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Risks, Security, Audits

This page explains how we think about security. It is written for all readers (users, investors, institutions, and developers).

Important

  • Smart contracts are immutable once deployed; transactions are irreversible.
  • DeFi involves market, protocol, and operational risks. Losses are possible.
  • Nothing here is investment advice. Yields are variable and not guaranteed.

Our Security Principles​

1) Minimize avoidable risk. Prefer simple, battle‑tested patterns and conservative assumptions over yield‑chasing or complexity.
2) Least privilege & separation of duties. Use role‑based access, multisig guardianship, and timelocks where appropriate.
3) Defense in depth. Multiple layers: audits, monitoring, pausing/guardians, circuit breakers, parameter caps, and incident runbooks.
4) Transparency. Publish parameters, addresses, audit reports, and incident post‑mortems.
5) No surprise dependencies. Limit external protocol reliance; avoid leverage and bridging in the backing allocation for the PCA by default.

General DeFi Risks​

1) Smart Contract Risk​

Bugs or logic errors can lead to loss of funds, frozen assets, or unintended behavior. Even audited code can contain undiscovered issues.

What we do

  • Multiple internal reviews and external audits before enabling capital‑bearing features.
  • Gradual launch with caps / allowlists where prudent.
  • Continuous monitoring and formal incident runbooks.

2) Market, Liquidity & Volatility Risk​

On‑chain markets can move quickly; liquidity can disappear in stress. This affects pricing, collateral health, liquidations, and exit timing.

What we do

  • Conservative risk parameters and dynamic mechanisms in the broader product suite (e.g., snapshot LTVs, soft liquidations, time‑slicing).
  • Emphasis on unwind‑friendly positions for treasury/backing.

3) Price Discovery, MEV & Economic Attack Risk​

Front‑running, sandwich attacks, and flash‑loan‑driven manipulations can harm users and LPs if not mitigated. External oracle feeds can lag or be manipulated.

What we do

  • Depth‑aware pricing metrics in trading products; guardrails and regime detection.
  • Reduce reliance on external oracles where design allows; if used, apply cross‑checks and conservative thresholds.

4) Third‑Party & Integration Risk​

When capital is deployed to external venues (lending, staking, LSTs), those venues have their own contract, validator, or operational risks.

What we do

  • Use established, liquid venues for conservative yield.
  • Avoid leverage and bridging in the backing allocation.
  • Diversify and size exposures with caps and stress assumptions.

5) User Operational Risk​

Key loss, phishing, malicious approvals, wrong addresses/URLs, and wallet compromises are common causes of loss.

What you can do

  • Use hardware wallets; verify URLs and contract addresses.
  • Review token approvals; start small; simulate transactions when possible.

Security Controls & Operational Safeguards​

  • Roles & Multisig. Sensitive functions gated by multisig; roles separated (Configurator, Treasury, Strategy Manager, etc.).
  • Parameter Caps. Per‑asset/venue caps and allowlists; snapshot LTVs where relevant.
  • No Leverage / No Bridging (Backing). Backing allocation avoids leverage and bridging by default for unwind simplicity.
  • Transparency. Publish contract addresses, ABIs, parameters, and post‑mortems where applicable.

Incident Response (Overview)​

  1. Detect & Verify. Monitoring alerts; reproduce on a fork; classify severity.
  2. Contain. Pause/circuit breakers; parameter throttles; multisig actions.
  3. Remediate. Hotfixes via audited patterns; re‑audit if code changes.
  4. Communicate. Timely, factual updates; impact and user guidance.
  5. Post‑Mortem. Public root‑cause analysis and long‑term fixes.

What Users Can Do​

  • Verify URLs and contract addresses; never trust DMs.
  • Use hardware wallets and limit approvals to trusted contracts.
  • Start small and scale gradually; simulate transactions when possible.
  • Monitor your allowances and revoke unused approvals.
  • Understand the differences between Hold, Exit, and Withdraw in the FT PUT Option.