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Encyclopedia Stablecoins · Entry 312

What is LUSD? Liquity V1’s stablecoin

AI-assisted research · separate automated verificationCorrections

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Stablecoins
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3 cited records
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About 3 minutes
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Key facts

Key facts for What is LUSD? Liquity V1’s stablecoin
FactDetailSource
VersionLUSD belongs to Liquity V1; BOLD belongs to V2.[3]
CollateralV1 borrowing uses ETH in positions called Troves.[1]
RedemptionLUSD can be exchanged for ETH at protocol face value, less applicable fees.[2]
01

A Trove records collateral and debt

A borrower deposits ETH and obtains LUSD under V1’s rules. The position must meet its collateral requirements and can face liquidation if it becomes unsafe. Another person buying LUSD on a DEX does not acquire the borrower’s Trove.

The description “interest-free” in V1 documentation should not be read as “cost-free.” Borrowing and redemption fees, network costs and liquidation exposure are separate considerations.

02

Redemption is not your own repayment

A holder can redeem LUSD through the protocol for ETH valued at the specified face-value convention, after applicable fees. The process affects eligible Troves according to protocol ordering. It does not require the redeemer to be the original borrower.

Illustrative arithmetic: before fees, 100 LUSD at a protocol ETH price of $2,000 corresponds to 0.05 ETH. The holder receives collateral exposure, not 100 dollars in a bank account.

03

Closing a loan follows a different path

Repaying your own Trove’s debt releases your collateral under the closing rules. That is distinct from initiating a general LUSD redemption against the protocol’s Troves. Confusing the two can lead a borrower to choose the wrong interface action.

This entry describes Liquity V1 from documentation checked on 2 October 2026. Do not copy V2 interest or collateral assumptions into V1 merely because both share the Liquity name.

Direct answers

Questions people ask

Did BOLD replace every LUSD token?

No. Liquity’s V2 documentation distinguishes BOLD from the continuing V1 LUSD system. The token and protocol version must be identified before applying borrowing or redemption rules.

Inspect the evidence

The answer and key facts have stable claim links. These records retain the scope and qualification when reused.

LUSD is the stablecoin of Liquity V1, created by borrowing against ETH collateral. It targets a dollar value through the protocol’s collateral and redemption mechanisms. LUSD redemption exchanges tokens for a dollar-equivalent amount of ETH under protocol rules and fees; it is not a promise of a bank-dollar payout and is different from repaying your own Trove.

Scope: Stablecoins · data through 2026-10-02. Verification: verified · 2026-10-02T19:26:58.461Z.

Link to this claim
Version: LUSD belongs to Liquity V1; BOLD belongs to V2.

Scope: Stablecoins · data through 2026-10-02. Verification: verified · 2026-10-02T19:26:58.461Z.

Link to this claim
Collateral: V1 borrowing uses ETH in positions called Troves.

Scope: Stablecoins · data through 2026-10-02. Verification: verified · 2026-10-02T19:26:58.461Z.

Link to this claim
Redemption: LUSD can be exchanged for ETH at protocol face value, less applicable fees.

Scope: Stablecoins · data through 2026-10-02. Verification: verified · 2026-10-02T19:26:58.461Z.

Link to this claim
Revision history
  1. — First publication after primary-source research and separate automated verification.

Source register

Sources and references

Retrieval dates and locators are recorded individually.
  1. Liquity V1 borrowingLiquity

    ETH-backed V1 LUSD borrowing and fees, distinguished from V2.

    Locator: Trove; collateral; fees; repayment · Version / scope: Document retrieved 2026-10-02; content hash recorded · Retrieved: 2026-10-02T18:51:09.300ZOpen source
  2. Liquity V1 redemptionsLiquity

    LUSD-to-ETH redemption at protocol face value, fees and borrower effects.

    Locator: Redemption versus repayment · Version / scope: Document retrieved 2026-10-02; content hash recorded · Retrieved: 2026-10-02T18:51:09.187ZOpen source
  3. Liquity V2 overviewLiquity

    BOLD token, user-set borrowing rates and multiple collateral types.

    Locator: Differences to V1; collateral; interest · Version / scope: Document retrieved 2026-10-02; content hash recorded · Retrieved: 2026-10-02T18:51:09.526ZOpen source
How this article was made

Research and drafting use AI assistance. A separate automated review checks claims against primary sources; no external expert or named human review is implied. Publication, substantive editing, source retrieval and verification are recorded separately. This version was independently checked by an automated reviewer on 2 October 2026.

Editorial method and corrections

Degrees of Satoshi editorial project. “What is LUSD? Liquity V1’s stablecoin.” Published 2026-10-02; updated 2026-10-02. https://degreesofsatoshi.com/encyclopedia/what-is-lusd/