The main risks that the vault is exposed to as well as their mitigants are as follows:
- Smart Contract Risk: Funds in the vault are exposed to BRAHMA's smart contract risk as well as the smart contract risk of the underlying protocols that funds are deployed in.
- Consensys Diligence and Zellic have performed audits on Brahma's smart contract architecture, more here.
- The vault only deploys funds to blue-chip, battle-tested protocols.
- Stablecoin Peg Risk: The vault deploys USDC to various stablecoin liquidity pools and thus takes on peg risk of all the underlying stablecoins. If one of the stablecoins in a pool loses its peg, then the pool may hold most of its assets in the depegged asset, resulting in capital losses for the vault.
- Stablecoin pools are evaluated using BRAHMA's Stablecoin Risk Framework before allocating vault capital.
- The health of the stablecoin pool is continuously monitored using predefined quantitative metrics. Actionable alerts provide early warning signals to prevent capital losses.
- The vault proactively rebalances pool allocation according to risk.