❗Risks

This section describes the risks associated with Rysk v2 alongside a mitigation for that risk. It is important to note that all mitigations are not complete solutions to the problem as some risks are simply unavoidable, the mitigations are put in place to help reduce risk.

Financial risks

Trading Risk

• Market maker operators on exchanges can run into execution risks with their strategies, resulting in financial loss. This is an unavoidable risk given the nature of cross-exchange market making

Mitigation

• For the initial stages, market makers have been selected based on track-record, demonstrating their ability to perform their strategies with little error in a profitable manner.

Malicious Market Maker Risk

• Market maker operators on exchanges can potentially self-trade or deliberately lose funds.

Mitigation

• For the initial stages, market makers have been selected based on track-record, demonstrating their ability to perform their strategies with little error in a profitable manner. Risk management systems are also developed and continuously improved that aim to identify these patterns and prevent the market maker from acting maliciously. As is described in Rysk v2 phase 2, this risk will be solved.

Liquidation Risk

• Positions could be liquidated in adverse scenarios resulting in loss of funds.

Mitigation

• A liquidation buffer is maintained to ensure that collateral positions can be properly backed, the risk management system constantly checks health to ensure the market makers are not being irresponsible.

Smart Contract Risks

Smart Contract Risk

• The system is complex and inherently experimental and carries risk of a smart contract vulnerability which may result in total loss of funds.

Mitigation

• The Rysk smart contracts have completed audits, have been thoroughly tested, security best practices have been followed throughout development.

• The protocol has monitoring via Tenderly, if a security alert occurs there are guardians who are able to pause the protocol to prevent any further adverse scenarios.

Exchange failure Risk

• Exchanges can fail due to any number of reasons resulting in financial loss.

Mitigation

• Exchanges have been diligently selected based on track-record, quality of the team and other qualitative factors.

Human Risk

• Some contracts require manual setting of certain values. The team strives to eventually remove the need for any human intervention in the protocol but unfortunately some intervention is unavoidable in the current state of DeFi technology.

Mitigation

• All flows are internally documented with strict instructions to follow, these instructions will be made public, all processes are conducted via multisig so no individual can make a mistake or has control.