Atomica Risks

Arenas offers decentralised access to the liquidity but the process is not without risks. Robust risk management measures, including smart contract audits and carefully set risk parameters, are in place to help mitigate risks. Below is an overview of key risks and mitigation efforts.

Smart Contract Risk

Smart contracts can contain software bugs or other vulnerabilities within the protocol code and the underlying tokens. To mitigate these risks, Arenas has undergone multiple external third-party professional audits. Additionally, the protocol plans to run a continuous bug bounty program to incentivize external developers to identify and report any issues they may find so they can be fixed.

Oracle Risk

Arenas relies on third-party oracles for price feeds and external data, such as redemption ratios for liquid staking tokens. This reliance introduces potential risks such as incorrect valuations if an oracle fails or is compromised. To reduce this risk, Arenas uses decentralised oracles like Chainlink, which provide tamper-resistant data feeds, greater reliability, and security measures.

Repayment Risk

As Arenas use undercollateralized financing and off-chain signed financing agreement there is always a risk of a partial repayment of the financing principal and/ or interest, or a total non repayment.

Partially such a risk is mitigated by the use of the financing request approval, at which stage the borrower should be inspected thoroughly. But even a good borrower can have financial troubles in the future. For such a case there is another mitigation possibility - a non performing obligation liquidation and the sales process on the secondary markets. A discounted value after the obligation being sold is paid back directly to liquidity providers.