Bluechip, a research platform focused on cryptocurrencies, has recently begun its coverage of the $BOLD stablecoin developed by Liquity Protocol, a decentralized protocol built on the Ethereum blockchain. In this coverage, Bluechip has assigned an impressive A- rating to $BOLD, reflecting its innovative design and risk management profile.
The A- rating signifies the protocol”s commitment to using immutable smart contracts, limiting governance interference, and facilitating direct redemptions. These characteristics position $BOLD as a fully decentralized on-chain alternative to traditional dollar-pegged stablecoins.
Decentralized Architecture and Collateral Design
Bluechip”s evaluation highlights the robust decentralized framework of $BOLD, which is entirely supported by $ETH and liquid staked $ETH. The Liquity Protocol has chosen to avoid the inclusion of alternative collateral types, which simplifies the system and relies on the extensive liquidity of $ETH. This strategic choice allows for the liquidation of substantial positions with minimal market impact.
At the time of the assessment, $BOLD maintained a collateralization ratio exceeding 300%, underscoring its stability. The stablecoin was trading close to its intended $1 peg, supported by a market capitalization of $39 million. To maintain this fixed peg, $BOLD employs mechanisms for collateral liquidation and direct redemptions, facilitating automatic arbitrage opportunities when $BOLD”s value dips below its peg.
Censorship Resistance and On-Chain Exposure
Additionally, the structure of $BOLD allows individual users and market makers to engage directly with the core contracts, enhancing transparency and trustlessness. Bluechip”s report also emphasizes the strong decentralization credentials of $BOLD, noting that it operates through a set of audited, immutable smart contracts on the Ethereum network.
The team behind $BOLD, Liquidity AG, relinquishes control of the protocol post-deployment. This design choice means that unlike many stablecoin issuers, $BOLD is not governed by any specific jurisdiction or legal entity, significantly reducing custodial and regulatory risks while also limiting legal protections for users.
In summary, $BOLD represents an attractive option for users who prioritize censorship resistance and seek on-chain exposure to USD, favoring trust in code over reliance on human custodians.
