💰Atomica Liquidation Markets

In Atomica Liquidation Markets, all DAO decisions are risk-based and risk-driven. We are trying to figure out a better way to deal with risks from their clear and comprehensive identification to further retention/ mitigation/ transfer of risks. We can describe the following categories and single risks among those known and identified for Atomica Liquidation Markets.

Risks associated with pool contracts

• Smart contracts bugs/ hacks. Technical risk. Bugs that can lead to to security breaches and result in the theft of pool assets.

• Admin Key (until there are automated DAO decisions). Human/ centralization risks.

Risks associated with Keeper Adapter contracts/ bidding strategies

• Network congestion. A Keeper Pool does not participate in auctions due to a poor gas bidding strategy, or a Keeper Pool pays for gas to participate in auctions. However, transactions do not go through (“out of gas”) with the paid gas being lost.

• Assets bought at an auction can only be sold at a loss. An asset price drops faster than anticipated.

• Bidding above a market price.

• Smart contracts bugs/ hacks. Technical risk. Bugs that can lead to security breaches and result in the theft of assets.

• Private keys storage.

• Gas expenses coverage.

Risks associated with infrastructure (Risk Oracle, other possible Oracles, etc.)

• Oracle (Price Feed) performance. An inaccurate collateral to a DAI price.

• Oracle (Price Feed) failure.

• Front-running on a higher gas price.

• Gas price performance. An inaccurate gas price coming from a data source (i.e., a Gas Station). API failures/ connection failures to a data source (i.e., a Gas Station).

• Inability to monitor the chain Remote Procedure Calls failures (node access) when you make bids/ monitor. An example of such a failure is the "connection refused" error during congestion.

• Mempool front-runners. Inability to know on-chain bids.

Risks associated with governance

• Governance limits on a maximum withdrawal amount during a hard auction period. When there is a vote, for example, to set a limit how much you can take out at a certain time. If this vote goes against pool participants, the drained pool will not be competitive.

Risks associated with Oracles used by MCD and MCD Keepers

• The Price Oracles system failed to report an accurate picture of the market. Due to a rapid movement of a collateral price and high gas prices, reporting by "Medianizer" and/ or Oracle Security Module (OSM) can be impaired. This exposes MCD system to the following. During a volatility period, a probability of a loss for MKR holders - who rely on inaccurate Maker price feeds - grows exponentially in reverse to the downward movement of a collateral price. A probability of a loss for Vault holders grows exponentially, as well, but follows even a steeper curve due to the absence of a “surplus” buffer.

• Maker Oracles have little incentives to pay super-high gas prices during periods of extreme network congestion.

• Most Maker Oracles have little disincentives from missing the reporting of prices for a few hours.

• Maker OSM updates the price at a hourly basis. During periods of volatility, Keepers are exposed to a much higher risk of losing (bid and buy collateral at a higher price, sell at a loss) or running out of liquidity if they relay on price feeds.