👮Security and Risk Management

Rome Blockchain Labs

Security is a top priority for Kinetic. We have partnered with Rome Blockchain Labs (RBL), a company with a strong track record in launching technical infrastructure for lending protocols. RBL has adapted and refined our code from a Compound fork and internally audited and updated it over four years to create tailored lending protocols for different blockchains. This battle-tested code provides a solid foundation for Kinetics' security.

Shapeshifter

A technology development firm specializing in advanced solutions at the intersection of quantitative finance, blockchain, and AI. Custom algorithms, risk models, and economic frameworks are designed and implemented to optimize DeFi protocols.

For Kinetic, Shapeshifter’s expertise ensures the protocol remains efficient, sustainable, and competitive in the evolving Flare landscape. Work includes modeling dynamic interest rate curves, optimizing capital efficiency, and integrating risk management tools to enhance lending markets.

Hypernative

​Hypernative specializes in real-time threat detection and automated risk mitigation for Web3 platforms. By continuously monitoring blockchain activities, Hypernative identifies potential security threats, such as zero-day vulnerabilities and economic risks, before they impact protocols and users. This partnership enables proactive identification and prevention of security threats, ensuring a more secure environment for users.

Flare Time Series Oracle

While lending and borrowing activities carry inherent risks, Kinetic addresses these by building on the Flare Network, which offers the upgraded Flare Time Series Oracle (FTSO V2) and FAssets. FTSO V2 enhances price feed reliability by incorporating multiple tiers of data providers, improving decentralization and accuracy while further reducing price manipulation risks. Additionally, FAssets enable the use of various assets as collateral without traditional bridging risks, ensuring a more secure and efficient lending environment.

Your Health Factor

To manage risks effectively, Kinetic advises users to monitor their loan's health factors closely. Borrowers should be proactive in managing their positions and consider repaying or depositing additional assets if their health factor declines. Staying informed about blockchain developments and the assets used as collateral can help users make informed decisions.

How Health Factor is Calculated

The Health Factor (HF) measures how safe a user's borrowed funds are compared to their supplied collateral. The formula is:

Important: Each asset has a Collateral Factor, meaning only a percentage of its value counts toward your borrowing power.

Example Calculation:

• Collateral Factor:

  • sFLR: 70%

  • USDC: 80%

• User Supplied Assets:

  • sFLR: $2,000

  • USDC: $1,500

  • Total Collateral: $3,500

• Borrow Limit Calculation:

• User’s Actual Borrow: $1,500

• Health Factor Calculation:

If a user's Health Factor drops to 1, they risk liquidation. In this example, that happens when their borrow amount reaches $2,600.