Market & Collateral Security

Tydro contains market and collateral risk through isolation, conservative parameters, and caps

Isolation contains failure

Tydro launches with isolated markets. A single collateral asset backs a single loan asset, and stress in that asset stays inside the market rather than spreading across the protocol. A new asset can be listed in its own market without changing the risk profile of existing ones. See Isolated Markets.

Where markets share margin through clusters, exposure is managed at the cluster level with its own parameters and caps, so correlation is accounted for. See Clusters and Pools.

Parameters as controls

Risk parameters are the protocol's first line of defense against a falling market.

• Loan-to-value and liquidation threshold set the borrowing limit and the liquidation point, with a buffer between them. Conservative values leave more room before a position is at risk.
• The liquidation engine closes unhealthy positions automatically and permissionlessly, which keeps markets backed by sufficient collateral. See Liquidations.
• Caps limit total supply and borrowing in a market, which contains concentration and lets exposure scale in controlled steps.

These values are set through underwriting before a market launches, and adjusted as conditions change. See Asset Underwriting and Risk Parameters.

Active adjustment

Because markets are mutable, parameters respond to conditions. If volatility rises, the Risk Steward can lower LTV or tighten caps within approved bounds to protect existing positions, without waiting for a full governance cycle. If a threat appears, the Guardian can pause the market in the same step. See Governance.

Conservative parameters and caps limit how much can go wrong in a market and how fast. They are sized through underwriting and monitored continuously.

For the residual risk these controls reduce, see Market and Collateral Risk and Liquidation Risk.