Risk

What are the risks involved in Nexus Market?

No protocol can be considered entirely risk free, but extensive steps have been taken to minimize these risks as much as possible – the Nexus Protocol code is publicly available and auditable by anyone, and has been audited by multiple smart contract auditors. Any code changes must be executed through the onchain governance processes. Additionally, there is an ongoing bug bounty campaign and service providers specializing in technical reviews and risk mitigation.

Different risk categories are explained in detail below. You can find additional risk and security related information in the risk framework and security and audits sections.

• Smart Contract Risk Smart contract risk involves the potential for bugs or vulnerabilities within the Nexus Protocol code or the underlying reserve tokens.

• Oracle Risk Oracle risk arises from the reliance on third-party data providers for price feeds and other external data such as redemption ratio for liquid staking tokens. If an oracle fails or is compromised, it could lead to incorrect valuations of assets.

• Collateral Risk Collateral risk pertains to the value and stability of assets used as collateral. The inability to liquidate collateral due to rapid decrease in value or insufficient external liquidity can result in bad debt.

• Network Risk Network risk involves the potential issues related to the underlying blockchain networks upon which the Nexus Protocol operates. These risks include congestion, censorship, or security vulnerabilities.

What steps are taken to mitigate risks?

• Smart Contract Risk To mitigate smart contract risks, the Nexus Protocol code is publicly available and has been audited by multiple smart contract auditors. Nexus employs onchain governance, which validates that any changes to the protocol are thoroughly vetted and approved by the community. Additionally, service providers contribute their expertise to identify and mitigate potential risks. The protocol also runs an ongoing bug bounty program that encourages external developers to find and report vulnerabilities.

• Oracle Risk Nexus mitigates oracle risks by using decentralised oracles such as Chainlink to provide reliable and tamper-resistant price and redemption ratio feeds.

• Collateral Risk To address collateral risks, the Nexus DAO engages risk service providers who continuously monitor the collateral assets and market conditions to provide insights and adjustments. The protocol sets risk parameters such as loan-to-value (LTV) and liquidation thresholds to promote the maintenance of overcollateralized borrow positions. Onchain governance allows the community to adjust these risk parameters as needed to respond to changing market conditions, further safeguarding the protocol.

• Network Risk Nexus Governance has adopted a robust network onboarding framework to thoroughly vet new networks before integration. Onchain governance oversees decisions related to network and bridge integrations, ensuring community participation and scrutiny. This comprehensive approach helps to mitigate network and bridge risks, enhancing the security and reliability of the Nexus Protocol.