Dolomite protects user funds through non-custodial smart contracts, meaning users always retain ownership of their assets. Additionally, the platform leverages decentralized security practices such as audited code, on-chain transparency, and automated liquidation mechanisms to maintain solvency.
Dolomite reduces the risk of smart contract exploits by undergoing external audits, applying rigorous testing, and using modular, battle-tested DeFi code frameworks. It also employs monitoring systems to detect unusual activity and integrates decentralized oracles for accurate pricing.
How does Dolomite manage protocol risks?
Dolomite manages risks through collateralization ratios, dynamic interest rate models, liquidation mechanisms, and asset-specific risk parameters. By adjusting these parameters for each supported token, Dolomite ensures that lending pools remain solvent even in volatile markets.
What measures protect users from market volatility?
Dolomite uses collateral buffers (overcollateralization), liquidation thresholds, and price oracles to protect users during volatility. These systems ensure that loans remain secure, lenders’ funds are protected, and borrowers are incentivized to maintain healthy loan positions.
Are there risks of lending illiquid assets on Dolomite?
Yes, lending illiquid assets carries risks because these tokens may not have deep markets during liquidations. To mitigate this, Dolomite assigns lower loan-to-value ratios and stricter risk parameters to illiquid tokens, limiting exposure and protecting lenders.
Does Dolomite allow non-custodial control of assets?
Yes, Dolomite is fully non-custodial. Users never hand over control of their funds to a centralized authority. Instead, assets are locked in smart contracts, and users can withdraw them anytime, provided liquidity is available.
How does Dolomite handle flash crash scenarios?
During flash crashes, Dolomite relies on real-time price oracles and automated liquidation systems. If collateral rapidly drops below thresholds, liquidators are incentivized to step in immediately to repay debt, ensuring the protocol remains solvent even in extreme volatility.
What happens if the Dolomite protocol fails?
If Dolomite were to fail due to technical or governance issues, users’ non-custodial assets would still be safe since they are stored in smart contracts rather than controlled by a centralized entity. However, lending and borrowing operations could be disrupted until recovery measures are taken.
Does Dolomite provide transparency in reserves?
Yes, Dolomite is fully on-chain, meaning all reserves, deposits, and loans are publicly visible on the blockchain. This transparency allows anyone to verify liquidity, outstanding loans, and the health of the protocol in real time.
What risk factors should users be aware of on Dolomite?
Users should consider smart contract risks, liquidation risks during volatile markets, and the potential illiquidity of exotic tokens. Additionally, lending and borrowing always involve exposure to market conditions, so risk management is key when using Dolomite.
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