Risk Management

Asset Onboarding

Every asset clears a risk review before Bondify issues its CCR (Cleared Collateral Receipt). The review sets three parameters — LTV, debt ceiling, stability fee — from four inputs:

• Liquidity - market depth (slippage at size), on-chain unstake speed, off-chain redemption time. Higher liquidity raises LTV and debt ceiling.

• Credit - issuer track record, yield predictability, duration, default history, legal backing. RWAs require quantifiable, defined-duration cash flows.

• Market - price volatility, market correlation, oracle update frequency (24/7 for crypto, daily/weekly for RWA).

• Integration - oracle accuracy, audit status, liquidation viability, bridge security for multi-chain assets.

Parameters re-adjust automatically when an input deviates past its threshold; governance signs off on changes.

Liquidation & Loss Absorption

All liquidations are executed by the protocol - there are no external or public liquidators. Positions nearing the threshold trigger alerts and partial unwind; underwater positions are liquidated in full by Bondify.

Losses are absorbed in this order:

1. YT upside - YT holders pre-pay for future yield, so they absorb first: once a position has no remaining upside, that forfeited yield is the initial buffer.

2. Looper equity - the looper's 20-30% over-collateralization absorbs next; the protocol liquidates the position in full.

3. Treasury - if unstaked collateral (in USDC) falls below outstanding debt across the YT and looper legs, the treasury covers the shortfall.

Operational liquidity supports execution: SLF holds a 20% USDC reserve at an 80% utilization target, and CCR pools liquidity across RWAs to avoid isolated-pool fragmentation.

Security

• Multi-firm audits, formal verification, ongoing bug bounty, staged deployment.

• Multi-sig governance with emergency pause.

• 24/7 monitoring; liquidation-event insurance.

Risk Disclosure

Residual risks remain: contract bugs, oracle failure, extreme market moves, regulatory change, RWA issuer default, and asset illiquidity. Mitigations (diversification, dynamic parameters, insurance) reduce but do not eliminate them.