Summary
Ketju does not approve Liquity V1: only 27.74M LUSD was outstanding on 2026-08-14, so Ketju's $25M liquidity minimum is almost the whole supply, and a client could not sell a position at size. We keep Liquity V1 as a research benchmark, because its design leaves almost no one in control. It takes only ETH on Ethereum as collateral, its core contracts are immutable, it has no admin key and no governance changes to parameters, and anyone can redeem LUSD for $1 of ETH before fees. It passed a real stress test: 310 Trove liquidations when ETH fell from about $3,400 to $1,800 on 2021-05-19, with the Stability Pool absorbing the debt. In 2022 the team disclosed that its immutable fallback-oracle integration took Tellor prices without a dispute delay. The flaw was never exploited on Ethereum mainnet, but was exploited on the ETHW fork. Because Liquity cannot be upgraded, only a custom change in Tellor could fix it. Immutability removed the risk of an administrator seizing funds, and it also removed the normal way to patch a bug. CoinGecko showed a $1.001 price and about $10.5k of trailing 24-hour volume the same day. DefiLlama still showed $211.1M of collateral TVL, but collateral gives holders no way to sell. The V1 bug bounty ended after V2 launched.
Review triggers
- LUSD supply falls below $20M, which no client could use at any size
- LUSD trades above $1.10 or below $0.97 for a sustained period
Facts
- Verdict
- Not approved
- Type
- Dollar lending
- Chains examined
- Ethereum
- Instruments
- LUSD
- Reviewed
- Last confirmed