🛡️Risk Mitigation

REBALANCE recognizes the importance of risk mitigation within its platform, addressing key concerns such as smart contract risk, counterparty risk, and the risks inherent in interacting with underlying protocols.

Here's how REBALANCE tackles each of these challenges:

Smart Contract Risk

Given that smart contracts are crucial to DeFi protocols yet susceptible to bugs, REBALANCE adopts a dual strategy for risk mitigation:

• conducting audits

• offering bug bounties

Audits are performed by independent experts who scrutinize the smart contract code for vulnerabilities, while bug bounties encourage the community to uncover and report bugs, rewarding them for their contributions. This blend of expert review and community engagement fortifies the security of REBALANCE's smart contracts.

Counterparty Risk

Counterparty risks are evaluated based on criteria such as the presence of multisig and timelock mechanisms* (or DAO-based management) and the team's reputation/availability of investor funds.

*Multisig enhances security by requiring multiple approvals for transactions, and timelocks introduce a delay in executing certain actions, allowing time for any malicious activities to be addressed.

REBALANCE also relies on the MAM system, developed for the extra hack-protection.

Risks of Underlying Protocols

REBALANCE manages these through protocols risk filtering and diversification. Risk filtering selects protocols based on a comprehensive assessment of their risks, including smart contract and market risks, ensuring integration with only the most secure protocols.

Smart contract risks are assessed based on the following criteria:

• the protocol has been operational for over a year,

• the presence of audits,

• Total Value Locked (TVL) exceeding $3 million in the last 90 days

Diversification spreads investments across several protocols to mitigate the impact of any single failure. Liquidity risk management ensures that there is always enough liquidity available for user withdrawals.

Market Risks

Assets lacking a solid market history, with low liquidity, associated with teams of dubious reputation, or carrying the threat of a "rug pull" are systematically rejected. This careful selection process is crucial for averting the accumulation of bad debt within the protocol.

In essence, REBALANCE's risk management framework is an all-encompassing strategy designed to navigate and mitigate the myriad risks inherent in DeFi protocols.

To strategically oversee its deposit portfolio and borrowing activities, REBALANCE has established specific risk parameters, including two for deposits and three for borrowing.