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Risk Controls

Vault Curators operate the settings of a vault to manage risk, interest, growth, and liquidity:

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Collateral Management

Up to 250 collateral assets may be permissioned per vault, each with an assigned oracle. Curators may define:
  • Loan-to-Value (LTV): The maximum borrow value relative to deposited collateral value (also impacts how much collateral can be withdrawn from an outstanding loan).
  • Liquidation Threshold (LQT): The point at which liquidation is legal.
  • Oracles: Separate oracle accounts as well as staleness and variance criteria may be used for pricing and liquidations. Oracles must be selected from Loopscale-supported configurations as listed in the Oracles section of the docs.
  • Maximum Allocation: Per-asset loan exposure caps limit concentration for amount of principal at risk against any individual collateral asset.
  • Interest rates: Per-asset, per-duration interest rates can be set. Will apply to new loans or refinanced/rolled over loans.
LTV and LQT apply only to new or refinanced loans, outstanding loans retain their initial parameters until rollover.

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Liquidity Management

Vault liquidity can be actively shaped to balance yield generation and withdrawal readiness. Curators may define:
  • Loan Durations and Rates: Curators set which maturities are available in the order book and the rates for each tenor.
  • Liquidity Buffer: A portion of the vault can be reserved as idle liquidity to satisfy withdrawals, typically 2.5–7.5% of deposits.
  • Idle Yield: Unutilized funds may be allocated to external protocols (e.g. Marginfi) to earn incremental yield, though this introduces additional counterparty risk.
  • Refinancing at Maturity: If liquidity falls below the configured buffer, maturing loans are refinanced to other lenders or vaults to preserve withdrawal capacity.
Vault operations also include configurable controls to manage inflows, outflows, and parameter changes. Curators may define:
  • Deposit Caps: Limits on total deposits accepted into the vault.
  • Withdrawal Caps: Limits on withdrawals over rolling 1h or 24h windows, or in aggregate.
  • Pause Switches: Ability to halt new loan originations or deposits entirely if needed.
  • Timelock Buffers: Parameter changes that increase risk (e.g. higher LTVs, expanded collateral sets) are subject to enforced delays before taking effect.

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Curation Fees

  • Origination Fee: A fixed, one-time fee proportional to principal size, applied only on new loan originations (not refinances).
  • Interest Fee: A variable share of accrued interest, configurable up to 100% of total interest generated.

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Liquidations

Liqudiations for loans on vaults are no different than the rest of the protocol, the liquidation framework is designed to ensure orderly resolution of insufficiently collateralized loans.
  • Health Enforcement: Monitor loan health factors defined by LTV and liquidation thresholds. Liquidations are triggered when collateral falls below required coverage.
  • Settlement: Liquidations involve the partial or full repayment of a debt in order to claim some/all collateral
  • Whitelisted Access: Liquidators must be whitelisted by Loopscale in order to be able to trigger a liquidation.
  • Fees: Liquidations follow a quasi-reverse dutch auction structure that rewards the liquiditor proportionally to the percent below the liquidation ratio they are. This incentivizes less aggressive liquidations but in a competitive marketplace, liquidators are ultimately racing to determine a fair fee value at which they’re willing to liquidate.