# What is LUSD? Liquity V1’s stablecoin 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. Evidence: [Liquity V1 borrowing](https://docs.liquity.org/liquity-v1/faq/borrowing); [Liquity V1 redemptions](https://docs.liquity.org/liquity-v1/faq/lusd-redemptions) Canonical: https://degreesofsatoshi.com/encyclopedia/what-is-lusd/ Published: 2026-10-02 Substantively modified: 2026-10-02 Independently verified by an automated reviewer: 2026-10-02T19:26:58.461Z Data current through: 2026-10-02 AI-assisted research and drafting with a separate automated source-verification pass; no external expert or named human review is implied. ## Key facts - **Version:** LUSD belongs to Liquity V1; BOLD belongs to V2. ([Liquity V2 overview](https://docs.liquity.org/v2-faq)) - **Collateral:** V1 borrowing uses ETH in positions called Troves. ([Liquity V1 borrowing](https://docs.liquity.org/liquity-v1/faq/borrowing)) - **Redemption:** LUSD can be exchanged for ETH at protocol face value, less applicable fees. ([Liquity V1 redemptions](https://docs.liquity.org/liquity-v1/faq/lusd-redemptions)) ## 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. Evidence: [Liquity V1 borrowing](https://docs.liquity.org/liquity-v1/faq/borrowing) ## 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. Evidence: [Liquity V1 redemptions](https://docs.liquity.org/liquity-v1/faq/lusd-redemptions) ## 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. Evidence: [Liquity V1 borrowing](https://docs.liquity.org/liquity-v1/faq/borrowing); [Liquity V1 redemptions](https://docs.liquity.org/liquity-v1/faq/lusd-redemptions) ## Questions ### 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. Evidence: [Liquity V2 overview](https://docs.liquity.org/v2-faq); [Liquity V1 borrowing](https://docs.liquity.org/liquity-v1/faq/borrowing) ## Claims and scope ### what-is-lusd-quick-answer 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: {"collection":"stablecoins","dataAsOf":"2026-10-02","blockHeight":null} ### what-is-lusd-fact-version Version: LUSD belongs to Liquity V1; BOLD belongs to V2. Scope: {"collection":"stablecoins","dataAsOf":"2026-10-02","blockHeight":null} ### what-is-lusd-fact-collateral Collateral: V1 borrowing uses ETH in positions called Troves. Scope: {"collection":"stablecoins","dataAsOf":"2026-10-02","blockHeight":null} ### what-is-lusd-fact-redemption Redemption: LUSD can be exchanged for ETH at protocol face value, less applicable fees. Scope: {"collection":"stablecoins","dataAsOf":"2026-10-02","blockHeight":null} ## Sources - [Liquity V1 borrowing](https://docs.liquity.org/liquity-v1/faq/borrowing) — Liquity. ETH-backed V1 LUSD borrowing and fees, distinguished from V2. Locator: Trove; collateral; fees; repayment. Retrieved: 2026-10-02T18:51:09.300Z. - [Liquity V1 redemptions](https://docs.liquity.org/liquity-v1/faq/lusd-redemptions) — Liquity. LUSD-to-ETH redemption at protocol face value, fees and borrower effects. Locator: Redemption versus repayment. Retrieved: 2026-10-02T18:51:09.187Z. - [Liquity V2 overview](https://docs.liquity.org/v2-faq) — Liquity. BOLD token, user-set borrowing rates and multiple collateral types. Locator: Differences to V1; collateral; interest. Retrieved: 2026-10-02T18:51:09.526Z. ## Revision history - 2026-10-02: First publication after primary-source research and separate automated verification. ## Cite this entry 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/