Risk Management

Omneon implements a comprehensive risk management framework to protect users and ensure protocol stability across all market conditions.

🛡️ Core Risk Controls

Collateralization Requirements

Parameter	Value	Purpose
Maximum LTV	75%	Prevents over-borrowing
Liquidation Threshold	80%	Early liquidation trigger
Liquidation Bonus	5%	Incentivizes liquidators
Safety Buffer	5%	Protection margin

Pool Risk Parameters

Supply Cap: Configurable per asset
Borrow Cap: Prevents excessive leverage
Reserve Factor: 25% for protocol stability
Interest Rate Caps: Automatic maximum rates

🎯 Asset-Specific Risk Assessment

IOTA Collateral Risk Profile

Volatility: High (crypto asset)
Liquidity: Good (major exchange listings)
Market Cap: Large (established network)
Correlation: Medium with broader crypto markets

Risk Rating: MEDIUM-HIGH
Max LTV: 75% (conservative approach)

vUSD Borrowing Risk Profile

Volatility: Low (stablecoin-pegged)
Liquidity: High (protocol native)
Stability: Dependent on protocol health
Redemption: 1:1 backing mechanism

Risk Rating: LOW-MEDIUM
Utilization Cap: 90% maximum

🚨 Emergency Procedures

Pause Mechanisms

Global Pause: Stop all protocol activity
Asset Pause: Stop specific asset interactions
Function Pause: Stop specific operations (supply/borrow/liquidate)

Trigger Conditions:
- Smart contract vulnerability discovered
- Oracle failure or manipulation
- Extreme market conditions
- Governance emergency vote

Emergency Governance

• Multi-sig Control: 3-of-5 admin signatures required

• Time Delays: 24-48 hour delays for major changes

• Community Override: DAO can reverse emergency actions

• Transparency: All emergency actions logged and explained

📈 Risk Monitoring Systems

Real-Time Metrics

Metric	Threshold	Action
Pool Utilization	>90%	Rate increase
Average Health Factor	<1.5	User alerts
Large Position Size	>10% of pool	Enhanced monitoring
Price Volatility	>20% in 1 hour	Circuit breaker consideration

AI Risk Analysis

Continuous Monitoring:
- Individual position health tracking
- Portfolio-level risk assessment  
- Market condition analysis
- Correlation risk identification

Predictive Alerts:
- Liquidation risk forecasting
- Market volatility warnings
- Liquidity shortage predictions
- System stress test results

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Risk Summary

Overall Protocol Risk: MEDIUM

Strengths:

• Conservative risk parameters

• Multiple security layers

• Proactive monitoring systems

• Experienced development team

Considerations:

• New network (IOTA Rebased)

• Single asset pair (initially)

• DeFi market volatility

• Smart contract complexity

Recommendation: Start with small positions, enable AI monitoring,