BTC collapse spills over into ETH/LST prices enough to push a Liquity borrow market below its Critical Threshold (CT) or Shutdown Threshold (ST). Under that stress, Liquity V2 would first block new debt creation if a market’s TCR falls below the CT, while allowing withdrawals only if they are paired with sufficient debt repayment.

If TCR falls below the ST, the affected borrow market is shut down, new borrowing stops, and only closing Troves remains available; the protocol then encourages redemptions against that collateral branch. Liquity V2 also states that in extreme collateral-price drops or oracle failure, a market can become undercollateralized, creating bad debt and a possible bank-run style outcome where part of the BOLD supply may not be redeemable. This is the main tail-risk relevant to a BTC crash scenario, but the actual size of any exposed debt or TVL on Ethereum is Not verifiable as of 2026-09-03 in this run.

So the practical stress answer is: BTC < $10k would matter only insofar as it destabilizes ETH/LST collateral and oracle conditions; if that spillover is severe enough, Liquity V2 would move from restricted borrowing to market shutdown and urgent redemptions.

Under a 20% depeg of the largest collateral, Liquity V2’s impact depends on which collateral is largest and whether the branch’s TCR crosses the protocol’s branch-specific thresholds. Liquity V2 uses independent collateral branches with Critical Thresholds that block new debt creation and Shutdown Thresholds that disable borrowing and trigger redemptions if the branch becomes too undercollateralized. For the ETH branch, the published thresholds are CT 150% and ST 110%; for wstETH/rETH, they are CT 160% and ST 120%.

A 20% price drop does not automatically imply shutdown; the consequence depends on the branch’s starting collateralization. If the largest collateral is ETH, a 20% depeg only pushes a branch from TCR to TCR×0.8, so a branch starting below 137.5% would fall under ETH’s 110% shutdown threshold. If the largest collateral is wstETH/rETH, a branch starting below 150% would fall under the 120% shutdown threshold.

These are mechanical implications of the stated thresholds, not on-chain measured outcomes. Liquity’s documented liquidation design means losses are first absorbed by the Stability Pool, with any remainder redistributed; for ETH, the stated maximum loss is 10% of debt (at most), and for wstETH/rETH it is 20% of debt. Therefore, a 20% collateral depeg can materially increase liquidations and redemptions, but the protocol is designed to keep the market functioning until branch-level thresholds are breached. Not verifiable as of 2026-09-03: the actual largest-collateral mix on Ethereum, current branch TCRs, and whether a 20% depeg would trigger CT or ST in practice, because on-chain verification is unavailable in this run.

For Liquity V2 on Ethereum, the relevant *top counterparty insolvent* stress is a major borrower liquidation or a branch shutdown triggered by extreme collateral price collapse or oracle failure. Liquity V2’s own risk disclosure says that if a market’s TCR falls below the Critical Threshold, new debt is paused and withdrawals are restricted; if it falls below the Shutdown Threshold, the market shuts down and urgent redemptions begin. Expected loss path and who absorbs it:

• Normal liquidation path: undercollateralized Troves are liquidated; the Stability Pool (SP) offsets debt first, and SP depositors receive the seized collateral.
• If SP is insufficient or empty: remaining debt and seized collateral are redistributed to active Troves in the same branch, socializing losses across borrowers.
• If the branch is shut down / oracle fails: the protocol disables borrowing and relies on redemptions to clear debt; any residual bad debt is not fully specified in the docs and is therefore Not verifiable as of 2026-09-03. Compensation and impact path through contracts:
• SP depositors are compensated by collateral seized from liquidations when the SP covers debt.
• Borrowers/Troves absorb residual loss through redistribution when SP liquidity is exhausted.
• Gas compensation is taken from seized collateral before redistribution, reducing what remains for others.
• Contract flow is: price/oracle shock → ICR falls below MCR → liquidation callable → SP offset → if shortfall remains, redistribution to active Troves → if TCR breaches CT/ST, branch pause/shutdown and redemptions. A precise quantitative “top counterparty insolvent” loss waterfall for Ethereum is Not verifiable as of 2026-09-03 without on-chain analysis.

For a fraud-by-DAO-or-owners stress scenario, Liquity V2 appears low direct risk because the protocol documentation and security reviews describe it as having no governance overhead, no manual pause/freeze/shutdown by owners, and an immutable design with limited trust assumptions. That means there is no clear owner-controlled path to unilaterally steal user funds via admin abuse based on the sources provided. The main residual risks are governance-contract and protocol-mechanics failures, not classic owner fraud.

Coinspect and Dedaub found governance-related issues such as bribe-locking/griefing and censorship-style edge cases in initiative handling, but these were described as implementation risks and mitigated in follow-up revisions; they are not evidence of a proven fraudulent action by the DAO or owners. ChainSecurity likewise states the system is designed to be immutable with limited trust assumptions, which reduces the surface for owner misconduct. There are also protocol risks that could be severe in a stress event, but they are not fraud.

Liquity documents automatic shutdown behavior if collateral thresholds are breached or an oracle fails, and security reports note oracle/manipulation issues that could trigger depeg, liquidation, or branch shutdown. These are technical failure modes, not committed fraud by the DAO/owners. Assessment: committed fraud by the DAO or owners is Not verifiable as of 2026-09-03 based on the provided sources. The evidence supports a view of low governance-exploit risk and some smart-contract/oracle risk, but not confirmed fraud.

Liquity V2’s primary yield source for Stability Pool depositors is borrower interest, and the protocol says roughly 75% of interest paid by borrowers goes to Stability Pool depositors (“Earners”). In a negative 30-day yield stress scenario, that primary source can turn negative if borrower interest inflows over the last 30 days are outweighed by losses from liquidations, redemptions, or capital costs, because Liquity’s docs define the Stability Pool as earning from both liquidation gains and interest revenue rather than a guaranteed positive APY. For Ethereum specifically, the key risk channels are clear: Liquity V2 has no manual pause/freeze, but it can automatically shut down a borrow market if the branch’s collateral ratio falls below the shutdown threshold or if its oracle fails.

During such stress, borrowing stops, collateral withdrawals are constrained, and redemptions are used to clear debt; if the Stability Pool is depleted, liquidations can fall back to JIT liquidation or redistribution, which can weaken the yield profile for depositors. So the stress-case answer is: yes, the primary yield source can be negative over 30 days, but that outcome is not directly published as a protocol metric in the provided sources, so the exact 30-day negative yield is Not verifiable as of 2026-09-03. The strongest verifiable conclusion is that Liquity V2’s main yield leg is borrower interest, and in severe branch stress that income stream can be disrupted or overwhelmed by protocol losses and forced deleveraging.

Assessment as of September 13, 2026 — Ethereum only. Liquity AG appears to control development, documentation, the governance forum and related off-chain infrastructure, but Liquity V2’s core contracts are documented as immutable and non-upgradeable. Governance has no authority over borrowing, liquidation, oracle, collateral or contract-upgrade parameters. Liquity AG states it does not operate a central frontend; interfaces are community/operator-run. DAO reality: real but narrowly scoped.

LQTY stakers allocate the hard-coded 25% Protocol Liquidity Incentives revenue stream to permissionlessly registered Initiatives. Voting is time-weighted, weekly, and permits votes and vetoes. A proposer needs ≥0.01% of total staked voting power plus a 100 BOLD registration fee; an Initiative generally needs ≥2% of votes to qualify, and inactive Initiatives can be deregistered permissionlessly.

This is operational governance over incentive distribution, not control of protocol parameters, upgrades or treasury policy. Control and funds: core user collateral/debt accounting is controlled by deployed immutable contracts. PIL funds are directed to external Initiative addresses/contracts chosen by voters; Initiative-specific contract logic is a material recipient-side risk. Liquity AG’s forum Terms identify Liquity AG as the provider and reserve unilateral control over forum accounts/content, but apply only to the forum, not protocol governance. Company: Liquity AG, Swiss Aktiengesellschaft, CHE-184.101.707, Dufourstrasse 43, 8008 Zürich, Switzerland.

Listed directors/officers: Cédric Thomas Waldburger (board president) and Michael Martin Svoboda Meyer (board member and CEO). The Terms identify Liquity AG as forum provider; the exact section-14 governing-law/jurisdiction text was not retrievable: Not verifiable as of September 13, 2026. Concentration / controls: Dune is unavailable in this run; top LQTY stakers, voting concentration, multisig signers/threshold, and any independent treasury signers are Not verifiable as of September 13, 2026. No documented upgrade/admin key or emergency bypass was found in the reviewed sources.

Liquity V2 is presented in official documentation as a decentralized borrowing/stablecoin protocol, but the web results did not verify a separate operating company for the protocol itself, nor a disclosed corporate domicile specific to Liquity V2. The clearest legal-terms result appears to be from a different, similarly named site ('Liqvity') and therefore is not safely attributable to Liquity V2; as a result, the protocol’s entity, jurisdiction, and any ToS-based restrictions are not verifiable as of 2026-09-03. On KYC/AML, no source in the gathered material shows mandatory protocol-level KYC/AML for Liquity V2; absent verified terms, this is also not verifiable as of 2026-09-03.

I found no verified regulator action, court case, or sanctions designation against Liquity V2 or a disclosed entity associated with it in the gathered results. The privacy-policy result from an unrelated 'Liquidity' site is likewise not attributable to Liquity V2, so data-protection structure is not verifiable from these results. From a risk perspective, the legal structure looks closer to a decentralized protocol with unclear/undisclosed operator entity exposure, which means actual regulatory risk can be materially different from any marketing description of decentralization.

GLEIF LEI registry unavailable at scan time. OFAC SDN screening of 'Liquity V2': no match. SEC litigation and administrative release feeds: no mention.

Liquity V2 does issue its own stablecoin, BOLD, on Ethereum; public sources describe it as USD-pegged and redeemable for collateral, so own_stablecoin is true. However, the gathered sources do not verify any historical depeg events, their frequency, the last depeg date, or the maximum depeg percentage, so those fields remain Not verifiable as of 2026-09-05. The stable field is also Not verifiable as of 2026-09-05 because no verifiable peg-history dataset was available in the gathered evidence.

Liquity V2’s main risks are concentrated in collateral/oracle dependence, liquidation performance, complex immutable smart contracts, and the operational effects of redemptions and delegated position management. Audits found no unresolved high-severity findings in the reviewed versions, but explicitly note that complexity, oracle dependence, and sudden collateral collapse remain material residual risks.

Liquity V2’s top strengths are: immutable and upgrade-resistant design, which the team says makes the protocol more predictable and censorship-resistant; user-set interest rates, giving borrowers direct control over borrowing costs; multi-collateral support, including ETH and LSTs such as wstETH and rETH; capital efficiency, with the protocol emphasizing high LTVs and no Recovery Mode; and sustainable, user-directed yield, where borrowing revenues are routed back to BOLD stakeholders rather than a centralized treasury. A fifth strength is minimal governance / no trusted intermediaries, which reduces governance overhead and keeps core mechanics largely immutable.