Liquity USD (LUSD) is a decentralized stablecoin pegged to the US dollar, minted by collateralizing ETH through the Liquity Protocol at a minimum collateral ratio of 110% — the lowest among major decentralized stablecoins — enabled by an efficient liquidation mechanism via the Stability Pool and without any governance or admin keys.
| Stat | Value |
|---|---|
| Ticker | LUSD |
| Price | $1.00 |
| Market Cap | $29.30M |
| 24h Change | +0.0% |
| Circulating Supply | 29.22M LUSD |
| All-Time High | $1.16 |
| Contract (Ethereum) | 0x5f98...8ba0 |
| Contract (Zksync) | 0x5032...6115 |
| Contract (Base) | 0x3681...b8c6 |
| Contract (Polygon Pos) | 0x2300...21c7 |
| Contract (Arbitrum One) | 0x93b3...425b |
| Contract (Optimistic Ethereum) | 0xc40f...2819 |
How It Works
- Open a Trove — A user deposits ETH as collateral into a smart contract called a Trove (minimal ratio: 110% collateral-to-debt).
- Mint LUSD — LUSD is issued up to the permitted loan amount. A one-time borrowing fee (determined algorithmically based on redemption activity) is charged in LUSD.
- Stability Pool — LUSD holders can deposit LUSD into the Stability Pool to earn liquidation gains (ETH collateral from undercollateralized positions) plus LQTY rewards.
- Redemptions — The Liquity Protocol allows anyone to redeem LUSD for ETH at face value ($1), providing a price floor. Redemptions reduce the debt of the riskiest Troves first.
- No governance — The protocol is immutable. No admin keys, no governance votes, no upgrades.
Tokenomics
| Parameter | Value |
|---|---|
| Ticker | LUSD |
| Peg | 1:1 USD |
| Collateral | ETH only |
| Min. Collateral Ratio | 110% |
| Borrowing Fee | 0.5% (dynamic) |
| Redemption Fee | 0.5% (dynamic) |
| Launch | April 2021 |
| Protocol Token | LQTY (earnings-sharing, not governance) |
Use Cases
- Decentralized borrowing — Borrow LUSD against ETH with minimal over-collateralization requirements.
- Stability Pool yield — Deposit LUSD to earn ETH from liquidations and LQTY rewards.
- Censorship-resistant stablecoin — LUSD has no admin key or blacklist function.
- DeFi base layer — Used in Curve pools, MakerDAO collateral, and Yearn strategies.
History
- 2020 — Liquity Protocol developed by Robert Lauko and Rick Pardoe. Concept introduced in white paper.
- 2021-04-05 — Protocol launches on Ethereum mainnet. LUSD is minted; LQTY distribution begins.
- 2021 — LUSD supply grows to several hundred million via DeFi integrations. Curve pool established.
- 2022 — Terra/LUNA collapse increases interest in non-algorithmic, fully-collateralized alternatives like LUSD. LUSD supply and usage increase.
- 2023 — Liquity announces V2 development plan, introducing multi-collateral support and a modular architecture, while V1 LUSD remains immutable and live.
- 2024 — Liquity V2 launches, introducing BOLD stablecoin alongside LUSD. V1 LUSD continues operating independently.
Common Misconceptions
“LUSD can be turned off by the team.”
Liquity Protocol V1 is immutable — no admin keys, no upgrades. No team action can modify or halt V1.
“110% collateral ratio is too risky to be sustainable.”
The Stability Pool and redemption mechanism keep the protocol solvent even at 110%, because liquidations are near-instant and redeemers act as arbitrageurs keeping the peg tight.
“LUSD is algorithmic like UST.”
LUSD is fully collateralized by ETH, not algorithmic. It cannot spiral to zero because every LUSD in existence has at least $1.10 of ETH backing it.
Social Media Sentiment
LUSD is generally viewed positively in DeFi circles as one of the most trustless and decentralized stablecoins available. It gained attention after the Terra/LUNA collapse as a safer alternative. The main criticism is ETH-only collateral limiting supply scalability compared to multi-collateral stablecoins.
Last updated: 2026-04