Zealynx AcademyZealynx Academy
Medium
engineering

Building Liquity V1

Build the cleanest stablecoin protocol in DeFi from scratch. Open a Trove, borrow LUSD against ETH collateral, absorb liquidations into the Stability Pool, redeem at face value to enforce the peg. No governance, no interest, no oracle wrappers. Every function, every invariant. Modernized to Solidity 0.8.x.

What you are building

You will write the actual Liquity V1 protocol: TroveManager, BorrowerOperations, StabilityPool with P/S decay accounting, ActivePool, DefaultPool, CollSurplusPool, GasPool, LUSDToken with EIP-2612 permit and minting allowlist, SortedTroves linked list, and LQTYStaking with F_LUSD/F_ETH fee distribution. CDP mechanics at 110% MCR, 150% CCR, redemption-driven peg, Recovery Mode liquidations with capped collateral payout. Eight contracts, fifteen sections, modernized to Solidity 0.8.x.

License: MITSource: liquity/devSolidity: ^0.8.20
15 sections
Lynx300 Lynx
~360 min
Start Module

Part 1: Trove Fundamentals

6 sections
1
Introduction to Liquity V1
Lynx5
2
LiquityBase: Constants, Math, and Helpers
Lynx15
3
LUSDToken: ERC-20 + Permit + Minting Allowlist
Lynx15
4
TroveManager: Storage, Trove Struct, Getters
Lynx15
5
SortedTroves: Linked List Sorted by NICR
Lynx15
6
ActivePool + DefaultPool: ETH and Debt Accounting
Lynx15

Part 2: Borrowing and the Stability Pool

4 sections
7
BorrowerOperations: openTrove
Lynx15
8
BorrowerOperations: adjustTrove and closeTrove
Lynx15
9
StabilityPool: Deposits and Compounded Balance
Lynx15
10
StabilityPool: ETH Gains via P/S Decay
Lynx15

Part 3: Liquidations, Redemptions, Fees

5 sections
11
TroveManager: Liquidate (Normal Mode)
Lynx15
12
TroveManager: Redistribution and Batch Liquidation
Lynx15
13
TroveManager: Recovery Mode and CollSurplusPool
Lynx15
14
LQTYStaking: Fee Distribution and Borrowing Fees
Lynx15
15
TroveManager: redeemCollateral and Base Rate Decay
Lynx100