Liquity V2 Smart Contract Audit

In October 2024, Liquity once again trusted Coinspect to perform a Smart Contract Audit of Bold Core, the Solidity implementation of the Liquity V2 protocol. As the only audit firm involved in both Liquity V1 and V2, Coinspect brings a unique depth of expertise and continuity to this engagement.

Since launching in 2021, Liquity has become a DeFi leader by introducing a stablecoin system backed by ETH that quickly reached $3 billion in Total Value Locked. Liquity V1’s immutable, non-upgradable smart contracts and network of community-powered front-ends earned recognition as a truly decentralized project, establishing Liquity as a trusted name in DeFi. Liquity V2 builds on that foundation with even more innovative features.

Liquity V2: Security at the Core of Innovation

While Liquity V2 introduces innovative features, such as multi-collateral support and batch management, these advancements naturally come with added complexity. The introduction of decentralized oracles and reliance on batch managers, for example, presents potential operational risks that could influence the protocol’s resilience.

To address these challenges, Liquity V2 has incorporated robust fallback mechanisms and batch-level risk controls designed to enhance stability and mitigate potential vulnerabilities.

Bold Core represents a robust implementation of an innovative DeFi protocol, balancing cutting-edge features with a commitment to security and reliability.

Extensive documentation, rigorous prior audits by multiple firms, and comprehensive testing have contributed to a high-quality codebase. The protocol’s advanced development stage is evident in the severity and scope of the issues identified during this audit.

Liquity V2 Smart Contract Audit Report

Coinspect identified two significant findings during the security assessment:

• BOLD-01: An approval reset renders Leveraged Zappers unusable.
• BOLD-05: A failure in a single oracle can halt redemptions across all branches, causing a depeg of the stablecoin.

Download Liquity V2 Audit Report

Multi-collateral lending with enhanced borrowing flexibility

Liquity V2 is a decentralized borrowing protocol enabling users to mint BOLD stablecoin tokens with multiple forms of collateral, such as WETH and Liquid Staking Tokens (LSTs). The system introduces significant advancements, including NFT-based troves (debt positions) that enhance management flexibility and user-set interest rates, empowering borrowers to optimize their borrowing conditions. Batch management further streamlines operations, allowing users to adjust interest rates across multiple troves efficiently.

Core stability mechanisms from Liquity V1, such as the redemption process and liquidations, have been adapted to support the multi-collateral framework and user-set interest rates. New features like delegation options for trove management allow borrowers to assign control to third parties. These improvements enhance debt management flexibility while reinforcing system stability. For users, this translates to streamlined debt management, more secure collateral handling, and a stablecoin system designed for long-term resilience.

Coinspect’s involvement in both Liquity V1 and V2 highlights a shared dedication to building secure and innovative DeFi solutions. The insights gained from this collaboration continue to strengthen the protocol as it evolves to meet the demands of decentralized finance.

Engage Coinspect from the start of your development process. Focus on innovation and we’ll block the threats.