Echelon
  • ⚡Echelon Protocol
  • CORE
    • Borrow/Lend
      • Core Concepts
      • Borrowing Assets
      • Supplying Assets
      • Protocol Fees
    • Interest Rates
      • Borrow Rates
      • Supply Rates
    • Supported Assets
    • Oracles
  • Security
    • Risk Management
      • Asset Parameters
      • User Risk Parameters
      • Liquidations
  • Integrations
    • Running a Liquidator Bot
    • Developer Documentation
  • Operations
    • Audits
    • Risks
    • Disclaimer
    • Terms of Service
    • Restricted Geolocations
  • Group 1
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  1. Security
  2. Risk Management

Asset Parameters

Overview Risk parameters for each asset differ, as they factor in security, governance, and market behavior. As such, the protocol can onboard higher risk assets through controlled conditions, enhancing overall protocol safety.

Asset-Specific Risk

  • Each asset carries distinct risks—such as smart contract vulnerabilities, centralization concerns, and market volatility—that affect lending and borrowing.

  • Both the main collateral market and isolated markets operate under separate requirements and functions.

  • When reviewing new assets for listing, the protocol evaluates usage, distribution, liquidity, and asset quality to establish loan-to-value (LTV) ratios, supply and borrow caps, and interest rate models.

Governance and Asset Onboarding

  • Assets are added either through governance proposals or by Asset Listing Admins appointed by governance.

  • This process ensures new assets align with protocol safety measures and maintain overall system stability.

Over-Collateralization and Liquidation

  • Borrowers must over-collateralize their loans to protect against market volatility.

  • If collateral value drops below a set threshold, a portion of the position is liquidated to repay the debt and restore healthy collateralization.

  • These thresholds and procedures vary depending on each asset’s risk profile.

Key Risk Parameters

  • Supply Caps: Limit an asset’s total supply in the protocol, based on on-chain liquidity and overall collateral volume.

  • Borrow Caps: Set the maximum borrowing limit for each asset to reduce the risk of price manipulation, large-scale liquidations, and insolvency events.

  • Maximum Loan-to-Value (LTV): Defines the maximum borrowing power of a given collateral asset.

  • Liquidation Threshold (LT): Triggers liquidation when collateral falls below a certain value.

  • Liquidation Incentives: Directs a portion of repaid collateral to liquidators to encourage timely liquidations.

  • Efficiency Mode (eMode): Optimizes settings for correlated assets by offering higher LTV ratios for capital efficiency and lower liquidation incentives to reduce bad debt risk in leveraged positions.

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Last updated 15 days ago