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Liquity V2

85%

Process Quality Reviews

Liquity V2

Process Quality Review (0.9)

Liquity V2

Final score:85%

Date:07 Feb 2025

Audit Process:version 0.9

Author:Rex

PQR Score:85%

PASS

Protocol Website:https://www.liquity.org/

Scoring Appendix

The final review score is indicated as a percentage. The percentage is calculated as Achieved Points due to MAX Possible Points. For each element the answer can be either Yes/No or a percentage. For a detailed breakdown of the individual weights of each question, please consult this document.

The blockchain used by this protocol

Ethereum

#QuestionAnswer

92%

1.100%

2.Yes

3.100%

4.50%

86%

5.Yes

6.100%

7.90%

8.40%

9.100%

82%

10.100%

11.99%

12.0%

13.Yes

83%

14.100%

15.100%

16.50%

17.0%

18.0%

97%

19.100%

20.100%

21.80%

22.100%

23.100%

50%

24.Yes

25.100%

26.No

Total:85%

Very simply, the review looks for the following declarations from the developer's site. With these declarations, it is reasonable to trust the smart contracts.

Here are my smart contract on the blockchain(s)
Here is the documentation that explains what my smart contracts do
Here are the tests I ran to verify my smart contracts
Here are all the security steps I took to safeguard these contracts
Here is an explanation of the control I have to change these smart contracts
Here is how these smart contracts get information from outside the blockchain (if applicable)

This report is for informational purposes only and does not constitute investment advice of any kind, nor does it constitute an offer to provide investment advisory or other services. Nothing in this report shall be considered a solicitation or offer to buy or sell any security, token, future, option or other financial instrument or to offer or provide any investment advice or service to any person in any jurisdiction. Nothing contained in this report constitutes investment advice or offers any opinion with respect to the suitability of any security, and the views expressed in this report should not be taken as advice to buy, sell or hold any security. The information in this report should not be relied upon for the purpose of investing. In preparing the information contained in this report, we have not taken into account the investment needs, objectives and financial circumstances of any particular investor. This information has no regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this information and investments discussed may not be suitable for all investors.

Any views expressed in this report by us were prepared based upon the information available to us at the time such views were written. The views expressed within this report are limited to DeFiSafety and the author and do not reflect those of any additional or third party and are strictly based upon DeFiSafety, its authors, interpretations and evaluation of relevant data. Changed or additional information could cause such views to change. All information is subject to possible correction. Information may quickly become unreliable for various reasons, including changes in market conditions or economic circumstances.

This completed report is copyright (c) DeFiSafety 2023. Permission is given to copy in whole, retaining this copyright label.

Code and Team

92%

This section looks at the code deployed on the relevant chains and team aspects. The document explaining these questions is here.

1. Are the smart contract addresses easy to find? (%)

Answer: 100%

Smart contract addresses were easy to find on the Liquity GitHub.

Percentage Score Guidance:

100%

Clearly labelled and on website, documents or repository, quick to find

70%

Clearly labelled and on website, docs or repo but takes a bit of looking

40%

Addresses in mainnet.json, in discord or sub graph, etc

20%

Address found but labelling not clear or easy to find

Executing addresses could not be found

2. Does the protocol have a public software repository? (Y/N)

Answer: Yes

Yes: https://github.com/liquity/bold?tab=readme-ov-file

Score Guidance:

Yes

There is a public software repository with the code at a minimum, but also normally test and scripts. Even if the repository was created just to hold the files and has just 1 transaction.

For teams with private repositories.

3. Is the team public (not anonymous)?

Answer: 100%

The team is very public as indicated by their team page. Score 100%.

Percentage Score Guidance:

100%

At least two names can be easily found in the protocol's website, documentation or medium. These are then confirmed by the personal websites of the individuals / their linkedin / twitter.

50%

At least one public name can be found to be working on the protocol.

No public team members could be found.

4. How responsive are the devs when we present our initial report?

Answer: 50%

Awaiting response from devs

Percentage Score Guidance:

100%

Devs responded within 24hours

100%

Devs slow but very active in improving the report

75%

Devs responded within 48 hours

50%

Devs responded within 72 hours

25%

Data not entered yet

no dev response within 72 hours

Code Documentation

86%

This section looks at the software documentation. The document explaining these questions is here.

5. Is there a whitepaper? (Y/N)

Answer: Yes

Yes, there is a white paper. The link is on their top level technical docs page.

Score Guidance:

Yes

There is an actual whitepaper or at least a very detailed doc on the technical basis of the protocol.

No whitepaper. Simple gitbook description of the protocol is not sufficient.

6. Is the protocol's software architecture documented? (%)

Answer: 100%

Software architecture is detailed in the readme under Multilateral Architecture Overview. Score 100%.

Percentage Score Guidance:

100%

Detailed software architecture diagram with explanation

75%

Basic block diagram of software aspects or basic text architecture description

No software architecture documentation

7. Does the software documentation fully cover the deployed contracts' source code? (%)

Answer: 90%

There appears to be software documentation on all contracts. This is largely in the readme file. There is limited documentation in comments in the code. Score 90%.

Percentage Score Guidance:

100%

All contracts and functions documented

80%

Only the major functions documented

79 - 1%

Estimate of the level of software documentation

No software documentation

8. Is it possible to trace the documented software to its implementation in the protocol's source code? (%)

Answer: 40%

Traceability seems quite light. The documentation lists all functions and describes them clearly. However there is no even informal connection to the code. This gives a score of 40%.

Percentage Score Guidance:

100%

Will be Requirements with traceability to code and to tests (as in avionics DO-178)

90%

On formal requirements with some traceability

80%

For good autogen docs

60%

Clear association between code and documents via non explicit traceability

40%

Documentation lists all the functions and describes their functions

No connection between documentation and code

9. Is the documentation organized to ensure information availability and clarity? (%)

Answer: 100%

The documentation is well organized, clear and easy to navigate. Score 100%.

Percentage Score Guidance:

100%

Information is well organized, compartmentalized and easy to navigate

50%

Information is decently organized but could use some streamlining

50%

Minimal documentation but well organized

information is generally obfuscated

Testing

82%

This section covers the testing process of the protocol’s smart contract code previous to its deployment on the mainnet. The document explaining these questions is here.

10. Has the protocol tested their deployed code? (%)

Answer: 100%

Test to Code = 10436 / 2261 = 461% which gives a score of 100% as per guidance.

Percentage Score Guidance:

100%

TtC > 120% Both unit and system test visible

80%

TtC > 80% Both unit and system test visible

40%

TtC < 80% Some tests visible

No tests obvious

11. How covered is the protocol's code? (%)

Answer: 99%

Code coverage it is 99% as per coveralls.

Percentage Score Guidance:

100%

Documented full coverage

99 - 51%

Value of test coverage from documented results

50%

No indication of code coverage but clearly there is a complete set of tests

30%

Some tests evident but not complete

No test for coverage seen

12. Is there a detailed report of the protocol's test results?(%)

Answer: 0%

No test report is evident. Score 0%.

Percentage Score Guidance:

100%

Detailed test report as described below

70%

GitHub code coverage report visible

No test report evident

13. Has the protocol undergone Formal Verification? (Y/N)

Answer: Yes

Formal verification report is here.

Score Guidance:

Yes

Formal Verification was performed and the report is readily available

Formal Verification was not performed and/or the report is not readily available.

Security

83%

This section looks at the 3rd party software audits done. It is explained in this document.

14. Is the protocol sufficiently audited? (%)

Answer: 100%

There is a list comprehensive audits. The audits are of high quality from reputable organizations. Findings were corrected when applicable. Given that there are multiple audits implemented before deployment with changes implemented this brings a score of 100%.

Percentage Score Guidance:

100%

Multiple Audits performed before deployment and the audit findings are public and implemented or not required

90%

Single audit performed before deployment and audit findings are public and implemented or not required

70%

Audit(s) performed after deployment and no changes required. The Audit report is public.

65%

Code is forked from an already audited protocol and a changelog is provided explaining why forked code was used and what changes were made. This changelog must justify why the changes made do not affect the audit.

50%

Audit(s) performed after deployment and changes are needed but not implemented.

30%

Audit(s) performed are low-quality and do not indicate proper due diligence.

20%

No audit performed

Audit Performed after deployment, existence is public, report is not public OR smart contract address' not found.

Deduct 25% if the audited code is not available for comparison.

15. Is there a matrix of audit applicability on deployed code (%)? Please refer to the example doc for reference.

Answer: 100%

The audits are clearly listed by date. The scope of the audit is described in the audit list. As Liquity v2 is immutable, all audits are applicable. This fulfills the requirements of the matrix of audit applicability and results in a score of 100%.

Percentage Score Guidance:

100%

Current and clear matrix of applicability

100%

4 or less clearly relevant audits

50%

Out of date matrix of applicability

no matrix of applicability

16. Is the bug bounty value acceptably high (%)

Answer: 50%

There is a bug bounty for 300 K with Hats Finance. As the Liquity v2 TVL is 105 million at time of writing 300 K is less than 5%. This results in a score of 50% as per our guidance for an active program with 300 K.

Percentage Score Guidance:

100%

Bounty is 10% TVL or at least $1M AND active program (see below)

90%

Bounty is 5% TVL or at least 500k AND active program

80%

Bounty is 5% TVL or at least 500k

70%

Bounty is 100k or over AND active program

60%

Bounty is 100k or over

50%

Bounty is 50k or over AND active program

40%

Bounty is 50k or over

20%

Bug bounty program bounty is less than 50k

No bug bounty program offered / the bug bounty program is dead

An active program means that a third party (such as Immunefi) is actively driving hackers to the site. An inactive program would be static mentions on the docs.

17. Is there documented protocol monitoring (%)?

Answer: 0%

No protocol monitoring documentation was found. Score 0%.

Percentage Score Guidance:

80%

Documentation covering protocol specific threat monitoring

60%

Documentation covering generic threat monitoring

40%

Documentation covering operational monitoring

No on chain monitoring

Add 20% for documented incident response process

18. Is there documented protocol front-end monitoring (%)?

Answer: 0%

No documented front-end monitoring was found. Score 0%

Percentage Score Guidance:

25%

DDOS Protection

25%

DNS steps to protect the domain

25%

Intrusion detection protection on the front end

25%

Unwanted front-end modification detection OR

60%

For a generic web site protection statement

Admin Controls

97%

This section covers the documentation of special access controls for a DeFi protocol. The admin access controls are the contracts that allow updating contracts or coefficients in the protocol. Since these contracts can allow the protocol admins to "change the rules", complete disclosure of capabilities is vital for user's transparency. It is explained in this document.

19. Is the protocol code immutable or upgradeable? (%)

Answer: 100%

The protocol is 100% immutable. Score 100%.

Percentage Score Guidance:

100%

Fully Immutable

90%

Updateable via Governance with a timelock >= 5 days

80%

Updateable with Timelock >= 5 days

70%

Updateable via Governance

50%

Updateable code with Roles

40%

Updateable code MultiSig

Updateable code via EOA

Pause control does not impact immutability

20. Is the protocol's code upgradeability clearly explained in non technical terms? (%)

Answer: 100%

Code is Immutable and clearly indicated so in documentation. Score 100%.

Percentage Score Guidance:

100%

Code is Immutable and clearly indicated so in documentation OR

100%

Code is upgradeable and clearly explained in non technical terms

50%

Code is upgradeable with minimal explanation

50%

Code is immutable but this is not mentioned clearly in the documentation

No documentation on code upgradeability

21. Are the admin addresses, roles and capabilities clearly explained? (%)

Answer: 80%

Admin addresses, roles and capabilities minimally explained, information scattered. Discussion was in a few places, including a [blog](https://www.liquity.org/blog/directing-protocol-incentivized-liquidity-with-lqty, which points to a repo).
Once I found the GitHub, it became clear there were no signers, just voting. Score 80%.

Percentage Score Guidance:

100%

If immutable code and no changes possible, no admins required OR

100%

Admin addresses, roles and capabilities clearly explained OR

100%

Admin control is through Governance and process clearly explained

80%

Admin addresses, roles and capabilities incompletely explained but good content

40%

Admin addresses, roles and capabilities minimally explained, information scattered

No information on admin addresses, roles and capabilities

22. Are the signers of the admin addresses clearly listed and provably distinct humans? (%)

Answer: 100%

Admin control is through Governance thus no signers

Percentage Score Guidance:

100%

If immutable and no changes possible

100%

If admin control is fully via governance

80%

Robust transaction signing process (7 or more elements)

70%

Adequate transaction signing process (5 or more elements)

60%

Weak transaction signing process (3 or more elements)

No transaction signing process evident

Evidence of audits of signers following the process add 20%

23. Is there a robust documented transaction signing policy? Please refer to the Example doc for reference.(%)

Answer: 100%

Administration is 100% through governance. Score 100%.

Percentage Score Guidance:

100%

If immutable and no changes possible

100%

If admin control is fully via governance

80%

Robust transaction signing process (7 or more elements)

70%

Adequate transaction signing process (5 or more elements)

60%

Weak transaction signing process (3 or more elements)

No transaction signing process evident

Evidence of audits of signers following the process add 20%

Oracles

50%

This section goes over the documentation that a protocol may or may not supply about their Oracle usage. Oracles are a fundamental part of DeFi as they are responsible for relaying tons of price data information to thousands of protocols using blockchain technology. Not only are they important for price feeds, but they are also an essential component of transaction verification and security. These questions are explained in this document.

24. Are Oracles relevant? (Y/N)

Answer: Yes

Score Guidance:

Yes

The protocol uses Oracles and the next 2 questions are relevant

If the protocol does not use Oracles, then the answer is No and the Oracle questions will not be answered or used in the final score for this protocol

25. Is the protocol's Oracle sufficiently documented? (%)

Answer: 100%

Oracles are well explained. Score 100%.

Percentage Score Guidance:

100%

The Oracle is specified. The contracts dependent on the oracle are identified. Basic software functions are identified (if the protocol provides its own price feed data). Timeframe of price feeds are identified.

75%

The Oracle documentation identifies both source and timeframe but does not provide additional context regarding smart contracts.

60%

Only the Oracle source is identified.

No oracle is named / no oracle information is documented.

26. Can flashloan attacks be applied to the protocol, and if so, are those flashloan attack risks mitigated? (Y/N)

Answer: No

Mitigations are described here.

Score Guidance:

Yes

The protocol's documentation includes information on how they mitigate the possibilities and extents of flash loan attacks.

The protocol's documentation does not include any information regarding the mitigation of flash loan attacks.