Licensing Liquity V2: May the Fork Be with You
Liquity V2 will be published under a multi-year Business Source License (BUSL).
We made this decision after reflecting on the history of Liquity v1 and our resulting desire to take a more proactive approach with third party deployments of Liquity V2. Why? We believe that the Liquity V2 codebase will be the preeminent solution for launching a collateralized onchain stablecoin. Our vision is one in which Liquity V2 “friendly forks” propagate across every EVM-compatible blockchain, with independent teams building out a wider ecosystem with aligned interests.
This is a fundamentally different approach to how competing stablecoins have scaled, but after all: fortune favors the BOLD.
Lessons from LUSD
Liquity was deployed by a new and unproven team in April 2021 under an open source GNU Public License (GPL) that allowed anyone to deploy forks as they pleased. Its stated purpose was to provide users with an onchain stablecoin collateralized solely by Ether, all via immutable smart contracts on mainnet.
The straightforwardness of the codebase attracted numerous teams who wanted to repurpose its functionality for stablecoins backed by different assets issued on Ethereum or other EVM-compatible networks. As reported by DeFiLlama, 35 such forks were launched, which themselves achieved an aggregate high-water mark of $1B in TVL at the beginning of 2024.
While these forks increased Liquity’s mindshare and battle tested the protocol under bouts of extreme volatility, it’s clear that significant value was left on the table for everyone involved.
- Little recognition of the Liquity community
- Questionable, even faulty, execution of codebase augmentations
- No coordination on collateral asset or network coverage
- Minimal exploration of joint liquidity provisioning
Greater collaboration between forking teams and Liquity core could have ensured a higher degree of fidelity across all deployments and opened up the door for a unified push across DeFi. We saw this with a notable exception to the above, Gravita, whose active collaboration with the Liquity community helped to bootstrap its stablecoin, GRAI, without the need for token emissions.
This is a goal worth striving for and one that is more easily achieved within the constraints posed by a BUSL. Although this precludes Liquity V2 from technically being open source for a few years, it will still be source available from the start, not representing a compromise on the values of openness and transparency that sit at the core of DeFi. Instead, it provides a new lever with which to hold teams accountable. This approach sets the stage for a more coordinated ecosystem, where innovation and growth can be fostered while maintaining the integrity of the core Liquity deployment.
Liquity V2 for Sovereign Stablecoins
Why go through all of this trouble when Liquity has been, and remains, focused on providing an unstoppable, Ether-backed onchain stablecoin? DeFi has expanded to well over 100 blockchains, and even back to Bitcoin itself, since its early days on Ethereum. Each of these ecosystems now finds itself competing for mindshare in an increasingly scarce market for users, builders, and liquidity. On the topic of stablecoins in particular, new networks are regularly forced to convince incumbent players and liquidity providers to allocate their way. That’s expensive!
It’s here where the value of a “sovereign” stablecoin shines. The ability to mint a synthetic dollar against a piece of native network collateral plays a fundamental role in kick-starting activity within any given DeFi ecosystem. This was true of DAI in 2018 and it still rings true today, even as our industry gets ever-more enamored with increasingly convoluted “protocols” that resemble money market funds more than they do autonomous borrowing facilities.
Liquity V2 is set to be the premier off-the-shelf solution for this critical piece of any network’s DeFi ecosystem. It addresses the core issues that have prevented Liquity v1 from doing so, namely by:
- No longer punishing leverage with increased redemption risk
- Supporting multi-collateral configurations
- Introducing user-set interest rates
This updated product will be able to meet the market demand demonstrated by the many forks of LUSD without diluting the value proposition of why our users have opted for Liquity to date.
Implications for BOLD
What does that mean for prospective users, the Liquity community, and the wider DeFi landscape? In short, Liquity V2 will be deployed by its core contributors on mainnet, allowing for users to mint BOLD against ETH and select liquid staking tokens. Independent teams will be reviewed as qualified stewards for friendly forks on either Ethereum or EVM-compatible networks, receiving the right to deploy Liquity V2 code in exchange for oversight of their launch. These teams will have exclusive forking rights for their respective chains, or in the case of Ethereum, whatever exotic collateral assets they plan to support (e.g., LRTs). Teams that demonstrate alignment with the Liquity community will be prioritized.
Keeping Liquity V2 source available while ensuring high fidelity across friendly forks will foster an ever-expanding ecosystem of decentralized dollars that can simultaneously serve their respective networks and help bootstrap early demand for BOLD.
Come Build with Us!
Open source code has been the foundation of DeFi since its inception. It has allowed users from all across the globe to verify, not trust, financial protocols deployed by complete strangers, to the tune of tens of billions of dollars. Accordingly, our decision to put Liquity V2 behind a BUSL was not made lightly, even with other industry heavyweights taking a similar path (e.g., Uniswap, Morpho, Curve with its decision to not license at all).
That said, we believe that this culture of transparency is best upheld by genuine builders who are keen to hold themselves to high standards and can see the positive sum value of collaboration. So whether you’re an existing stablecoin team looking for the next step in your roadmap, a network steward eager to refresh your DeFi ecosystem, or simply a builder with a dream, we’d love to hear from you.
Our current timeline for Liquity V2 involves multiple audits throughout Q3, with final revisions and deployment on mainnet slated for the beginning of Q4 through to Devcon. While our bandwidth is not infinite, we are keen to onboard leading friendly fork candidates in parallel to our own roadmap and beyond.
Feel free to drop our Head of Growth, Max, a line on telegram to learn more about the licensing process.
And if you’ll be in attendance at EthCC next week, don’t be a stranger—we’ll be at Stable Summit over the weekend and working from Brussels through Thursday.
