Risk Management

Risk Management Framework

MultichainZ incorporates advanced risk parameters and features to enhance the protocol's resilience and mitigate the risk of potential insolvency.

Below is the list of risk management additions:

1. Isolation mode assets enable the listing of riskier assets in an isolated manner, imposing restrictions that include:

• Limiting borrowing exclusively to isolated stablecoins.

• Allowing the use of only a single isolated asset as collateral at any given time.

2. Siloed assets refer to assets that have the potential for manipulatable oracles and are listed solely for supply purposes, meaning they cannot be utilized as collateral.

3. Permissioned roles for RISK_ADMIN in MultichainZ Governance allows the protocol to appoint specific entities with the authority to modify risk parameters without requiring a governance vote for each parameter update. This empowers the protocol to efficiently and swiftly adjust risk parameters as the market matures, facilitating more agile risk management.

4. It is now possible to set upper limits for supply and borrow on each asset reserve by configuring supply and borrow caps (optional). This feature helps reduce exposure to specific assets and mitigates risks such as infinite minting or manipulation of price oracles.

5. The liquidation mechanism in the protocol has been enhanced with a variable liquidation close factor, allowing for full liquidation of a position as it approaches insolvency (HF < 0.95).

6. The Price Oracle sentinel feature primarily caters to Layer 2 solutions and addresses potential downtime of sequencers. It introduces a grace period for liquidations and grants RISK_ADMINS the ability to disable borrowing for a reserve under specific circumstances.

The following documentation analyzes the fundamental risks of the protocol and describes the processes in place to mitigate them in more details.

If you have any questions, join the MultichainZ Telegram Community; our team and members of the community look forward to helping you understand MultichainZ’s risks and risk management procedures