Risks
Risk Classification of the Protocol
The protocol is subject to several inherent risks, primarily related to the behavior of smart contracts and participants. These risks include:
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Smart Contract Vulnerabilities: Custom-developed smart contracts within the protocol may contain vulnerabilities that could be exploited by malicious actors. This includes potential attacks on the Gardens or individual strategies managed by Gardeners.
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Malicious or Rogue Gardener Behavior: A Gardener—once managing a significant amount of capital—may adopt an unexpectedly aggressive investment strategy, deviating from the originally intended risk parameters. Such behavior could lead to substantial financial losses for contributors.
Risk Mitigation Measures
To address the above risks, the following on-chain solutions are proposed:
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Smart Contract Auditing and Verification: All protocol contracts and strategy modules must undergo rigorous, transparent, and preferably continuous smart contract audits. Public access to audit results enhances trust and accountability.
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On-Chain Risk Governance Mechanisms: Enforceable constraints should be embedded within smart contracts to prevent unauthorized or risky actions. For example, a rule could be implemented to restrict swaps or capital deployment unless the portfolio’s risk profile remains within a predefined acceptable range.
These controls aim to ensure that investment strategies align with the intended risk appetite and protect users from both code-level vulnerabilities and misaligned incentives.