Risk Management

DeFi projects, like the Evaa Protocol, rely heavily on a robust risk management framework to ensure the safety of funds and maintain trust within the ecosystem. Below, we delve into some of the critical components of this framework for the Evaa Protocol.

Collateral Management

In decentralized finance (DeFi), collateral is a fundamental aspect. It ensures loans are repaid, and if they aren't, it's what compensates the lender.

• Collateral Types: Evaa might accept a range of assets as collateral: TON, stTON, tsTON, USDt, jUSDC

• Collateral Valuation: The platform would likely utilize oracle services to fetch real-time prices for collateral assets, ensuring they are accurately valued. Regular updates and multiple data sources can reduce manipulation risks.

Liquidation Thresholds

Liquidation is a mechanism that protects lenders if the value of the collateral falls too much.

• The threshold is a predefined ratio of loan value to collateral value. If the collateral's value drops to this threshold, it will be sold off (or liquidated) to ensure the lender doesn't suffer a loss. It is 75%.

• This ratio can vary depending on the volatility of the collateral asset. For example, more stable assets might have a higher threshold than volatile ones.

Interest Rate Models

Interest rates play a pivotal role in DeFi, influencing borrowers and lenders. A well-structured model ensures platform sustainability and attractive yields.

How Rates Are Determined

The Evaa Protocol might utilize a dynamic interest rate model that adjusts based on supply and demand. For instance, interest rates could rise if there's high demand to borrow but low liquidity. Conversely, rates might decrease if there's a surplus of funds but low borrowing demand.

Factors Affecting Rates

Several factors could influence these rates:

• Liquidity: As mentioned, the available funds can push rates up or down.

• Platform Utilization: A high utilization ratio might increase rates to encourage more deposits and discourage borrowing to some extent.

• Collateral Stability: If a collateral type is deemed more volatile or risky, loans against it might attract higher interest.

• Governance Decisions: Token holders, possibly through a governance mechanism, might vote on interest rate adjustments or introduce rate caps.