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  • ⭐What is StableUnit ?
  • ⚙️Technical Docs
    • System Overview
    • Stability
      • Stablecoin liquidity
    • Collateral
    • Liquidations
      • Async MEV-resistant liquidation module
    • Oracles
      • LP token pricing
    • Yield distribution
    • Circuit breaker
  • 🎙️Governance
    • StableUnit DAO
      • Types of voting
      • Voting delegation
    • NFT unlock conditions
  • 🪙Tokenomics
    • Tokenomics
  • 🛡️Risks and mitigation
    • General risks & mitigation
    • Risk Framework
      • Asset-Specific Insurance Funds in StableUnit
      • Collateral Risk Management
        • Collateral Risk Management Mandate
        • Risk Management of Candidate Collaterals
        • Risk Management of Active, Listed Collaterals
        • Qualitative and Quantitative Collateral Risk Rating
        • Comparison of Collateral Risk Framework vs Peers
        • Internal & External Collateral Risk Pricing
        • Collateral Risk Mitigation
        • Collateral Risk Transfer
      • Peg Stability Risk Management
      • Technical & Smart Contract Risk Management
        • Technical & Smart Contract Risk Mitigation
      • Insurance Fund
  • Extras
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  1. Risks and mitigation

Risk Framework

This current part is a work in progress. Additional details and information to be added.

PreviousGeneral risks & mitigationNextAsset-Specific Insurance Funds in StableUnit

Last updated 7 months ago

Risk Framework Flow

The objective of the StableUnit Risk Framework is to define and proactively manage risk with the goal to maximize the economic security of the products offered by the StableUnit protocol through risk mitigation and risk transfer.

Visualizing Space of StableUnit Economic Security

StableUnit Economic Security Ratio (ESR).

To satisfy the objective of StableUnit's Risk Framework, we define a single objective of mechanism design of the StableUnit Risk Framework, - maximize StableUnit Economic Security Ratio (ESR).

Example of solvency reserves

  1. Core solvency reserves: Value of assets collateralizing the monetary supply of stablecoin products.

  2. Internal solvency reserves:

    1. Protocol Owned Liquidity

    2. DAO Treasury

    3. Internal Insurance Fund

  3. External solvency reserves:

    1. Liquidity available on exchanges and market makers for liquidation of collateral

    2. Safety Module with stakers backing certain risks, up to a certain amount of loss.

    3. Specialty insurance and reinsurance markets with capital pools backing some specific risks (i.e. hacks, oracle risk, specific collateral causing bad debt).

Optimal ESR vs Actual ESR

Covering all exposure to various risks by solvency reserves is a theoretical ideal. We state that an optimum Economic Security Ratio (Optimum ESR) can be defined and reasonably achievable.

The dynamic nature of the monetary supply of StableUnit products (stablecoins), the presence of various kinds of risks, and the dynamic nature of collaterals backing the supply of StableUnit result in a deviation of Actual ESR as compared to an Optimum ESR at any given moment of time. Over time (x), exposure to various risks changes, and so do solvency reserves.

Scope of Risk Framework v1

In Scope
Out of scope

Collateral Risk:

  • Market Risk (Liquidity, Slippage, Volatility),

  • Technical Risks (Smart Contract Risk, Oracle Risk)

  • Interoperability & Composability Risk (i.e. availability of redemption of underlying assets, 3rd party dependencies such as bridges)

  • Counterparty Risk (Governance Risks, Centralization Risks, Legal Risks)

Economic attacks

Depeg Risk

Smart Contract Risk

🛡️
  • Risk Framework Flow
  • Visualizing Space of StableUnit Economic Security
  • StableUnit Economic Security Ratio (ESR).
  • Optimal ESR vs Actual ESR
  • Scope of Risk Framework v1