Level
  • Introduction
    • Level Overview
    • Stablecoins: The Next Level
  • How It Works
    • lvlUSD
      • Peg Stability
    • slvlUSD
    • Risks
  • Rewards
    • What is Level XP
    • How to Earn XP
  • Technical Documentation
    • Security
    • Audits
    • Contract Details
    • Roles and Permissions
  • User Guides
    • How to Get lvlUSD
    • How to Stake lvlUSD
    • How to Earn Level XP
    • slvlUSD: Key Use Cases
    • lvlUSD: Key Use Cases
    • How to Refer Users
  • FAQ
    • General FAQ
  • Legal
    • Terms and Conditions
    • Privacy Policy
  • Links
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On this page
  • Collateral Risk
  • Lending Protocol Risk
  • Smart Contract Risk
  • Operational Security Risk
  1. How It Works

Risks

Description of Risks & Mitigations

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Last updated 1 month ago

This section highlights the risks of using the Level protocol, how we mitigate the risks and any plans to minimize these risks further.

Collateral Risk

  • Description: Risk that the underlying collateral is insolvent.

  • Mitigations:

    • Strict criteria for deciding what collateral to accept to back lvlUSD.

    • Currently, the only accepted collateral are USDC and USDT.

Lending Protocol Risk

  • Description: the underlying lending protocols may accrue bad debt.

  • Mitigations:

    • Strict criteria for deciding which lending protocols to deploy collateral into, including size, what collateral a lending protocol accepts, and historical performance during periods of heightened volatility. For lending protocols where collateral assets are selected by curators, we apply a similar methodology to the curators.

Smart Contract Risk

  • Description: Vulnerabilities in smart contracts that lvlUSD collateral is deployed into, or that manage lvlUSD collateral may make lvlUSD insolvent.

  • Mitigations:

    • All smart contracts are audited by reputable audit firms, and audits are published on our website ().

    • Internally, at least one other engineer peer reviews all smart contract code.

    • Level may also run competitions or have bug bounties in the future to gather feedback from the community.

Operational Security Risk

  • Description: certain protocol functionality, such as emergency collateral rescue functions, are controlled by permissioned roles, which may become compromised.

  • Mitigation:

    • [In progress] All smart contract owners are OpenZeppelin TimelockControllers that are controlled by the admin multisig

    • All admin roles are multisigs.

    • All end-signers are cold wallets.

    • The team cannot unilaterally execute transactions, there must be at least one external signer.

    • External signers are known, reputable firms such as Spearbit.

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