TL;DR:
- The DeFi Collective has decided to stop providing liquidity based on the strategy announced in this topic
- The 62,375 BOLD that were withdrawn from the LP position will be reinjected into the PIL system as well as into the Merkl campaign.
- If you are a LQTY staker, please upvote another liquidity initiative, or downvote the DeFi Collective’s initiative, or both
Why the PermaLP initiative has been unwound
The decision to suspend PermaLP was particularly difficult, given our expertise in liquidity management and our commitment to promoting genuinely decentralised DeFi protocols.
In the end, a multitude of factors motivated this rational decision:
- DeFiScan: DeFiScan is the Collective’s flagship initiative, as it is the most visible and impactful one. That said, DeFiScan also represents the Collective’s largest current recurring expense, which is incompressible since we are actively working on DeFiScan V2.
- Current market conditions have rendered certain positions unviable, more info below.
The PermaLP impact on Liquity
BOLD was the biggest permaLP position the Collective did, as Liquity was specifically built to be the most disintermediated stablecoin issuer possible.
Before BOLD even launched, the Collective set aside 100 ETH specifically to mint BOLD immediately after the protocol went live, and the treasury management team devised a clear allocation strategy for the BOLD Liquidity initiative they created for Liquity’s Protocol Incentivized Liquidity:
- 50% would be posted as vote incentives on Layer 2 decentralized exchanges (like Velodrome and Aerodrome) to increase the emissions directed to BOLD pools.
- 50% would be matched with the Collective’s existing treasury assets (USDC, LUSD) to directly supply liquidity to these pools
By May 2025, the treasury re-established BOLD liquidity across key Layer 2s:
- On Optimism (Velodrome): The Collective split its legacy LUSD/USDC position to seed both LUSD/BOLD and BOLD/USDC pools, backing them with massive veVELO voting power.
- On Base (Aerodrome): Similar BOLD/USDC and BOLD/LUSD pools were deployed, receiving significant vote and bribe support. This approach proved highly effective; by June 2025, the BOLD pools on Base had surpassed $5 million in TVL.
The thing is, overall activity on OP Mainnet was declining, while activity on Base remained high. The Collective, therefore, decided to focus its efforts on Aerodrome.
But another problem arose shortly afterwards: current market conditions led VELO and AERO’s respective prices to decrease, thus decreasing the absolute value of AERO emissions directed by the Collective towards the BOLD pools on Base.
The strategy made sense as long as the AERO emissions’ value was superior to the vote incentives paid by the Collective, but this ratio reversed at the beginning of 2026.
Recycling BOLD
Per our BOLD PIL Strategy, half of the assets received from the Liquity v2 PIL system were matched with stablecoins from the Collective treasury, and supplied as permaLP on Velodrome and Aerodrome.
The LP position have been withdrawn, resulting in the recovery of 62 375.41 BOLD, sent to the grants wallet.
These BOLD will be re-injected into the PIL system, to maximize the long-term positive impact for BOLD. Each week until the balance runs out, the following will be performed:
- 4000 BOLD injection into the PIL system itself
- 1500 BOLD injection into BOLD/USDC Merkl campaign.
First PIL+Merkl re-injection – March 12
At the current pace, the re-injection should last about 11 weeks, but it could be a bit longer, since the Collective is still receiving BOLD from PIL.
What you can do as a LQTY staker
If you are a LQTY staker, please do one of the following actions
- Upvote another liquidity initiative, we can recommend Uniswap as it is currently one of the most efficient initiatives
- Downvote the DeFi Collective’s initiative
You can both upvote and downvote by splitting your voting power (see above).
Final words
We took the permaLP as far as we could, but we simply could not stomach its operating costs anymore.
Despite today’s wind down of the permaLP positions, the impact remains overwhelmingly positive for Liquity as a whole.
We express our gratitude to Liquity for their trust in that adventure, and we hope that the reinjection of BOLD will have a positive influence on Liquity over the coming weeks.