Asset-level

Each asset on Solera is assigned specific risk parameters that govern its use for lending and borrowing. These parameters are designed to address security, governance, and market dynamics, ensuring that risks are managed at an individual asset level. V1 introduces advanced risk measures to onboard a broader range of assets, including those with higher risk profiles.

Understanding the inherent risks of each asset, including smart contract security, centralization risks, and market volatility, is crucial to maintaining a stable protocol. Each asset in Solera is onboarded through governance proposals or by admins appointed by governance, ensuring a thorough risk assessment.

Key Risk Parameters:

• Supply Caps: Limit the total supply of an asset within the protocol, based on its on-chain liquidity and collateral volume.

• Borrow Caps: Set a maximum borrowing limit for each asset, reducing the risk of price manipulation and insolvency.

• Efficiency Mode (eMode): Provides higher Loan-to-Value (LTV) ratios for correlated assets like stablecoins and Liquid Staking Derivatives (LSDs), optimizing capital efficiency while managing risk.

To further mitigate market risks, loans on Solera require over-collateralization, and assets are subject to specific collateralization and liquidation rules. If the value of collateral falls below a defined liquidation threshold, a portion is liquidated to repay debt and maintain solvency.

Solera’s risk management framework ensures that each asset is appropriately managed, balancing capital efficiency with the security of the protocol.