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Collateralization Safeguards

Aurum’s primary defense against market volatility lies in its conservative collateralization requirements:
  • 200% Minimum Ratio: All positions must maintain at least 200% collateralization (2:1 ratio of collateral to debt)
  • No Liquidation Mechanism: Unlike traditional lending protocols, Aurum does not implement liquidations
  • Self-Healing Positions: As yield continuously reduces debt, positions naturally become more secure over time
  • Conservative LTV: The 50% maximum loan-to-value ratio provides substantial buffer against market fluctuations

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Oracle Implementation

Reliable price data is critical to protocol security. Aurum implements:
  • Dual Oracle System:
    • Primary: Switchboard provides main price feeds
    • Secondary: Pyth serves as verification and fallback
    • Cross-validation logic ensures price accuracy
  • Price Update Frequency: Regular price updates ensure the protocol operates with current market data
  • Manipulation Protection: Outlier detection and time-weighted averaging prevent flash crashes or manipulation from affecting protocol operations

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Exposure Limits

To manage protocol-wide risk, Aurum implements several capacity controls:
  • Total Deposit Cap: Maximum SOL that can be deposited into the protocol
  • Per-User Limits: Caps on individual position sizes to prevent concentration risk
  • Utilization Targets: Managed allocation of deposits to different yield strategies
  • TVL Growth Rate: Controlled expansion of protocol capacity to ensure stability

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Drift Vault Risk Management

By integrating with Drift’s vault system, Aurum inherits several proven risk management features:
  • Strategy Diversification: Exposure across multiple yield sources within Drift’s ecosystem
  • Smart Contract Security: Leveraging Drift’s extensively audited and battle-tested infrastructure
  • Liquidity Management: Careful balance between yield generation and withdrawal capabilities
  • Monitoring Systems: Continuous oversight of vault performance and risk metrics

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Contingency Planning

Aurum prepares for adverse scenarios through a comprehensive contingency framework:
  • Emergency Shutdown: Protocol pause capability if critical issues are detected
  • Graceful Withdrawal Process: Structured wind-down procedure to return user funds if necessary
  • Reserve Fund: Planned allocation of protocol revenue to an insurance fund for addressing unforeseen events
  • Response Team: Dedicated technical team available to address emergencies
This multi-layered approach to risk management ensures that Aurum can withstand market turbulence while protecting user assets and maintaining protocol stability.