Liquity | Bluechip

LUSD is the most decentralized stablecoin and is entirely issued, managed and redeemed on-chain.
It is part of Liquity Protocol, a lending App that is autonomous, immutable and governance-free.
LUSD is one of the safest on-chain stablecoins, because it requires no governance, management or trust in counter-parties. In designing such a stablecoin, the makers of LUSD have made a conscious decision to eliminate risks which stem from human judgement and embrace technical risks instead.
Liquity advertises a minimum required collateralization ratio (CR) of 110%, which can be perceived as risky, but the actual CR is currently above 250%.
Although Liquity's smart contracts have been audited twice and no exploits have occurred till date, users are reminded that smart contract and oracle risks cannot be eliminated. Unidentified vulnerabilities can lead to a loss of all funds. This risk is common to all stablecoin systems that are managed by smart contracts.
LUSD is most ideal for sophisticated users who trust code over humans as custodian of their assets, and are capable of making independent judgment about a stablecoin's technical risk.

LUSD often trades above $1 (typically between $1 and $1.05) in the open market even though Liquity protocol only guarantees a redemption value of $1 per LUSD.

Users who buy LUSD above $1 are warned that they could incur a small loss if LUSD's market price drops below their purchase price. We, therefore, advise against buying LUSD above $1.

LUSD is backed exclusively by ETH. Collateral is held in immutable and audited smart contracts owned by the Liquity Protocol.

Market makers maintain the peg through direct redemptions for an equivalent value of collateral. Any user can mint or redeem using the underlying contracts.

LUSD is issued by Liquity Protocol, developed in 2021 by Liquity AG. The company is managed by Michael Svoboda as CEO.

The developer does not retain any control over the protocol. All functions are executed by fully autonomous smart contracts on Ethereum.

This factor evaluates technical implementation using indicators like smart contract quality, oracle risk, exploit history, and more.

Currently, we do not assign a standalone score to this factor. An independent assessment of technical risk will be included in future iterations.

LUSD is issued by a fully decentralized and permissionless protocol. It is not subject to any regulatory oversight and does not rely on custodians for asset storage.

As a non-custodial and immutable system, the protocol does not face any governance or censorship risk associated with a centralized issuer.

LUSD is issued by a protocol with no voting system or onchain governance mechanisms. This removes risks tied to attacks from malicious actors.

The protocol also issues LQTY as a secondary token. However, LQTY is not entitled to any voting rights and instead functions as a mechanism to earn fee revenue.

This factor evaluates external feedback using indicators like prediction markets, social sentiment, perpetual futures, and more.

Currently, we do not assign a standalone score to this factor. An independent assessment of external feedback will be included in future iterations.