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Counter-Protocol Tech and Economic Risks

The goal of vaults is to strike a balance between preventing exposure to tail technical risk, while giving vault managers the freedom to take on counter-protocol economic risks, since the latter is frequently rewarded while the former is not.
Some of the key tech risks we consider:
  • Track record of the protocol
  • Admin key existence and management
  • Existing audits
  • Protocol tech risk hedging opportunities
  • Degree to which the protocol is prone to manipulation
Some of the economic risks that we consider:
  • Economic exploit risks
  • Economic stability risks
  • Collateralization risk (if a system is under-collateralized)