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Security & Risks

Orchid Credit’s security model combines architectural decisions, risk controls, and design principles aimed at limiting systemic exposure while preserving user control.

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Protocol Security Principles

Orchid Credit follows strict security principles:

  • Minimized attack surface Unnecessary complexity is avoided to reduce exploit vectors.

  • Clear separation of responsibilities Each component handles a specific function such as position management, risk calculation, or pricing.

  • Solvency-first design All protocol mechanisms prioritize the protection of deposited assets.

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Pool Isolation and Risk Limitation

Risk is limited through clear market segmentation.

Each lending environment operates with:

  • Independent risk parameters

  • Dedicated liquidation thresholds

  • Specific collateral rules

This structure:

  • Prevents risk propagation between markets

  • Contains the impact of volatile assets

  • Allows users to precisely choose their exposure

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Oracle-Related Risks

Oracles are critical to protocol safety, as they determine asset values.

Key oracle-related risks include:

  • Incorrect or manipulated price data

  • Update delays

  • Temporary outages

To mitigate these risks, Orchid Credit uses:

  • Carefully selected oracle sources

  • Fallback mechanisms in case of anomalies

  • Safeguards against abnormal price values

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Volatility Risks

Crypto markets are inherently volatile.

Price fluctuations can:

  • Rapidly reduce collateral value

  • Deteriorate Health Factors

  • Increase liquidation risk

Orchid Credit does not remove volatility, but makes it:

  • Fully visible in real time

  • Measurable through clear metrics

  • Actionable by the user

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Leverage Risks

Leverage amplifies both potential returns and losses.

Associated risks include:

  • Faster liquidations during adverse price moves

  • Increased reliance on pool liquidity

  • Greater sensitivity to interest rate changes

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Recommendations for Safe Use

For prudent usage, users are advised to:

  • Maintain a Health Factor well above 2

  • Diversify collateral when possible

  • Avoid excessive leverage

  • Monitor positions regularly

  • Act quickly during market changes

Risk management remains a shared responsibility between the protocol and its users.

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