Liquity V1

Liquity V1 receives a B risk grade (21/100) from Hindenrank, where lower scores indicate lower risk. Liquity V1 is one of DeFi's most elegant and battle-tested protocols. Its immutable, governance-free design eliminates entire categories of risk (governance attacks, admin key compromises, malicious upgrades). However, this same immutability means it cannot adapt to new threats. With a clean track record since 2021 and thoughtful mechanism design, it earns one of the strongest risk ratings in DeFi. The main concern is long-term sustainability as LQTY incentives deplete and Liquity V2 takes focus. Liquity V1 lets you borrow a stablecoin called LUSD against your ETH with no ongoing interest — just a one-time fee of around 0.5%. The protocol is unique because it has no governance, no admin keys, and completely immutable code. It maintains the lowest minimum collateral requirement in DeFi at 110%, and LUSD can always be redeemed for $1 worth of ETH from the protocol.

The key risks identified for Liquity V1 are: (1) The 110% collateral requirement is very tight — a sudden ETH crash of 10%+ could liquidate your position before you can react (2) The code can never be updated or fixed — if a bug is found, there is no way to patch it (3) LUSD often trades above $1, which makes it less useful for everyday DeFi activities compared to DAI or USDC (4) LQTY rewards are almost fully distributed, so Stability Pool incentives are declining

Liquity V1 scores 21/100 across eight risk dimensions: Mechanism Novelty: 3/15, Interaction Severity: 3/20, Oracle Surface: 2/10, Documentation Gaps: 1/10, Track Record: 1/15, Scale Exposure: 5/10, Regulatory Risk: 1/10, Vitality Risk: 5/10. The highest risk area is Scale Exposure at 5/10.

Among 25 rated CDP protocols on Hindenrank, Liquity V1 ranks #2 by safety (lowest risk score = safest). Its 21/100 risk score and B grade place it among the safer CDP protocols.

Liquity V1 scores 1/15 on the Track Record risk dimension, indicating some history of security incidents or exploits. Higher scores reflect more severe or frequent incidents. Review the full risk report for details.