In the previous section we discussed how DeltaPrime makes use of liquidations to protect deposited funds. The ability to provide people with up to 5 times their collateral for multiple DeFi investments, while protecting borrowed assets from being lost, is unique to DeltaPrime. In addition to liquidations, the protocol has several other safety measures in place to protect the funds of depositors and borrowers alike.
To protect borrowers from being immediately liquidated after a wrong action, our protocol reverts every transaction that would result in surpassing a solvency limit. Additionally, a borrower can borrow up to a maximum of 450% TVL. That gives a leeway of 50% of the margin to account for rapid price swings.
Every Prime Account is a dedicated contract deployed to a blockchain. That is why the insolvency of one account does not affect the insolvency of others. Funds and debts are separated, mitigating the risk of cascade insolvency (account with bad debt affecting others). At the same time, this approach simplifies the accountancy and liquidation mechanism.
Borrowers have sole control over the assets they borrow. To make sure they don't put their borrowed assets in a high-risk protocol, there is a certain level of gatekeeping in the Prime Account. By only allowing audited protocols to be used, protocol risk is severely reduced. When DeltaPrime becomes a DAO, the community will decide on which protocols to integrate. While we are building towards the DAO, DeltaPrime's developer team will be making these decisions. Next to announcing new protocols on our socials, every integrated protocol will also be visible at least 7 days before the actual integration in the integrated protocols list.
To ensure timely liquidations of accounts, we exclude extreme-volatile or high-risk tokens. Every token included in our platform must meet all of the points described below:
- 1.The project is well-known in web3 and has an overall positive image.
- 2.Liquidity has at least $1.000.000 prior to integration.
- 3.There are at least three price data sources.
On top of that we perform an analysis of asset's volatility history on the integrated AMMs. The limit for profitable liquidation is the price change of 16.66%. To ensure enough safety margin for the protocol, we do not accept tokens with history of price changes of more than 5% over any 30 seconds period (time required for submitting and mining a liquidation transaction) during last 100 days or important market up- or downturns. In the future, every included token will have a defined maximum leverage ratio based on its current liquidity and pricing history. In this way we can control protocol exposure to more volatile tokens.
DeltaPrime uses price feeds from an oracle, enabling us to calculate the price from multiple independent price sources. In the past, existing liquidity protocols have often been a target of price manipulation by affecting liquidity on AMMs. In DeltaPrime, every evaluation of assets is based on data from one oracle. This ensures that solvency checks of accounts are based on real-world data and protects depositors from losing funds due to price manipulation. To guarantee that price feeds are always up to date, DeltaPrime uses RedStone oracle that offers 10s update interval, which is way lower than the current industry standard.
One of the purposes of DeltaPrime treasury is to support protocol solvency in the event of accounts having a "bad debt" (total value of assets lower than current debt). Protocol-run liquidation bots have additional funds to be able to perform unprofitable liquidations. By constantly increasing treasury with protocol revenue, the system is secured to be sustainable long term.
Currently two audits have been performed: one by leading auditing company PeckShield; another by independent auditor Piotr Szlachcia. As DeltaPrime develops, new audits will be performed to provide maximum security.
No critical / high-risk bugs or vulnerabilities were found. Medium and low risk vulnerabilities have been resolved.
Blockchain and decentralized finance are new technologies and therefore have some inherent risks. While the team makes every effort to ensure protocol safety, protocol risks are existent in every single protocol. The above mentioned safety measures are put in place to mitigate this risk as much as possible. Should you, in spite of our rigorous testing and professional audits, find any possible vulnerabilities in our codebase, we urge you to reach out to us at: https://discord.gg/9bwsnsHEzD