🪙Asset-level Risk Parameters

Each asset in the Echelon Markets protocol has specific risk values that affect how they're used for lending and borrowing. V1 enhances risk mitigation with additional parameters focusing on security, governance, and market dynamics.

Understanding the risks associated with each asset is crucial, including smart contract security, centralization risks, and market dynamics. Assets bring their inherent risks into the Echelon Markets ecosystem. V1 introduces advanced risk parameters, facilitating the onboarding of high-risk assets with defined limits.

Assets in Echelon Markets are added through governance proposals or by Asset Listing Admins appointed by governance.

Risk parameters in Echelon Markets mitigate market risks. In V1, each loan requires over-collateralization with assets subject to market volatility. Adequate margins and incentives are vital to maintain collateralization during adverse market conditions. If collateral value falls below a set threshold, a portion is liquidated to repay debt and maintain collateralization.

These parameters, including collateralization and liquidation rules, are asset-specific.

V1 introduces tried and true risk parameters for enhanced protection against insolvency:

  1. Supply Caps: Limit the maximum supply of an asset to the protocol, based on on-chain liquidity and total collateral volume.

  2. Borrow Caps: Set a maximum borrow limit for an asset to prevent price exploits and insolvency risks.

  3. Efficiency Mode (eMode): Allows higher LTVs for correlated assets like stablecoins and Liquid Staking Derivatives (LSDs).

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