Securing security — Beyond the audit
With DeltaPrime we intend to unlock the blockchain. Meaning: Get the 42 billion dollars currently locked in lending protocols into the hands of active investors. We accomplish this by providing a decentralized, undercollateralized lending protocol where borrowed funds can be used for leveraged trading, staking and liquidity mining.
Unlock the blockchain.
It’s an ambitious mission with large sums of assets at stake. Security is key. For this reason we are doing everything in our power to ensure full security to the funds in the protocol. This comprises performing code reviews with every change, rigorous unit testing and integration testing on a mainnet fork by the team. On top of this several audits were performed by professional, independent auditors, assessed the resulting code as secure. You can find the audits right here. Of course, this for us is only the first step. We intend to make the way we handle security as transparent and understandable as possible, for liquidity providers and borrowers alike.
Liquidity provider is Safu
As a liquidity provider to our undercollateralized liquidity pool, you are an essential part of the community. By providing assets which would otherwise lie idle, you give them an active and flowing life. Of course, at the same time, you also want to be sure your assets won’t get lost on bad investments.
To make sure your funds are Safu, the DeltaPrime protocol secures security in the following way:
When you deposit assets in a liquidity pool, the transaction gets saved on-chain and every potential borrower will be able to borrow part of these funds for their investments. As means of security, they will have to add a deposit of their own funds, worth at least 25% of the loan. When this happens, a brand-new smart contract is created to which the loan and deposited collateral gets sent. This smart contract has the sole purpose of protecting your assets as a provider.
In order to do this, the contract restricts the movement of funds to within the services provided by the platform. Here, it keeps track of the Loan-to-Value (LTV) percentage. This percentage is calculated by dividing the total worth of the loan — denominated in $AVAX- by the Value of your collateral in the smart contract. The worth of the Loan always stays the same: everything the investor borrowed. The worth of the Value varies, depending on the profitability of the investment. If overall investments are profiting, the Value of the collateral increases, lowering the LTV. If overall investments are losing, the Value of the collateral decreases, increasing the LTV.
These contracts ensure all liquidity providers of full loan payback by preventing the LTV of a loan to reach critical conditions. This happens two-fold: A fully automated preventive mechanism ensures that every action of a borrower needs to leave the loan in a solvent state. It prevents any action leading to insolvent loans from happening. As soon as the LTV of a contract is 500% or more, everyone can trigger a function in the protocol, aimed at liquidating part of the contract, getting the LTV back to a safe value. These “liquidators” are incentivised to do so, by receiving a reward, paid from the deposit of the liquidated borrower. This mechanism serves two purposes. First of all, it incentivises liquidators to compete with each other to liquidate loans as soon as LTV rises above 500%, strengthening the security process. Second, this mechanism incentivises borrowers to refrain from taking needless risks, as they will be the one paying for liquidations.
The borrower bears the full risk of his investments, making your deposited funds as a liquidity provider safe.
Borrower is Safu
“The borrower bears the full risk of his investments”
This might lead you, as a borrower, to ask: What is this full risk?
To start off. You are the one in control. You control your own profits as well as your own risks. By making use of the DeltaPrime protocol you give yourself the power to magnify the strength of your capital. If you don’t feel confident in your investment strategies, don’t give yourself that power. While using leverage magnifies good investments, leading to bigger profits, it also magnifies bad investments, which might lead to bigger losses. That said, the protocol is also taking care of you, helping you to reduce your risk to a responsible level.
The first time you take out a loan, the maximum LTV is set to 400%. This buffer protects you from taking out loans with a risk of immediate liquidation due to slight price movements.
While you are completely free to make any trades and investments at your own discretion, the protocol will protect you from making mistakes which would lead to immediate liquidation. This means you can trade and invest, without having to worry you might make a trade which would instantly liquidate your assets. Of course you do still have to stay conscious with your trades and investments, as especially with currencies with extreme volatility, the time-window from loan to liquidation might be very short. The freedom to overthink and make these decisions is all yours.
Another safety measure put in place is through our collaboration with RedStone. By making use of an oracle relying on multiple data providers and meta transactions, we protect our users from losses due to price manipulation. The current price of AVAX for example, is a result of the data from 14 different providers. The data integrity on RedStone, and with that, on DeltaPrime is particularly high, protecting you from nefarious actors in the DeFi ecosystem. Make sure to read our upcoming article to read more about our collaboration with RedStone and the way this benefits you as a DeltaPrime user.
Securing security
In short, with DeltaPrime the security of your funds is our top priority. This goes whether you’re a liquidity provider or borrower and whether you’re here for the short run or for years to come. Our protocol is built around security, which goes way further than the rigorous professional audits we succumb our code to. On top of this, we want to be as transparent as possible, so if you have any further questions after reading this, feel free to let us know on our discord.
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About DeltaPrime
DeltaPrime is your prime broker on a mission to unlock the full potential of DeFi. We accomplish this by providing secure undercollateralized loans, redestributing assets with a focus on maximum fund utility. Being built on the strong foundation of the Avalanche network, our investors are ensured of fast and reliable transactions for their most important investments.
Be sure to check us out!
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